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Operator: Greetings, and welcome to XPEL, Inc. First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Garrett Williams, vice president of finance and investor relations. Thank you, Mr. Williams. You may begin. Garrett Williams: Thank you, operator, and good morning, everyone. We appreciate you joining us for 2026. With me today are John Smith, our Founder, Chairman, President, and Chief Executive Officer, and Chris George, Executive Vice President and Chief Financial Officer. Before I turn the call over to John, I have a few housekeeping items to cover. A replay of today's call will be available by webcast and accessible from our website at selectwater.com. There will also be a recorded telephonic replay available until 05/20/2026. The access information for this replay was also included in yesterday's earnings release. Please note that the information reported on this call speaks only as of today, 05/06/2026, and therefore, time-sensitive information may no longer be accurate at the time of the replay listening or transcript reading. In addition, the comments made by management during this conference call may contain forward-looking statements within the meaning of the United States federal securities laws. These forward-looking statements reflect the current views of XPEL, Inc. management. However, various risks, uncertainties, and contingencies could cause our actual results, performance, or achievements to differ materially from those expressed in the statements made by management. Listeners are encouraged to read our annual report on Form 10-Ks, our current reports on Form 8-K, as well as our quarterly reports on Form 10-Q to understand those risks, uncertainties, and contingencies. Please refer to our earnings announcement released yesterday for reconciliations of non-GAAP financial measures. Now I would like to turn the call over to John. John Smith: Thanks, Garrett. Good morning, and thank you for joining us. I am pleased to be discussing XPEL, Inc. again with you today. The 2026 was a strong start to the year for XPEL, Inc. I would like to start with some of the key first quarter highlights and other strategic and market updates, then I will hand it to Chris to discuss the first quarter financial results and forward outlook in more detail. The first quarter was a great start for the year for us. We executed within or ahead of our expectations across all parts of our business, continued to add new contracts to the portfolio, and are well positioned for a strong rest of the year. During the first quarter, on a consolidated basis, we increased revenue by $19.5 million, increased adjusted EBITDA by $13.5 million, and increased net income by $11.5 million as compared to 2025. Our water infrastructure segment performed very well in the first quarter, meaningfully outpacing our guidance for the period. During the first quarter, we increased our water infrastructure revenues by 19% relative to 2025. Additionally, water infrastructure gross margins before D&A increased to 56%, driving consolidated gross margins before D&A above 30% for the first time and to a new all-time high for the company. Across our water infrastructure network, we managed approximately 1.4 million barrels per day of produced water during 2026, with increases to both our recycling and disposal volumes. This resulted in a record quarterly segment revenue of approximately $97 million. Supported by the strong outperformance during the first quarter, our water infrastructure segment is well on track to exceed the high end of our previous full-year guidance. We continue to focus on the value-add of our invested capital across the system with increased commercialization and contracted service offering expansion. Since year-end, we have executed several new contracts across multiple basins, leveraging our existing networks to provide incremental committed volumes, tie-in opportunities, or increased produced water flows and utilization throughout our system. For example, during 2026, we leveraged our market-leading disposal position in the Northeast Region to sign a new multiyear disposal dedication agreement with a core customer while concurrently becoming the preferred water transfer provider for this customer. In total, since the start of 2026, we have added three new MVCs, two additional acreage dedications, two new ROFR dedications, and eight new interruptible agreements to our network across the Permian, the Northeast, Bakken, and Mid-Con regions. While we still have another number of sizable growth capital expansion opportunities that we are targeting around our core network, I am very excited to see the progress in adding these low-to-no-capital-required commercial opportunities. These opportunities leverage the strength of the expanding networks we already have in place, add incremental revenue through enhanced utilization, and further bolster the flexibility and the water-balancing capabilities of the network overall. More recently, here in May, we also closed on multiple acquisitions in the Northern Delaware Basin, adding approximately 4 thousand acres of surface and minerals, 30 thousand barrels per day of disposal capacity, 1.8 thousand acre-feet of annual water rights, and 500 thousand barrels of storage across Texas and New Mexico. We expect these acquisitions to integrate efficiently and bolster the operational and economic development potential of our Northern Delaware network, and we will continue to look for opportunities to tactically add to our footprint in the region. Elsewhere, in our water services segment, we outperformed our expectation in the first quarter with a 7% top-line revenue increase compared to the fourth quarter and remain very well positioned to capitalize on any activity uplift in the market associated with the current commodity price environment. Our chemical technology segments continue to see strong demand for new product development, both in our core friction reducer product lines as well as our specialty surfactant product offering, which should drive strong double-digit percent revenue growth and margin uplift for the second quarter ahead. On the macro side of things, the recent geopolitical tension in the Middle East has changed the commodity outlook in a big way since the start of the year. While it is not yet clear what the long-term impacts are for the energy markets, what is very clear is that the U.S. energy industry will remain a critical stabilizer of a diversified global energy supply chain for many years to come. While we have yet to see any major behavioral changes from our customers’ activity or pricing perspective, we are closely monitoring the commodity and the activity outlook with our customers and are well positioned to support any uplift in demand, whether over the short term or the long term. In the meantime, on the revenue side, we expect to benefit from higher skim oil pricing within our water infrastructure segment. Separately, on the cost side, we will work to mitigate any impacts from higher commodity prices or supply chain disruptions. Overall, I am very pleased with the performance of the business year-to-date, and I believe we are well positioned to drive incremental growth in the quarters ahead. At this point, I will hand it over to Chris to speak to our financial results and outlook in a bit more detail. Chris? Chris George: Thank you, John, and good morning, everyone. XPEL, Inc. made great strides in the first quarter, which included strong consolidated revenue, net income, and adjusted EBITDA growth; record consolidated gross margins before D&A; record water infrastructure revenue; and continued commercialization wins across our water infrastructure platform, strong outperformance in water services, and a successful equity offering enhancing the company’s liquidity and balance sheet flexibility. Looking at our first quarter segment performance in more detail, as I mentioned earlier, Water Infrastructure posted a great first quarter. We grew both our recycled and disposed volumes in the first quarter, driving revenue growth of 19% compared to 2025, and more than 33% growth on a year-over-year basis relative to 2025. This led to record revenues of $97 million and very strong 56% gross margins before D&A, meaningfully outpacing our guided expectations. While we expect a relatively steady second quarter for the segment, with the strength of the first quarter growth and with additional projects coming online over the course of the second and third quarters, we are well positioned to exceed our original full-year guidance for the segment. Accordingly, we are increasing our full-year guidance to 25% to 30% year-over-year growth for the segment in 2026, up from the 20% to 25% growth previously forecasted. We still have a strong organic business development backlog for this segment, and I am confident in our ability to add additional contract wins across the year, both for greenfield expansion and ongoing commercialization opportunities. Switching over to Water Services, this segment saw revenues grow by about 7% sequentially, outpacing our guidance of steady revenues, driven by improved activity levels, strong gains in our water transfer business unit, and increased spot market water sales. Gross margins before D&A in Services increased to 21.8% during Q1, a solid improvement compared to 19.6% in the fourth quarter and our guided margins in the 19% to 21% range. While we forecast a modest low single-digit percentage revenue decline in the second quarter for Q1, we anticipate margins to remain relatively steady at the 20% to 22% range in Q2. Overall, this segment is well positioned to participate in any activity upside and pricing opportunities that may arise with elevated commodity prices in the near term. In the Chemical Technology segment, both revenue and gross margins in the first quarter of $78 million and 19% were in line with our guided expectations. Looking ahead to the second quarter, we expect strong sequential revenue growth of 10% to 15% as the business continues to see increased demand for both its core friction and specialty surfactant product offering. Additionally, margins for the segment should move upwards into the 20% to 21% range as well. We are excited about the initial results of a number of our surfactant projects, and looking at full-year 2026, we do see the potential for upside to our original full-year guidance for the segment. Looking back on a consolidated basis, in the first quarter we decreased SG&A by more than 6% to $40.6 million, or approximately 11% of revenue, showing good progress on our cost reduction efforts. Altogether, we saw a consolidated adjusted EBITDA of $77.6 million during 2026, significantly above the high end of our guidance, largely resulting from the stronger-than-expected performance in our Water Infrastructure and Water Service segments. Looking forward into the second quarter, we expect continued strong performance across the business, resulting in adjusted EBITDA of $77 million to $80 million. Overall, we are very pleased with how our business has performed year-to-date in 2026, and with the current commodity price levels, we are encouraged by the potential tailwinds that could benefit our business as we look ahead to the remainder of the year. We continue to advance the commercialization and earnings potential of our water infrastructure business, and with the additional projects slated to come online in late Q2 and Q3, we expect to drive continued growth in 2026 and well into 2027 for the Water Infrastructure segment, which should support continued improvement in consolidated revenue and margin profile for the company. Looking at our other costs, D&A expense should remain fairly steady in Q2 at approximately $47 million to $50 million, before modestly ticking up throughout the year into the low fifties as new capital projects are completed. Following the recent equity offering, we were able to fully repay our outstanding borrowings on the revolver and ended the quarter with $196 million of net debt outstanding and more than $300 million of total available liquidity. Relatedly, net interest expense decreased sequentially in conjunction with reduced borrowings, and we expect interest to remain in the $4 million to $6 million range per quarter in the near term. On the operating cash flow side, we had a relatively meaningful short-term drag on operating cash flow driven by increased accounts receivable; however, we expect this to largely cycle through during the year and convert back into cash in the near term. On the investing side, we spent $78 million of CapEx in the first quarter, primarily in support of infrastructure projects, with an expectation that CapEx spend accelerates during the second quarter as the bulk of our ongoing capital projects target late Q2 and early Q3 completion. As John mentioned, we also closed on multiple acquisitions subsequent to quarter end, totaling approximately $29 million. These acquisitions can be integrated into our existing networks while adding accretive cash flows, attractive asset diversification, and enhanced future development potential. Following the recent project wins and acquisition integration expectations, we now expect $200 million to $250 million of net CapEx in 2026, up from $175–$225 million. We maintain our expectation of $50 million to $60 million of this CapEx going towards ongoing maintenance and margin improvement initiatives this year. While we continue to capitalize on the growth opportunities in front of us, we believe we are setting the stage for strong long-term free cash flow generation as we look into 2027 and beyond. Outside of the sizable growth capital outlays, our business maintains a very maintenance-like capital model, and we have significant free cash flow generating capabilities and flexibility to manage this maintenance spend in accordance with market conditions without impacting our operational performance. In summary, the financial, operational, and strategic results of 2026 demonstrated significant progress in our ongoing business evolution, and we are excited to continue building on these financial results and strategic success. We will now open the call for questions. Operator: Thank you. We will now begin 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 questions from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. The first question from the line of Jim Rollison with Raymond James. Please go ahead. Analyst: Hey, good morning, guys, and congrats on a really nice quarter. I guess not to take the spotlight away from Water Infrastructure, but as we have seen this oil market kind of turn pretty remarkably post-Iran conflict here, obviously I have heard a lot of commentary from other U.S. land OFS providers about prospects for getting things getting better. You guys have kind of suffered through going on four years of impact there, especially in Water Services and to some extent, Chemical Technology. So we would kind of love to hear your thoughts about what you see out there for prospects of that ramping up over the back half of this year just kind of given the market shift here? John Smith: Yes, Jim, this is John Smith. Logically, most of Water Services now have a big exposure to completion activity. It really relates to our Water Infrastructure. Moving water to the completion job is a big piece of our capture as well as the friction reducers or surfactants that we are building for the frac chemistry in the Chemical side. We are having conversations now, and we are hearing from the market that the commodity price that we all watched ramp and the effects of that—they are pulling both intensity of which they are completing the wells or bringing new oil online. We are starting to have those conversations or see that effect, as well as we would also say that we are also seeing customers that, let us say they had four frac crews running, were going to drop one in the second quarter. They are not dropping it now; they are keeping four running. Or, whether it is through the horsepower of the frac company or through our customer base in the E&P side, we are hearing of adding more frac crews. So we do believe we will have some intensity from the macro, probably first to see something pull forward, get it to market faster, or the intensity of adding to the volume or repairing the volume and refracking, or just making sure the oil is still being produced and sold. Chris George: And maybe to just add on top of that, Jim, I would say from a financial perspective, we are certainly going to be looking for a close dialogue with our customers on an ongoing basis here to see what the outlook looks like and whether activity gets pulled forward, whether it stabilizes on a through-cycle basis through the end of the year, and what the impact is on customer budgets and the outlook. I would say for the Chemicals business, we are guiding pretty strong double-digit growth in the second quarter here, and that is absent any material uplift in activity. It is really driven by intensity of what is going on in that business. So, based on the numbers we are putting out in front of you, we are not taking an aggressive outlook on the activity framework here. But whether it is Services, whether it is Chemicals, or whether it is the pull-forward of volumes getting onto the Infrastructure side, we are taking a pretty sober approach to what the macro outlook looks like. But we are well positioned to capitalize on any uplift in activity or any pull-forward or hopefully also the potential to stabilize or look at pricing opportunities as well, particularly on the Services side. Analyst: Yeah, it would certainly be amazing to see everything move in the same direction for a change. Maybe, Chris, this is a follow-up. I do not want to get too far ahead of things here, but if I kind of take your first quarter numbers, your second quarter guidance, and obviously, the implied pickup from incremental projects that start up in the second half, it kind of seems like you are on a pace to maybe have an exit run-rate EBITDA somewhere approaching the mid-$300 million range. Am I doing my math right there? Chris George: Well, we are certainly not putting in any formal guidance out yet on the back half or into 2027. But what I would say, Jim, is that with the strength of Q1, the opportunity set in front of us, we certainly see growth in the second half of the year. It would be good to see how some of the macro settles out—every day is a new day right now, as you see this morning. But the projects that are going to come online in late Q2 and Q3 are definitely going to provide uplift into the third quarter. A little unclear what Q4 is going to look like, but as we put a run rate on that heading into 2027, you are well positioned to see good, solid, additional double-digit growth on an Infrastructure basis looking into 2027. And depending upon the outlook on the Services and Chem side, we are going to be well positioned to see that EBITDA push towards levels like you are describing. The earnings capacity of the business is certainly pushing towards that, and we continue to hopefully add to that with new contracted opportunities over the next couple of quarters as well. Analyst: Appreciate all your thoughts. Operator: Thank you. Next question comes from the line of Bobby Brooks with Northland Capital Markets. Please go ahead. Analyst: Hey, morning, guys, and thank you for taking my question. First, I wanted to ask on the new Northern Delaware water supply and takeaway agreement. Reading the presser and listening to the prepared remarks, it sounds like a highly accretive bolt-on opportunity that you probably won given your footprint that you already had existing there. Am I thinking of that right? And if so, could you just give some more framework of how to think about how accretive this could be and maybe a little bit more color on how that win came about? Chris George: Yeah, certainly. Good read-through on that, Bobby. I think about the first quarter as most of the commercial opportunities we brought to bear around the Infrastructure side of the business are pretty low-capital to, some of them, even no-capital opportunities in terms of adding incremental volume flow through the system over time, whether it is on an MVC basis, a dedication basis, or just adding additional commercial potential around interruptible. So from a capital deployment perspective, we are talking about something less than likely $5 million on an aggregate basis across all of those commercial arrangements. So it is very much leveraging the existing invested capital or ongoing buildout that has already been underwritten for that footprint. And we are pretty excited about adding on to that with these additional commercial development opportunities. There still are some larger capital projects that are in the backlog and some on a more greenfield basis. To the extent we can start rolling into the ROFR cycle here or adding on a brownfield basis or a tie-in basis and underwrite those with committed capacity, it is a great outcome from an accretive add-on to the system. Analyst: Got it. And then just one follow-up there is I think you guys have talked about the cash-on-cash returns of kind of greenfield opportunities like three to five years maybe is the number you set, I think what you put out before. Is that excel or is that a shorter timeline on these more tie-in opportunities? Chris George: I would say on the tie-in side, Bobby, it can certainly have an accelerated timeline given the strength of the existing footprint and the capital we have already invested. From a greenfield project underwriting framework, you are correct, generally targeting that four-year cash-on-cash is still the base framework. We do still have some of those chunkier opportunities ahead of us that we are looking to get to the finish line. But as we continue to roll new capacity onto the system or new volumes onto the system, every barrel is an incremental accretive barrel from a margin standpoint and a return on capital standpoint. And so some of these ROFR executions could look like something more in between what you are describing, Bobby, and a traditional greenfield buildout—where you are adding capital to the system to build out, grab new geography, but doing it under a base dedication or base ROFR dedication within the current footprint. Analyst: Got it. That is super helpful. And just one last for me is, obviously, there has been a ton of news and movement about data developments in West Texas and those facilities. And if those facilities use evaporative cooling, they are going to need a ton of water, which is obviously a specialty of yours, and so with that in mind, was just curious to hear your thoughts about how your business and expertise might lead to opportunities within that buildout in West Texas and if that is something on your radar and just general thoughts there. Thank you. Chris George: Yes, it is a great question, Bobby. It is very much something on our radar. I do not have anything specific to convey today, but we do have a number of active and ongoing dialogues in that space, both on a water solution side in terms of the source water needs for some of these projects as you described. But there is also application of support around services, rentals, power—other things that all are part of the core business or ancillary to the business. There is a waste stream application of management as well. So we are pretty active and engaged in understanding the marketplace, and there will be, I would say, a critical need for water solutions because water can be a gatekeeping item to getting some of these projects to the finish line. And so, yes, I think folks are pretty focused on it. John Smith: Thanks, Bobby. Operator: Thank you. Next question comes from the line of Derek Podhaser with Piper Sandler. Please go ahead. Analyst: Maybe to kind of keep going on that line of questioning, just coming at it from a different angle overall and looking at your portfolio and thinking about optimization. First off, Peak Rentals, right? You kind of mentioned power in your response, and I know you stood this thing up, you ring-fenced it, you are feeding in a bit of capital. So first, maybe let us start there on an update of how we should think about Peak Rentals moving ahead. And then maybe just separately, the portfolio optimization and feeding growth projects like your friction reducers and surfactants. And if you have the right footprint today to capture those growth tailwinds? Or could we see some potential bolt-on opportunities for that as well? John Smith: This is John. I appreciate the conversation around Peak and the question, but what we would say is there is really no material change yet that we are ready to express here, but we are still very actively evaluating all opportunities around it. The course of direction has not changed. The efforts in which we are applying have not changed. And so that is still very much like the last time is where it would be. On the opportunity set, I think some of the acquisitions we just announced tell you the opportunity set in some sort, which is really what asset base is out there that is an enhanced value to that asset base if it is part of this network. And the network is very different than any other network because it is really built around recycling first. So if you just think of the ability to have dual lines—so a distributing line to be able to get frac fluids to where it is going to be needed or a gathering system to bring barrel into the recycling facility or expose it to the ability to dispose of that barrel—there are assets that really fit that network in a meaningful way, and the way that thing is dual purposed and built of size, it really enhances the value of that asset when we bring it into our network. It has got a big effect. Chris George: And I would add to that, you look over the last year, we have continued to focus on what adds value, what helps us drive incremental return profile to the footprint. So we have looked at things that might have historically been a bit more tangential around the solids management side with the landfill opportunities and solids treatment opportunities last year—looking at the surface application of what is underneath the infrastructure we are deploying and building out; looking to add disposal capacity to both risk management profile and additional growth and committed capacity potential to the system. So anything that fits the profile of how we are approaching growth around the asset, full life cycle and waste stream management, supporting the customers on their needed solutions—we are going to focus on all of those things. And I think there is still a good opportunity set around them. To your question on the Chemical side, there is, I would say, a very good opportunity set in front of us, and we can execute and act upon that in a pretty meaningful way with what we have got—whether that is the existing manufacturing base that we have in-basin in the Permian, the existing R&D and lab capabilities, the product lines, the pilot efforts that are already underway, and some of these new projects and product development wins we have had. And I think we feel pretty good about the opportunity set to drive further growth there. And even if we get to the point where capacity becomes a consideration, we have got ability to flex up and add capacity to our existing footprint out in the Permian or, alternatively, supplement out in East Texas and do so in a way that is pretty capital efficient given the current footprint we have already got in place. John Smith: The thing that I would add to the Chemical side of it is, as Chris expressed, we can expand the throughput in a meaningful way in our plant capacity, but we also have a very unique position to be able to service the customer in the delivery of that chemistry and the management of that chemistry throughout the fracking process. And that is localized. It is a very good footprint around a local manufacturing plant. So it really gives value to the customer or a leverage to us to be able to win more business or expand that throughput capacity that Chris talked about. Analyst: Got it. Really appreciate the color, guys. Maybe switching to the capital outlook here for the business. You upped CapEx this year—completely understand, just given some of the acquisitions you made and some of the needs for capital. But, Chris, I think in your prepared remarks, you talked about the company really being set up for free cash flow generation 2027 and beyond just given the growth outlook. So maybe just help us understand the interplay of the equity raise. You have, I think, $300 million of total liquidity. You are getting pretty good free cash flow generation out of Services and Chemicals. Just how should us and investors really think about the long-term free cash flow generation of the business thinking about capital and maybe conversion down from EBITDA? Just help us understand that a little bit more, just given that is an exciting growth outlook for you guys. Chris George: Sure. It is a great question, and obviously something we think about every day from a capital allocation framework perspective. I think, importantly, the base maintenance needs on the business are pretty light. So looking at something like $60 million of maintenance capital on the system, with a solid weighting towards the Services side of the business there, is a pretty effective position for us to be able to reinvest in the business efficiently. Obviously, last year and this year, we are focused more on the reinvestment side. We continue to have a good profile of backlog opportunities that we are excited about getting to the finish line. So we think that the build cycle is ongoing and has an opportunity to continue. We would be excited to add to that. So the base CapEx guide and the uptick here this quarter—could that translate into something that looks more like last year from a capital deployment profile than that current guide if we sign additional contracts? That is very well a possibility here. As we look forward into 2027, we think we are driving solid incremental growth, as Jim questioned on, and what that earnings power is going to also do to drive incremental free cash flow generation. So, as we look forward into 2027, we think the opportunity set still has some backlog opportunity to it. The growth of the earnings profile continues to move upwards as well. So both of those moving in tandem are still going to generate excess free cash flow opportunities. The margin profile of that Infrastructure business is very well suited to generate very strong free cash flow on a through-cycle basis over the longevity of these contracts we are putting in place. And so as we look forward to the back half of this year, I think it is more likely than not we continue to get opportunities to the finish line. As we look forward into 2027, we think that capital deployment program is probably going to have a bit more maturation to it, particularly in New Mexico. But even if we are able to continue to add on opportunities, you are going to grow the earnings profile, grow the free cash flow profile, and start to generate those incremental dollars that you can make good discrete choices with. But, as we have said before, the Services and Chemicals businesses generate solid 70% to 80% free cash flow generation out of the gross profit in those businesses. And Infrastructure, on a stable, low-growth basis, should provide something similarly competitive. Right now, we are just focused on how to continue to reinvest and drive that growth like we saw in Q1 and we are expecting to see in the back half of the year. Analyst: Great. Appreciate all the comments. I will turn it back. Operator: Thank you. Next question comes from the line of Don Crist with Johnson Rice. Please go ahead. Analyst: Good morning, guys. I know you have answered this in a couple different ways, but I am hearing specifically in New Mexico that the E&P operators were going to drop frac crews because of natural gas takeaway issues and the lack of flaring opportunities. And I just wanted to explore that a little bit and see if, number one, you are hearing that; but number two, if those operators are now keeping those frac crews because of higher oil prices and that could set up a significant uplift in volumes across your system once the natural gas takeaway pipelines come on in the fourth quarter or first quarter of next year, and that could drive significantly higher volumes across your system. Just any comments around that, because I am hearing that more and more lately over the past couple weeks. Chris George: Don, obviously, we are all looking at the new capacity coming online later this year, looking into next year, as a needed solution. I would say based on the customer dialogues we are having, nothing has given us any indication that we have any meaningful change in outlook expected due to nat gas takeaway concerns. The capital programs that we are talking to our customers about, the schedules that we have that we are building into to bring assets online over the next couple of quarters—there is nothing that gives us any indication there is any change expected there. If anything, there is probably more of a question around what the commodity profile looks like and how you address the opportunity to maximize potential around that current commodity outlook. So not to say that we are not thinking about it and focused on it and paying attention to what the customers are looking at out there, but that is the current lay of the land. But, John, anything to add? John Smith: Don, I would mention a few things. One is those interruptible opportunities that keep ringing the phone—that is in that area. So that has really turned into a strategic ability to capture that work because of this network we put together. We thought it would show—it would show now, and it is pretty meaningful. The other one I would tell you that we do get out of the operators is, what can they do with that gas differently than what they are doing today? Whether it is in movement, whether it is in heat-related application, whether it is in power generation application, it is “help us think about what we can do with it differently than what we are challenged with as it sits,” but not to the tune that we are hearing from our operators that they are going to slow down their programs. Analyst: I appreciate that. And I know you do not like to talk about things before they are fully baked and ready to go into guidance. But on this data center opportunity, obviously, some of your main competitors are talking about how big it could be. Do you see the data center opportunity on the water side being a significant opportunity for many years to come—sign long-term contracts, etcetera—like some of your competitors are seeing? John Smith: What we do see is our position in the Permian we think is a very unique position. And our relationship between our Service business units and our Infrastructure business unit is a very positive way to address what they are asking us to address. And, yes, we are having the conversations around water, but we would also tell you that we are having conversations that this company was really built on—the skill set and the knowledge base of how you procure water, treat water, move water, store water, recycle water—but it is also built on doing intense operations in remote areas. We have been pulling off stuff in meaningful ways in remote areas for a long time. Well, Pampa is not much different. It just really came to the forefront that we can support the efforts in a different manner because of the way this company was built and the skill set that is in it, Don. Analyst: I appreciate all the color. I will turn it back. Thanks, John and Chris. John Smith: Thanks, Don. Operator: Thank you. Next question comes from the line of Nick Armato with Texas Capital. Please go ahead. Analyst: Good morning, all, and congrats on the strong quarter. John Smith: Good morning, Nick. Analyst: On the disposal and service agreements in the North, can you provide some color on the structure of the agreement and potential revenue uplift you are expecting? Additionally, could you provide maybe a brief overview of water handling needs in the basin and how they compare with the broader Permian complex as well as the potential for additional agreements similar to this going forward? Chris George: I will jump on that, Nick. Very good question. We are actually quite excited about the opportunity set in the Northeast. We are the largest traditional disposal provider in the basin. It is a challenging market environment to operate in just given the regulatory complexities across multiple states and the geography. That contract that you mentioned was a very good one for us on the back of one that we executed on late last year where we added a large transfer dedication on top of an Infrastructure relationship. This was another great one to add on that Water Transfer relationship scope in tandem with negotiating a commercial framework around a sizable disposal dedication. So we were pretty excited to get that one to the finish line and able to leverage the strength of that leading disposal position and the asset and market share capacity we have in that basin to continue to engage in dialogues like that. We are pretty excited about the opportunity to continue to add that relationship between Services and Infrastructure in any of these areas where we have got strength of service and infrastructure scope overlapping. I would say in the Northeast more broadly, that is a basin we really like the potential around. We have talked about the gas markets a little bit in the Permian, but I think more traditionally our leading footprint in both the Haynesville and the Northeast provide pretty meaningful upside to us for gas market demand over time. And so we feel very good about that Northeast position. We have added assets to the basin over the last year as well, and it is one that we think there is good opportunity set on to continue to grow and enhance that already market-leading position. Similarly, in the Haynesville, I would say from a market dynamics perspective relative to the Permian, it is a different type of need of solution versus the Permian. The scale of the problem in the Permian is just fundamentally different, given the size of the production scope, the size of the water problem in terms of the volumes and the intensity of the fracs and the bench depths and everything else that comes with the Permian. But we very much are going to continue to focus on the opportunity set across all of our footprint. And as you saw here, we added new contract scope across four basins. And so we continue to see our capital priorities weighed toward the Permian, but we think there is a good opportunity set elsewhere. John, anything to add? John Smith: Just a couple. It is not necessarily just directly to the Northeast. But if you look at the history of XPEL, Inc., where we have been able to apply the last-mile logistics or Water Transfer along with our Water Infrastructure through quite a few years now, we have always gotten better margins out of the service side of it. And the reason is because those two things together bring real value to our customers. And the ability to share some of that value is meaningful to us in the service side. The other side I would tell you, if you ask the relationship to the Permian that Chris was talking about, the Permian is really very focused on recycle first—the value-add, how can they balance water. And if you are recycling produced water, that means your Water Transfer has to be built around transferring that produced water to the frac site. And that is a different skill set than transferring freshwater to the frac site. And XPEL, Inc. Tideline, XPEL, Inc. Automation, XPEL, Inc. interaction with that Infrastructure brings meaningful value to our customers, and we should be able to pull a portion of that value as we bring that along by bringing those two segments together. Analyst: Perfect. Maybe shifting over to the municipal business. Could you offer some color on how that project is progressing? And then also in light of the stronger commodity environment, how do you think about opportunities like this relative to some of the more traditional oil and gas related ones? Chris George: On the base project up in Colorado on the municipal space, no material updates at this point other than we continue to see good progress in marching that towards the original expectation of getting contracts in hand by 2027 and putting that incremental capital to work. So we still feel like we are moving the right direction. It is a slower development cycle working with municipal counterparties than traditional oilfield counterparties, and similarly with some of the other industrial opportunities in the region as well, but still feel very good about the position and the potential to get something moving by 2027, and we will keep working on that. As it relates to capital allocation choice between that diversification opportunity set versus the core potential in the energy industry, I do not think our view has really changed. We want to continue to focus on the right return profile, how we add stability and contracted stability to the business over time. We are going to focus on the competitive return profile amongst all of our growth opportunities, but we are definitely focused on getting this one done. There definitely are other opportunities that we are going to be spending time on along the way, but we are not going to have them conflict or limit our ability to develop what is a very attractive opportunity set in the core business today. And we are continuing to see that, as you saw here in Q1 and in some of the larger opportunities we are looking to get to the finish line over the course of the next couple of quarters this year. So, very much a growing opportunity set across the business, whether that is industrial or municipal opportunities around that Colorado project, data centers, or elsewhere. As we look at beneficial reuse as another technology application that is going to bring freshwater to market over time, that is something that lends itself towards a diversity of potential consumers—whether that is the base industrial demand around the oilfield or whether that is other opportunities. So either way, they should move in tandem, particularly as beneficial reuse progresses over the next couple of years. And we will be focused on the right return profile across that full opportunity set. Analyst: Perfect. Thanks for taking my questions. I will turn it back to the operator. Operator: Thanks, Nick. Thank you. Next question comes from the line of Jeff Robertson with Watertower Research. Please go ahead. Analyst: Thank you. John, given some of the comments around free cash flow growing into 2027, can you just talk a little bit about your thought process around returning cash to shareholders through the repurchase program and the common stock dividend? John Smith: I do believe, and I think Chris leaned into this, what we are building is really a low-maintenance capital-required business, and as the growth capital matures, the systems, the network, the growth show—we do have a very strong opinion that we are building a company that is built around repeatable, predictable, and dividends will be a part of the capital allocation and the growth of that dividend. We are probably, by nature, more of value takers when it comes to stock buybacks. If you look at when we really spent the money, it is when the stock got affected by the banking crisis out on the West Coast, and we took advantage of that. But we do believe we are building a company that will be able to focus on a regular way dividend and capital allocation decisions. We also believe that the Infrastructure growth that we are building in Eddy and Lea and different places across the United States, as we come up with opportunities that are very attractive in building these networks in the oil and gas space—we actually believe that our skill sets in and around water really open up opportunities in addition to that. So I do not think the growth is going to disappear on us. I think those opportunities are still going to be there. And, you know, the contractual nature and the high gross margin and the good rate of return, I believe, will show up within our skill sets around water. Chris George: And I would maybe just wrap on that, Jeff. Whether it is looking at the base dividend and the potential to grow that over time, whether it is adding stability through cycle in a historically cyclical industry, or whether it is thinking about diversification of industry scope, all of those things lend themselves towards more repeatable, predictable cash flows over time. Whether that is looking at the balance sheet structure or shareholder returns, either way, you are going to have different choices as we continue along this strategic transition, and we are focused on what that right structure looks like over time. As John said, we will continue to be tactical in our view around the ability to repurchase shares in and out of excess free cash flow. But as we look forward to generating incremental free cash, we are going to make the right choices and have the right balance between growth and shareholder returns. But, obviously, for now, we have got a great growth opportunity set in front of us—that is what we are on in the immediate term. Analyst: Chris, one question on the assets—the Black River Ranch and the surface acreage bought in New Mexico. Can you talk about how that fits into your Delaware Basin system, John or Chris? Chris George: I will start, and, John, feel free to add on top. When we are looking at the full footprint buildout of what we are doing in New Mexico, we look at all the opportunities to get value out of that footprint. So that surface position is effectively overlapping with our existing Infrastructure buildout. So the ability to utilize right-of-way and easement access across a piece of owned surface is obviously accretive to the cost structure of the business. The ability to utilize that surface to develop incremental capacity—whether it is storage, whether it is disposal, whether it is recycling—all provides opportunity to the footprint. If we can add accretive returns through some royalty structures or mineral structures along with that surface, that is a good high-margin opportunity for us as well. So when we are looking at what best fits the profile of the buildout of the system, we are looking at all these opportunities, and we are going to continue to find these along the way. And if we can do so in a manner that provides very clear strategic benefit to the buildout of the core strategy or gives us leverage and opportunity to develop something new, we will continue to look at opportunities like that. John, anything to add? John Smith: The one thing I would add is that, whether it is in opportunities that we are finding by buying surface and being able to harvest royalty or position out of that surface, what we are for sure finding in a meaningful way is that the asset base of the company—whether it is the water itself, whether it is the location, whether it is surface owned, whether it is a network of pipe—we are finding ways now that we can take repeatable high gross margin or full gross margin royalty-type revenue into our existing company today to increase the margins or have a different type of income stream than a typical service company had. And it is becoming more and more apparent as we build out this network or buy this surface or create the relationship between waste stream management and fluids management. Operator: Thank you. Next question comes from the line of John Daniel with Daniel Energy Partners. Please go ahead. Analyst: Hey, John and Chris. Not sure this has been addressed or not, but I am just curious—with the market heating up a bit, what are the opportunities right now for you guys to talk to customers about incremental pricing opportunities? Are you having those yet? John Smith: First of all, John, as you know very well, there are certain conversations that you have to have because there is an effect on your business as it relates to the procurement side. And some of that is built in, some of it is not. But I would say those conversations are very active, they are not lagging, and they are well received. I would not say they are getting a lot of pushback. As it relates to price, what we find is that where we can bring value and we can demonstrate value, the price conversations with the customers that are trying to do more with less with better results are conversations they love to have, and they will give you price, and they will share in that value that you bring. And we find very good success there, John. Chris George: And I would add to that, as John mentioned earlier, when you can integrate that service capability with the Infrastructure relationship around the contracted barrel, it is always a more productive outcome for us on a margin profile basis. And it can also have a benefit on the revenue basis as well. And then, furthermore, if you are thinking about something like Chemicals, the push into some of the higher-margin specialty application of products—whether it is on the FR side around the intensity of what is demanded right now, or whether it is the more specialty application of surfactant development around the reservoir rock, the matching of that with the chemistry and the quality of the water along with it—that is just a fundamentally different solution, and we are going to be able to price that in a manner that is more effective. Because at the end of the day, it is helping the customer create more oil production out of their reservoir, and we can share in the benefit of that uplift. Analyst: Can you remind me, roughly what percent of your business you would characterize as spot and therefore opportunities to incremental pricing later this year? Chris George: On the Services side, John, you are going to have some integrated pricing relationships with your Infrastructure contracts. You are going to have some relationships that are more medium or pad- or well-program-defined. But I would not say there is any expectation that there is not going to be an ability to be responsive to the market conditions and the need of the industry’s application for service. So nothing that is going to be limiting in our ability to capitalize on the market opportunity set in any meaningful respect. And so, obviously, on the Infrastructure side of the business, you have more defined long-term contracted structures there with frameworks that get us great outcome and great return profile regardless of market conditions. But, John, anything to add to that? John Smith: I guess the one thing I would say, John, is we have experienced—the market has become such intensity in 24-hour operations that schedule and planning and engineering of jobs have become more and more important. So even our call-out business, one, it is probably going to have pricing arrangements around it. It is going to have MSAs around it. It is going to have contractual relations to our Infrastructure around it. That has changed some, but I would tell you the biggest thing that changed in the industry—it has just become mission critical in what we do and how we do it. Now, that brings value to the customer. The ability to take the phone call and execute a job inside this business is still very much intact, John. And if it torques up, we can take the call, and we can make the money. But, boy, it really changed in planning and engineering and execution and the ability of not having that downtime. And one thing I might add further on the Infrastructure side of the business—the real mover there in this type of market environment is something like skim oil. We generate a good amount of skim oil out of that Infrastructure footprint. And so any uplift in the commodity price in the short term or medium term, if it becomes more stabilized, is something that gives us upside opportunity as we continue to extract incremental oil barrels out of that footprint, whether it is through recycling, disposal, or solids. Either way, you are in a position to catch your oil, and that is a good opportunity set for us to move up with the spot market oil pricing. And then I would say, furthermore, the ability to be responsive to the market’s need for reuse barrels versus dispose—yeah, the more we can reuse that barrel versus put it downhole and get rid of it, the more opportunity we have to maximize the revenue and the value stream out of that barrel potential. And so, obviously, it is a good market environment to potentially do that. Analyst: Got it. Okay. Well, thank you for including me. John Smith: Thank you. Thanks, John. Operator: Thank you. Ladies and gentlemen, we have reached the end of question-and-answer session. I would now like to turn the floor over to John Smith for closing comments. John Smith: Sure. Thanks to everyone for joining the call. We appreciate your continued support and interest in learning more about Water Solutions. We look forward to speaking to you again next quarter. Operator: Thank you. This concludes today’s teleconference. You may disconnect your lines.
Operator: Good day, and welcome to The GEO Group, Inc. First Quarter 2026 Earnings Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, 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 Pablo E. Paez, Executive Vice President, Corporate Relations. Please go ahead. Pablo E. Paez: Good morning, everyone, and thank you for joining us for today's discussion of The GEO Group, Inc.'s first quarter 2026 earnings results. This morning, we will discuss our first quarter results as well as our outlook. We will conclude the call with a question and answer session. This conference call is also being webcast live on our investor website at investors.geogroup.com. Today, we will discuss non-GAAP basis information. A reconciliation from non-GAAP basis information to GAAP basis results is included in the press release and the supplemental disclosure that we issued this morning. Additionally, much of the information we will discuss today, including the answers we give in response to your questions, may include forward-looking statements regarding our beliefs and current expectations with respect to various matters. These forward-looking statements are intended to fall within the safe harbor provisions of the securities laws. Our actual results may differ materially from those in the forward-looking statements as a result of various factors contained in our Securities and Exchange Commission filings, including the Form 10-Ks, 10-Qs, and 8-Ks. With that, please allow me to turn this call over to our Chairman, CEO, and Founder, George C. Zoley. George? George C. Zoley: Thank you, Pablo. Good morning, everyone, and thank you for joining us on this call. I will conduct the entire conference call due to Shane being out for a couple of weeks. Our diversified five business units delivered strong financial and operational performance during 2026. Our better-than-expected performance reflects significant revenue growth from the contracts that we entered into throughout 2025. As we have previously discussed, in 2025 we were awarded new or expanded contracts that represent up to approximately $520 million in incremental annual revenues, the most in a single year in our company's history. In our Secure Services segment, we entered into new contracts to house ICE detainees at four facilities totaling approximately 6,000 beds, including three previously idled company-owned facilities in New Jersey, Michigan, and Georgia, and a management services contract in Florida. We also reactivated our company-owned Adelanto ICE Processing Center in California, which was already under contract but had been severely underutilized due to a longstanding COVID-related court case. These facility activations represent annual revenues of $300 million and increased our total beds under contract with ICE to approximately 26,000 beds. The census across our ICE facilities reached a high of 24,000 early this year but has since declined to approximately 21,000, still representing more than one-third of the national ICE population of approximately 58,000. We believe that this recent decline is likely due to several factors including the recent transition in leadership at the Department of Homeland Security and the 82-day partial government shutdown of DHS resulting in a lapse in annual appropriations for ICE. During this lapse in annual appropriations, we believe ICE detention operations have been supported with funding from the “one big beautiful bill.” As a reminder, under the budget reconciliation bill, ICE received approximately $45 billion for detention available through 09/30/2029, and this funding is not impacted by the partial government shutdown. Congress has approved legislation that reopened most of DHS, excluding ICE and Customs and Border Protection, through an annual appropriations bill while proposing legislation through reconciliation for $70 billion to fund ICE and CBP through the next three and a half years. Consistent with prior shutdowns, the services rendered under our contracts with ICE have continued uninterrupted as they are considered essential public safety services. However, the timing of payments and collections has been somewhat delayed, requiring us to carefully manage our liquidity and working capital needs. With the expansion of our revolving credit facility by $100 million earlier this year, we believe we have substantial liquidity. Our first quarter 2026 results also reflected significant expansion in our Secure Transportation services on behalf of both ICE and the U.S. Marshals Service. In 2025, we entered into new or amended contracts to expand secured ground transportation services at four existing ICE facilities and at our three newly activated ICE facilities, and the support services that we provide under our ICE Air subcontract have continued to steadily increase. In addition, in 2025, we signed a new five-year contract with the U.S. Marshals Service covering 26 federal judicial districts and spanning 14 states. Overall, these new and expanded transportation contracts are valued at approximately $60 million in incremental annual revenue. Importantly, in 2025, we also secured a new two-year contract for the ISAP 5 program. ISAP is the only ICE program currently in place to provide electronic monitoring and case management services for individuals on the non-detained docket. The program relies on several forms of monitoring, including GPS ankle bracelets or a wrist-worn device that provide real-time tracking, as well as the SmartLink phone app, which relies on facial recognition, voice ID, and GPS to confirm a person's location during predetermined check-ins. ISAP counts remained relatively stable during 2026 at approximately 180,000 to 181,000 participants. Consistent with the trend we highlighted last quarter, we have continued to see a steady technology shift to more intensive and higher-priced monitoring devices such as ankle monitors. The number of ISAP participants on GPS ankle monitors has increased to more than 48,000 currently from 17,000 in early 2025. Correspondingly, the number of ISAP participants on the SmartLink mobile app has declined to approximately 131,000 today from approximately 159,000 in early 2025. We also continue to experience a steady increase in the number of ISAP participants assigned to case management services, which involve staff interaction and monitoring for approximately 111,000 individuals currently. If this trend continues, the technology and case management mix shift would continue to increase the revenues and earnings generated under the ISAP 5 contract even if overall volume remains constant. Thus, we continue to be optimistic about the importance and growth potential of the ISAP 5 contract, and we believe that it is well positioned to scale up to higher overall counts. In the fourth quarter, we were also awarded a new two-year contract by ICE for the provision of skip tracing services valued at up to $60 million in revenues per year. We began providing skip tracing services under this new two-year contract in the month of March and are optimistic that the contract can ramp up to higher volumes later this year. Finally, at the state level, we were awarded two new management-only contracts in 2025 from the Florida Department of Corrections valued at approximately $100 million in combined annual revenues. They include the 1,884-bed Graceville facility and the 985-bed Bay facility and are scheduled to transition to The GEO Group, Inc. management on 07/01/2026. Moving to our updated guidance, we have increased our outlook for 2026 to reflect the strength of our first quarter results, and we believe there are still several sources of potential upside that are not currently included in our guidance. On the revenue side, sources of potential upside include additional growth in our Secure Services segment from the reactivation of additional idle facilities and/or higher overall populations across our active facilities; additional volume increases and/or accelerated technology service mix in our ISAP 5 contract; additional revenue from higher utilization of our skip tracing contract; and additional growth potential in our Secure Transportation segment. On the expense side, our guidance assumes more moderate contribution from labor savings in subsequent quarters. Moving to our outlook for new business opportunities in 2026, we will continue to be in active discussions with ICE and the U.S. Marshals Service regarding the potential reactivation of additional idle facilities. It is our understanding that the present ICE detention is approximately 58,000 distributed over approximately 225 separate locations, which are primarily short-term jail facilities. We believe the federal government is continuing to pursue the priority of increasing immigration detention capacity to approximately 100,000 beds or more and consolidating to fewer, larger facilities. As a 40-year partner to ICE, we expect to be part of the solution. We have approximately 6,000 idle beds at six company-owned facilities, which are primarily former U.S. Bureau of Prisons facilities and therefore high security, making them ideally suited for the current needs of the federal government. At full capacity, these 6,000 beds could generate more than $300 million in combined incremental revenues. Before moving on to a more detailed review of the first quarter results, I would like to highlight our continued progress towards strengthening our capital structure and enhancing shareholder value. During the first quarter, we purchased approximately 3.6 million shares for approximately $50 million, bringing the total number of shares repurchased to 8.5 million for approximately $141 million. Our current total outstanding share count is approximately 133.7 million shares, and we have approximately $359 million still available under our $500 million share repurchase authorization. We believe our stock continues to trade at historically low multiples despite the intrinsic value of our assets and our significant growth opportunities, and we recognize that this imbalance creates a unique opportunity to enhance value for our shareholders through share repurchases. Moving to a more detailed review of our financial results, revenues for the first quarter of 2026 increased to approximately $705.2 million, up from approximately $604.6 million in the prior year's first quarter, reflecting a 17% increase. For the first quarter of 2026, we reported net income attributable to The GEO Group, Inc. operations of approximately $38.3 million, or $0.29 per diluted share. This compares to net income attributable to The GEO Group, Inc. operations of approximately $19.6 million, or $0.14 per diluted share, for the first quarter of 2025, reflecting a 96% increase year over year. Our adjusted EBITDA for the first quarter of 2026 increased to approximately $131.4 million, up from approximately $99.8 million in the prior year's first quarter, reflecting a 32% increase. Looking at revenue trends, our owned and leased Secure Services revenues increased by approximately $70 million, or 23%, compared to the prior year's first quarter. This increase was driven by the activation of our three company-owned facilities under new contracts with ICE, which was offset by revenue loss from the sale of the Lawton, Oklahoma facility and the depopulation of the Lea County, New Mexico facility. Quarterly revenues for our managed-only contracts increased by approximately $33 million, or 22%, from the prior year's first quarter. This increase was driven by the joint venture agreement for the management of the North Florida Detention Facility, as well as certain transportation revenue increases that are reported in this segment. Quarterly revenues for our reentry services increased by approximately 5%, offset by a 5% decline in non-residential services revenues compared to the prior year's first quarter. Finally, first quarter 2026 revenues for our electronic monitoring and supervision services decreased by approximately 4% from the prior year's first quarter. This decrease was driven by the reduced pricing for our ISAP 5 contract, which was offset by favorable technology and case management mix shift and some modest skip tracing revenues. Turning to expenses, during the first quarter of 2026, our operating expenses increased by approximately 15% as a result of the activation of our new ICE facility contracts and increased occupancy compared to the prior year's first quarter. Operating expenses were favorably impacted by lower-than-expected labor costs compared to our prior guidance for 2026. Our general and administrative expenses for the first quarter of 2026 declined to 8.6% of revenue as compared to 9.6% of revenue in the prior year's first quarter. Our first quarter 2026 results reflect a year-over-year decrease in net interest expense of approximately $4 million as a result of the reduction of our total net debt. Our effective tax rate for the first quarter of 2026 was approximately 28.5%. Moving to our outlook, we have increased our guidance for the full year of 2026 and issued guidance for the second quarter of 2026. We expect full year 2026 GAAP net income to be $153 million to $166 million, or a range of $1.10 to $1.25 per diluted share, on annual revenues of $2.95 billion to $3.1 billion, based on an effective tax rate of approximately 30%, inclusive of known discrete items. We expect full year 2026 adjusted EBITDA to be in the range of $525 million to $545 million. We expect total capital expenditures for the full year of 2026 to be between $137.5 million and $162.5 million. For the second quarter of 2026, we expect GAAP net income to be $33 million to $39 million, or a range of $0.25 to $0.29 per diluted share, on quarterly revenues of $715 million to $725 million. We expect second quarter 2026 adjusted EBITDA to be between $130 million and $135 million. Moving to our balance sheet, we closed the first quarter of 2026 with approximately $80 million in cash on hand and approximately $1.61 billion in total debt. At the end of the first quarter of 2026, our total net debt was approximately $1.53 billion, and our total net leverage was below 3.2 times adjusted EBITDA. With the expansion of our revolving credit facility by $100 million, which we announced in January, we believe we have substantial liquidity to support our diverse capital needs as we manage through the current partial government shutdown. In closing, we are very pleased with our first quarter results and improved full year outlook. Our strong performance has been driven by the new growth opportunities we captured in 2025 and are normalizing in 2026. Last year was the most successful period for new business wins in our company's history, and we expect 2026 to be a very active year as well. We therefore believe we have upside potential across our diversified business segments. We have approximately 6,000 idle high-security beds that remain available, which could generate in excess of $300 million in annual revenues at full occupancy. The continued shift in technology and case management mix and potential increases in counts under our ISAP 5 contract could also provide additional upside through 2026. We are also well positioned to continue to expand our delivery of secure ground and air transportation services for ICE and the U.S. Marshals Service beyond the significant growth we have already experienced. Finally, as we discussed last quarter, ICE has purchased 11 commercial warehouses that were to be retrofitted as detention facilities while contracting with private sector companies for operations. These purchases were part of a plan to acquire 24 warehouses and retrofit them as detention facilities using funds from the $40 billion provided for detention in the “one big beautiful bill.” At this time, the warehouse project has been paused, and DHS is evaluating how to proceed with this initiative to increase and consolidate detention capacity. It has also been widely reported that ICE is considering the purchase of approximately 10 privately owned turnkey ICE Processing Centers. ICE uses approximately 40 existing detention sites nationwide that are owned and operated by private contractors. CoreCivic owns and operates approximately 15 detention facilities, while The GEO Group, Inc. owns and operates 23 ICE detention facilities. I can respectfully acknowledge that we have been in discussions with ICE regarding the potential sale of multiple facilities, subject to mutual agreement on price and our continued management of those facilities under long-term support services contracts. We consider ourselves primarily a support services operator and will place particular importance on our ability to continue our support services at any facility sold to ICE. There will also be a need to renegotiate select contracts so as to eliminate the ownership costs such as depreciation and property taxes embedded in our present contracts in the event of ICE ownership. At this time, there is no definitive agreement in place with ICE and no precise timeline for the closing of any such transactions, and of course, we can give no assurances that these transactions will take place at all. But if select facilities are sold to ICE, The GEO Group, Inc. would use the proceeds to reduce debt and continue stock repurchases as well as other corporate purposes. The potential sale of multiple facilities to ICE could represent a significant liquidity and shareholder value-enhancing event for our company. While the exact timing of government actions is always difficult to estimate, we remain focused on pursuing new growth opportunities and allocating capital to enhance our long-term value for our shareholders. Given the intrinsic value of our assets, including 50,000 owned beds at 70 facilities, and our current and expected future growth, we believe that our stock is significantly undervalued and offers a very attractive investment opportunity. That completes my remarks, and I would be glad to take any questions from our audience. Thank you. Pablo E. Paez: Thank you. Operator: We will now open the call for questions. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble the roster. The first question will come from Gregory Thomas Gibas with Northland Securities. Please go ahead. Gregory Thomas Gibas: Hey, good morning. Thanks for taking the questions, and congrats on the execution there. I wanted to follow up on the potential facility sales and maybe how we should think about potential valuations in relation to the Lawton facility sale last year at, I believe, approximately $130,000 per bed. George C. Zoley: Thank you for the question. I think the Lawton per-bed valuation is a good baseline, to be followed by several other factors that should result in a meaningfully higher valuation for our ICE facilities. First, the physical plant at an ICE Processing Center is much more complicated, with the addition of courtrooms and office space requirements for ICE personnel, which adds to the cost. Second, the ICE facility locations are in or near urban areas, which add to the land and construction costs. And third, several of the ICE facility locations are in blue states, which makes their development very difficult to establish and very problematic to replicate, thus adding to their value. So, again, the Lawton sale in Oklahoma is a good baseline, but there are many things to consider beyond that which would drive the price to a higher level. Gregory Thomas Gibas: Got it. That makes sense. Appreciate that. I know you mentioned it is difficult to predict the timing of these sales, but do you believe initial sales could still be realized or announced within Q2, or is Q3 a more likely time frame? George C. Zoley: I would guess late Q2, maybe early Q3, but that is just a guess. Gregory Thomas Gibas: Fair enough. And last one for me related to some reports that ICE was activating the Central Valley Annex facility in California, next to the Golden State Annex. Is that a transfer facility, or is that new? Any color you can provide there would be helpful. George C. Zoley: The Central Valley facility actually was under ICE to begin with in 2020, and it was lent to the U.S. Marshals Service up until only recently, and then ICE has taken it over since then. It is a 700-bed facility located in the McFarland, California area, next to another ICE facility, adjacent to it. So it is part of a complex that is entirely ICE controlled. Operator: The next question will come from Joseph Anthony Gomes with Noble Capital. Please go ahead. Joseph Anthony Gomes: Good morning, and thanks for the detailed overview, George, much appreciated. I wanted to circle back on the Q1 performance, especially given the decline in ICE populations over the period — they were down roughly from 24,000 at the end of the fourth quarter to 21,000 at the end of the first quarter or today. Maybe give a little more color on how that progressed through the quarter, and also some color on the ramp-up of the reactivated facilities. Is that going as expected, or slower than expected given the decline in ICE populations recently? And what that possibly means for getting those facilities up to normalized occupancy levels. George C. Zoley: Two very good questions. Let me take the first regarding lower populations, which actually promoted an increase in our EBITDA. With respect to lower populations, it required less intake duties, less housing assignments, less off-site travel, and less labor and overtime. At one point, these facilities were extremely active as to the intake and outflow of detainees, which was very costly, often bringing people in on an overtime basis to handle intake, housing, and off-site requirements. It has stabilized at this point, and we think it will be fairly stable through the second quarter as well, with a pickup starting probably in the second half of the year. Regarding the new facilities, we had very rapid intakes at one point, and that has slowed down because of the general scale-down of ICE populations nationally. We are in a holding pattern to a large extent because of the change in administration, the lack of specific funding for ICE, and the reevaluation of immigration enforcement policies and programs. Joseph Anthony Gomes: Thank you for that. You also talked about lower-than-anticipated labor costs. Can you provide a little more color on where that is coming from and what is driving it? George C. Zoley: As I said, it is the lower number of intakes and lower overall population that drive it, primarily in overtime costs — additional people in the intake area and additional people serving in special needs cases, particularly in mental health cases, require additional staff and, in many cases, overtime. We are seeing a population that is more sickly than we have historically had, and these individuals require more off-site visits, more staff involvement, and more overtime expense. With the pause in overall population levels and intake activity, it has given us a welcome breather from the very rapid intake and outflow processing that we experienced last year. Joseph Anthony Gomes: One more for me, if I may. Last quarter you talked about looking at additional opportunities in the mental health area. How are those efforts progressing? George C. Zoley: We do have a pending proposal with the State of Florida Department of Children and Families for a forensic facility in the state that we at one time developed, constructed, and operated for eight years. We expect there will be a decision on that procurement in the next 30 days, I imagine. Operator: The next question will come from Brendan Michael McCarthy with Sidoti & Company. Please go ahead. Brendan Michael McCarthy: Great, good morning. Thanks for taking my questions. I wanted to start off on the skip tracing business. You are only about two months or so into operations there. Can you give us any detail on the current volume in that program and the revenue model associated with the program? George C. Zoley: Our guidance reflects some modest improvement in that program. We received an initial contract assignment and delivered it very quickly. There are other contractors that were awarded similar contracts; they are still working on their assignments. We are waiting for them to catch up so we can get our next assignment. Brendan Michael McCarthy: Understood. On the updated 2026 guidance, the low end of the revenue guide was brought up, but there was a more meaningful uplift in adjusted EBITDA and EPS for the year. What is the read-through there? Is it really in line with your prior comments on a lower cost structure at these new facilities? George C. Zoley: It really is at this point. That is our view of what is taking place in the financials of these facilities. We have had one month of activity to reflect on, and we think we are on track as to our guidance and the underlying assumptions. We believe we have given you good guidance. Brendan Michael McCarthy: Got it. One more on the updated guidance for CapEx — it was up 10% to 11% at the midpoint. Any insight into that increase and which specific segment will consume that incremental capital? George C. Zoley: We have 6,000 idle beds, and some of those facilities need retrofitting to bring them up to date and revise them according to the updated needs of ICE. As we get these new contracts, ICE is typically asking for more office space and areas for their use for more staff, and we have to pay for those improvements to the capital structure of the facility. Operator: The next question will come from Raj Sharma with Texas Capital. Please go ahead. Raj Sharma: Hi, congratulations on the results and raising the guidance, and thank you for taking my questions. I wanted clarity on the $520 million of revenues from wins last year. They do not seem to be fully reflected in the increase in the revenue guidance. Could you please help bridge how much of these wins will be fully ramped versus still to come, and also comment on utilization at Adelanto and the three activated ICE facilities by year-end? George C. Zoley: A $100 million of the new $520 million was related to two facilities in the State of Florida. Those facilities have not yet been activated; they start 07/01/2026, so only half of the $100 million will take place this year. Then we had an offset of two facilities with the discontinuation of the Lawton, Oklahoma facility, which was approximately 2,400 beds, and the Lea County facility, which was approximately 1,200 beds. Raj Sharma: Got it. How soon do you see a pickup in ICE detention stats, and has your outlook on ICE achieving approximately 100,000 detentions changed with the change in the DHS administration and the laws? George C. Zoley: We do not have any special insight into how the administration is reassessing the initiative to convert warehouses to detention facilities. I think there is still an objective of trying to increase nationwide capacity as close as possible to 100,000 and to consolidate from approximately 250 locations now to fewer, larger-scale facilities. As I said, we have 6,000 beds that can be activated within a few months. I think CoreCivic has maybe 10,000 beds. Both of us have expansion capabilities on those beds — we could expand our 6,000 to maybe 10,000 — and the private sector with the two major providers can provide a very meaningful increase in nationwide capacity at a very favorable, comparable cost. Operator: The next question will come from Kirk Ludtke with Imperial Capital. Please go ahead. Kirk Ludtke: Hello, everyone. Thank you for the call. George, you mentioned the 100,000 beds and fewer facilities. Do you have a sense for how many of those 100,000 beds ICE would want to own? George C. Zoley: Probably as many as possible. But I think they are starting to look at the price tags of each of the facilities and doing comparisons as to whether the existing turnkey facilities may be a better play financially and operationally than some of these other locations, which have been politically problematic. All of the plans are being reviewed and assessed, and I am sure they will come up with some reasonable conclusions. Kirk Ludtke: Why do they want to own the facilities rather than contract with third parties? George C. Zoley: It has been reported that through federal ownership there are more protections from unwarranted litigation that infringes upon the activities of ICE Processing Centers. There has been litigation regarding oversight of medical services, food services, general cleanliness, etc. It is really unprecedented and, I believe, fundamentally unconstitutional. As some blue states are considering more active involvement in oversight of facilities, I think the logical solution to much of that is federal ownership of the facilities. They are federal facilities to begin with, in my opinion. It is the federal government that is paying for the operations of the facilities, but the ownership of the buildings will provide stronger credibility in the courts as to the Supremacy Clause in the Constitution — that these are federal facilities carrying out the congressional priorities of immigration programs and policies that Congress has passed — and that states can only have very limited involvement in those policies and programs. Kirk Ludtke: Interesting. Thank you. How many beds are in your 23 ICE facilities? George C. Zoley: We have 25,000 beds in those 23 owned facilities. Kirk Ludtke: Great. Lastly, you mentioned the $45 billion. Would ICE need any type of incremental approval to do this, or is the $45 billion at their discretion? George C. Zoley: The $45 billion is at their discretion. Operator: This concludes our question and answer session. I would like to turn the conference back over to George C. Zoley for any closing remarks. George C. Zoley: Thank you for being on this call. We look forward to addressing you on the next one. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Q1 2026 Louisiana-Pacific Corporation Earnings Conference Call. After the speakers' presentation, there will be a short question-and-answer session. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Aaron Howald. Please go ahead. Aaron Howald: Thank you, Operator, and good morning, everyone. Thank you for joining Louisiana-Pacific Corporation to discuss our financial results for 2026 and our updated guidance for the second quarter and the remainder of the year. Hosting the call with me this morning are Jason Ringblom and Alan J. Haughie, who are Louisiana-Pacific Corporation’s chief executive officer and chief financial officer, respectively. After prepared remarks, we will take a round of questions. During today's call, we will be referencing a presentation that has been posted to Louisiana-Pacific Corporation’s IR website, which is investors.lpcorp.com. Our 8-K filing, earnings press release, and other materials are also available there. Finally, today's discussion contains forward-looking statements and non-GAAP financial metrics, as described on Slides 2 and 3 of the earnings presentation. The appendix of the presentation also contains reconciliations that are further supplemented by this morning's 8-K filing. Rather than reading those materials, I will incorporate them by reference. And with that, I will turn the call over to Jason. Jason Ringblom: Thanks, Aaron. Good morning, everyone, and welcome to Louisiana-Pacific Corporation’s earnings call for 2026. We appreciate you joining us. I am proud to say that in the first quarter, Louisiana-Pacific Corporation navigated the challenges of a complex market exceptionally well. Against an increasingly volatile macro backdrop, and despite significant impact from winter storms and the conflict in Iran, we delivered on our guidance. Price realization both in Siding and OSB exceeded our expectations, partially offsetting lower volumes and contributing to EBITDA performance above the high end of our guided range. I will discuss our results for the quarter at a high level before describing what we are seeing in the various markets that we serve. One highlight that we are incredibly proud of is our safety performance in the quarter. Louisiana-Pacific Corporation team members in North America worked over 1 million and a half hours with a world-class total incident rate of only 0.26. I also want to recognize our newest Siding mill in Segola, Michigan, for achieving two years without a recordable injury. Our goal will always be zero injuries, but I want to personally thank every Louisiana-Pacific Corporation team member who contributes to our award-winning safety culture. From a macroeconomic perspective, given the trajectory with which the housing market weakened over the course of 2025, we expected the first quarter would be a challenging comparable. Accordingly, as you can see on page 5 of the presentation, our net sales were down compared to the prior-year quarter, driven largely by softer OSB demand and lower commodity prices, which fell below EBITDA breakeven for Q4 of last year and Q1 of this year. OSB price softness accounted for a $66 million reduction in net sales and EBITDA. By contrast, the pricing power of SmartSide helped offset lower sales volume, moderating revenue declines. Louisiana-Pacific Corporation delivered EBITDA in the quarter of $82 million, representing an $8.08 billion decline year over year, primarily from $66 million in lower OSB prices which I mentioned earlier. Siding EBITDA was only $5 million lower despite 10% lower net sales, with the remaining roughly $9 million attributable to other factors, including South America and higher corporate unallocated expenses. For the quarter, Louisiana-Pacific Corporation delivered $0.38 in adjusted earnings per share and returned $21 million to shareholders via dividends. I am pleased to share that we saw minimal impact from crude oil price volatility in the first quarter. This reflects both near-term agility of our supply chain and operations teams as well as the longer-term algorithmic structure of many of our strategic supply contracts. We did see modest increases in freight rates, which was not surprising given how quickly diesel prices respond to crude oil supply disruptions. Overall, however, other inflationary impacts were minimal in the quarter. Alan will share some sensitivity analyses later to help model the direct and indirect impacts of crude oil price volatility on our raw material costs in the second quarter and beyond. Next, I will go a layer deeper and spend a few minutes describing how the quarter unfolded across the three market segments that the Siding business serves, each representing roughly one-third of Siding volume. I will start with off-site construction, which includes both sheds and manufactured housing. While currently largely consisting of shed volume, opportunities are plentiful to grow market share in manufactured housing as well. As discussed in our prior call, prebuys in advance of our annual price increase resulted in elevated channel inventories. This was not exclusively a shed phenomenon, but the impact was disproportionately felt in this segment. In February, we anticipated that this would be a drag on first-quarter volumes while expecting channel inventory to normalize in Q2. I am pleased to say that this has played out more or less as we expected. While shed volumes were off significantly in the first quarter, sell-through rates held up quite well, and channel inventory is now back within seasonally normal ranges. Another third of Louisiana-Pacific Corporation’s Siding volume goes into the repair and remodeling market, with prefinished ExpertFinish being our fastest growing product line within this segment. In the first quarter, ExpertFinish accounted for 12% of our Siding volume and 18% of Siding revenue. We believe that ExpertFinish has a long runway for growth and continued share gains, and we are investing accordingly to support that demand. Our newest ExpertFinish line in Green Bay, Wisconsin, which adds approximately 50 million square feet, or 25%, to annual capacity, is now ramping up and making excellent progress. We also plan to add a further 20 million square feet of capacity at our Bath, New York facility later this year and finally, in late April, we acquired a piece of land in North Branch, Minnesota, where we intend to build additional ExpertFinish capacity to support growing demand over time. The final third of Louisiana-Pacific Corporation’s Siding is used in new residential construction. One of our most significant growth opportunities is with the national homebuilders, where we remain relatively underpenetrated. We believe we are uniquely well-positioned to build mutually beneficial partnerships with these homebuilders by leveraging SmartSide’s labor-saving value proposition together with our integrated portfolio of OSB and Siding. So far in 2026, we have secured two new builder partnerships, and we continue to actively pursue additional opportunities. Just to give you a sense of scale for the business we recently secured, with the nation’s largest homebuilders, as well as the magnitude of the opportunity ahead, I will share some specifics. We currently expect to supply about 100 million square feet of SmartSide in total to 15 of the top 25 U.S. homebuilders. We estimate that this represents a high-single-digit share of the total exteriors market for these builders, and a similar high-single-digit percentage of our overall SmartSide volume. Again, we believe that the unique value proposition we can offer these homebuilders gives us significant opportunities for additional growth in the years to come. Finally, before I turn the call over to Alan, I want to recognize Dusty McCoy and Ozi Horton, both of whom retired last week from Louisiana-Pacific Corporation’s board of directors. Personally and on behalf of the entire Louisiana-Pacific Corporation team, I want to thank Dusty and Ozi for their insights, their thoughtful counsel, and their contributions to Louisiana-Pacific Corporation’s culture and strategic transformation. With that, let me turn the call over to Alan for a more thorough review of Louisiana-Pacific Corporation’s financial results and our updated guidance. Thank you, Jason. I would also like to add my thanks and congratulations to the whole Louisiana-Pacific Corporation team for a very strong— Alan J. Haughie: —quarter for safety, and to Dusty and Ozi for their service on Louisiana-Pacific Corporation’s board of directors. I know I have certainly benefited from their wisdom and guidance over the last seven years. Okay. The first-quarter performance for Siding is shown on page 8 of the presentation. In line with expectations, unit volumes were down by 18% year over year. And as discussed on the last earnings call, in addition to a slowing market, we exited the fourth quarter with increased channel inventory following the announcement of our January price increases. A disproportionate amount of that inventory was held by serving our shed customers, where elevated inventory led to volume declines both sequentially and year over year. ExpertFinish, on the other hand, continues to be the best performing product category within Siding, which in this market means volumes are flat. The 9% increase in selling prices partly mitigated the decline in volume, with primed prices increasing by 8% and ExpertFinish prices increasing by 10%. Now there are a few moving parts within all of this, so let me briefly unpack it. The largest single contributor to the reported 9% price increase is naturally our January 1 list price increase, which averaged four to five points. The remainder, let us call it four and a half points, is roughly two and a half points from favorable mix and around two points from rebate refinements. Now the mix dynamics are the result of lower volume of shed products within the primed product category and relatively strong volumes for ExpertFinish, including the two-toned Naturals subcategory which we launched in 2025. And what I referred to as rebate refinements is the final recognition of lower-than-expected rebate payments relating to the fourth quarter of last year as well as modestly lower rebate accrual rates in 2026. Both factors are, of course, volume related. As we look toward the second quarter, we expect list price realization to remain steady, of course, while mix and rebate impacts will probably normalize somewhat. So price and volume combined for a revenue reduction of $42 million, but an EBITDA hit of only $8 million. The $2 million reduction in selling and marketing costs is merely timing, and while inflationary costs have been mild so far, I will discuss this subject further in a moment. The other bar includes the nonrecurrence of the EBITDA benefit of last year’s OSB production at Siding mills, more than offset by some inventory build in anticipation of maintenance outages later in the year. The resulting EBITDA margin of 28% for Siding was, of course, helped by the rebates and inventory dynamics I mentioned earlier, and would be closer to last year’s 26% without these factors. But in the long run, the roughly 50% incremental EBITDA on volume, albeit a decline this quarter, shows the significant leverage that this business will deliver as and when growth resumes. For OSB on page 9, price is once again the dominant element. In 2025, OSB prices were at their highest in the first quarter, fell significantly in the second, and have been mired in the EBITDA breakeven for the past several months. As a result, prices are 28% lower than the first quarter of last year, resulting in $66 million less revenue and EBITDA. Low OSB volumes for both commodity and Structural Solutions reduced sales and EBITDA by a further $30 million and $10 million, respectively. Now the operations team did an outstanding job of controlling what they can: operating efficiently, minimizing costs, and prioritizing safety. As a result, mill overhead and SG&A contributed $5 million in year-over-year savings. And the $3 million negative shown in the Siding waterfall from lower OSB transfers is offset here with income. All of this results in a $12 million EBITDA loss, better than our guidance amidst a very challenging demand and price environment. Cash flow on page 10 shows net operating cash outflow of $38 million compared to an inflow of $64 million last year, reflecting the $80 million reduction in total EBITDA and a somewhat larger-than-usual buildup of log inventory. Cash ended the quarter at $164 million, and we have $900 million in liquidity, including our undrawn revolver. Now, before I conclude with our updated guidance, let me address the impact of crude oil prices on Louisiana-Pacific Corporation’s raw material and freight costs as shown on page 11. Starting with freight, roughly speaking, we estimate that each $10 per barrel increase in crude oil corresponds to a $0.03 per mile increase in Louisiana-Pacific Corporation’s variable freight cost, on a blended basis assuming current rail-truck mix and refinery margins. Louisiana-Pacific Corporation experienced total freight usage of the order of 30 million miles in 2025. So the full-year freight cost impact of each $10 per barrel increase in crude oil prices, all else equal, would be an annual impact of about $1 million. In OSB, freight is generally passed through, while Siding is priced on a delivered basis, so the EBITDA impact to Louisiana-Pacific Corporation would be mitigated by that dynamic. I should also add that Louisiana-Pacific Corporation Siding is lighter and more durable than some competing alternatives, which allows us to ship by rail and transport much more volume on a truck than these competitors can. For raw materials, excluding logs, many of our inputs have crude oil as feedstock, including resins, primer, and paint. And, of course, the delivered cost of these materials includes some freight. For raw materials across Louisiana-Pacific Corporation’s North American business, we estimate that the total annual cost impact of each $10 per barrel increase in crude oil is of the order of $1.5 million to $2 million per quarter, or $6 million to $8 million per year, all else equal. This would be split roughly 75/25 between Siding and OSB, given Siding’s more raw-material-intensive recipe. Louisiana-Pacific Corporation can experience a slight cost impact for logs when higher diesel prices impact harvesting and delivery costs, but compared to the freight and raw material costs, the log cost impact is small enough to be immaterial for modeling purposes. Now bear in mind that these are estimates of annual impacts. Many of our raw material supply contracts have trailing algorithmically adjusted prices with varying update cycles, so the specific timing of these various impacts is more variable. We saw minimal impacts in the first quarter, but if prices stay elevated, we will trend towards these annual run rates over the next two quarters or so. Our raw material cost estimates are incorporated in our updated guidance as shown on slide 12. Unlike our approach to OSB guidance, we will explicitly avoid any attempts to predict future crude oil prices. And frankly, we are less concerned about the cost impact of higher crude oil prices than we are about the broader macroeconomic and demand impacts and the general volatility driving them. You will recall that our full-year guidance was predicated on housing starts being flat year over year. Mathematically, flat starts would require a rebound in the second half. Now we made no attempt to predict the timing or trajectory of that rebound, but expected that improving consumer confidence, moderating interest rates, and seasonal increases in OSB pricing and demand would be the bellwethers that would signal its approach. And as you are all aware, especially following the conflict in Iran, not only are those market indicators not improving, but they continue to erode. Now while our order files in Siding give us a good bit of visibility into the second quarter, high input costs, falling consumer confidence, and increasing interest rates are magnifying uncertainty about demand in the back half of the year. As a result, we feel it is prudent to temper our expectations for the second half. Current lower levels of market activity anticipate Siding volume declines year over year in the second quarter of about 10%, with sequential improvements through year end. Within this, ExpertFinish is expected to continue to outperform products as we gain share relative to competing prefinished alternatives; therefore expect full-year ExpertFinish volume growth in the mid-single-digits range. List prices should remain very steady, of course. But the very strong price/mix effect of the first quarter is expected to moderate as shed mix increases now that the channel inventory of shed products has normalized. As a result of these volume and price dynamics, we currently expect Siding revenue in the second quarter between $435 million and $445 million and EBITDA between $115 million and $120 million. For the full year, Siding revenue and EBITDA are now expected to be between $1.4 billion and $1.66 billion, with EBITDA between $410 million and $425 million. For OSB, we are applying our normal methodology, assuming prices remain flat from last Friday’s printed level. Unfortunately, Friday’s print included a significant drop in the Southeast and Southwest regions, bringing OSB prices back under EBITDA breakeven levels. As a result, we now expect OSB EBITDA in the second quarter to be a loss of about $10 million. Now we do not plan to merely plod doggedly ahead should these prices persist in an oversupplied market. Again, for modeling purposes, extrapolating current prices forward, the third and fourth quarters would deliver similar results, as reflected in the revised full-year guidance. And finally, while our modeling approach has generally been to assume that Louisiana-Pacific Corporation South America and unallocated corporate expenses net to zero, the economic situation in Chile is similarly depressed and uncertain at the moment, and the soft results in South America are reflected in the total adjusted EBITDA guidance. So in conclusion, housing and general consumer sentiment are not showing the hoped-for signs of recovery yet, and this is most acutely felt in OSB demand and prices. But we remain confident in the SmartSide value proposition and in the long-run ability of our Siding business to gain share in all the segments we serve. And with that, we will be happy to take a round of questions. Operator: Thank you. We will now open the call for questions. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. In order to accommodate as many individuals as possible for questions, we will allow one question and one follow-up question to be permitted per caller. Please stand by while we prepare the Q&A roster. Our first question comes from the line of George Staphos with Bank of America Securities. Your line is live. George Staphos: Thanks, Operator. Hi, everyone. Good morning. Thanks for the details. I wanted to ask a point of clarification, maybe as a two-parter for my first question. Alan, I just want to make sure your guidance does not include any assumption on oil pricing per se, correct? If so, can you tell us what the change in oil was relative to your fourth quarter so that we could calibrate somewhat to your adjustment in guidance relative to the cost? The second part of that question is, is there a way to give us pro rata, a change in oil, how much hits percentage-wise on cost of manufacturing in Siding, and how much hits on the freight side? Alan J. Haughie: Thanks for the question. In reverse order, the cost of manufacturing through the raw materials is a much larger impact than freight. The full annualized impact of freight is relatively small, as detailed. We have more miles of transport in OSB just given the volume, so you can basically anticipate most of the cost hitting on the raw material side and in the manufacturing side. Within that, about 75% of the impact to cost of manufacturing will land in Siding just because of the more raw-material-intensive recipes of Siding relative to OSB. Our guidance makes our best attempt to reflect our current understanding of what the actual annualized impact will be, meaning that we have baked in what we have seen near term in terms of those raw material inputs and also our understanding of the various dynamics of the supply contracts with regard to their pricing algorithms and methodologies. That is about as specific as we are going to get on that rather than diving too deep into the nuts and bolts of those individual contracts. So short answer, yes, the guidance for margins does reflect our outlook of what we are seeing in the market and what we anticipate seeing in the back half of the year. And if prices go significantly higher or lower, you have the sensitivities to give it some Kentucky windage. George Staphos: Okay. The second question is on the 100 million square feet of Siding across the 15 of the top 25 builders. Is that the 2026 actual volume that you expect, or is that a run rate? And what was the base in 2025, if you could share that? Thank you very much. Jason Ringblom: I will touch on that, George. The 100 million feet that we specified is, in fact, where we think we will land in 2026. Obviously, with the wins that we have communicated in recent calls, the prior-year volumes were lower. What I would say about the programs—we are not going to give specific names—but each one of these meets a material threshold for us and adds several thousand homes to our portfolio. In both cases, these programs that we talked about really provide us access to new markets where we are underpenetrated, specifically in the Southeast and Southwest markets. Because of that, it is allowing builders and contractors to experience the benefits of using SmartSide, in many cases for the first time with respect to installers. George Staphos: Is there any way to size that—a one-third increase, a 25% increase, a 2% increase? Any granularity would be helpful, and thanks, good luck in the quarter. Jason Ringblom: I would say it is above 10%. Operator: Our next question comes from the line of Michael Andrew Roxland of Truist Securities. Your line is live. Michael Andrew Roxland: Thank you, Jason, Alan, and Aaron, for taking my questions. One quick one. I believe the gap between vinyl and engineered wood Siding has narrowed. Vinyl—you are seeing increases due to oil. I think there has been a price increase announced for May, 3% to 8% in most products. So where does the price spread currently stand between vinyl and engineered wood, and how does that compare to, let us say, three or six months ago? Have you seen any switching to engineered wood or, even if not switching itself, indications of interest to switch to engineered wood as a result of this narrowing spread? Jason Ringblom: Mike, I will touch on that. As you noted, we are hearing from our customers that there are some manufacturers going up on the vinyl side; that just makes SmartSide more attractive with regard to that specific comparison. That is something we are keeping a close eye on. But I think most of that has taken place over the course of the last 30 days, essentially. So we have not felt anything material in our order file as it relates to some of the changes in pricing dynamics in the market. Michael Andrew Roxland: Got it. So in terms of your customers themselves, nothing in your order file just yet, but indications that there could be increased orders or better demand should this spread continue to narrow? Jason Ringblom: Yes. I think anytime that spread narrows, it presents an opportunity, and we are positioned well to capitalize on that. We like the narrowing of that spread, and we will take advantage of it where we can. Michael Andrew Roxland: One quick follow-up, Jason. Where does that spread currently stand relative to three months ago, six months ago? Jason Ringblom: It is tough to really put your finger on that. What we are hearing is price increases in the neighborhood of 6% to 12%, depending on who it is. So the spread has narrowed by that much. Michael Andrew Roxland: One last one, and I will turn it over. Any update on the potential conversion at Maniwaki? Jason Ringblom: I can touch on that, Mike. As of today, we have, roughly speaking, about 400 million to 500 million square feet of capacity to support our growth on the primed side. We have explained our options for expansion on prior calls, so I will not get into that. But the engineering work continues on a couple of different paths, including Maniwaki. Nothing new there to share, but I would expect we will be in a position to share more information in the coming quarters. Operator: One moment for our next question. Thank you. Our next question comes from the line of Anika Dholakia. Your line is live. Anika Dholakia: Good morning. You have Anika Dholakia on for Matt today. Thank you for taking my questions. First, staying on capacity—even if volumes come in softer than expected, our understanding is that the Green Bay line would still support margin expansion given its higher efficiency. Do you have a sense of the magnitude of the potential margin benefit if this were the case? And how is that contemplated in the guidance? Alan J. Haughie: Yes, thanks, Anika. Good question. It is contemplated, but the margin benefit really accrues to us more when the facility is fully ramped up. Early in its ramp-up, which is where we are now, that effect is less pronounced, both by virtue of lower efficiency in the early days of operations and the smaller amount of volume as it goes through. Very roughly speaking, if you think about the margin improvement for ExpertFinish as being on a similar trajectory that it was last year, I think that puts you in the right ballpark. As we get more volume through that facility, we will really be able to see the effect of that efficiency and get more specific about its actual effect in subsequent quarters. We will certainly bleat about it as and when it happens. Anika Dholakia: Okay. Great. That is really helpful. Second, back to the new construction opportunity—when we think about the Siding volume at the 15 of the top 25 builders, where can this high-single-digit number get to as we think of a more normalized starts environment? And then more broadly, longer term, for your new construction strategy, how are you growing in that channel? Is it more growing wallet share, or is it building up the number of builder partnerships? Jason Ringblom: Appreciate the question. In the new construction segment, specifically with the top 25 builders, we still have a relatively small share position—in the high single digits, as we noted earlier—so there is a ton of opportunity there. At the end of the day, we are trying to be very disciplined and strategic in terms of where we leverage these enterprise programs. It is really about getting access to markets where we are historically underpenetrated, building a stocking dealer base around those programs, and then building our business around some of those wins. In terms of the growth opportunity, at high single digits, the opportunity is very significant for us, and that will be the focus going forward. Operator: One moment for our next question. Our next question comes from the line of Ketan Mamtora of BMO Capital Markets. Your line is now open. Ketan Mamtora: Maybe just coming back to the full-year Siding guidance. Backing into the numbers, it feels like the guide is $32 million below what you all had talked about at the midpoint of guidance. But Q1 was a solid beat—about $18 million higher. It almost feels like a $50 million swing for the remaining three quarters. Can you highlight two or three key points that would help us think about the key pieces here? Alan J. Haughie: Sure, Ketan. The drop in guidance—it is about a $50 million drop from the midpoint. High level, you have to assume that the majority of this reduction is volume related. Call it $70 million of volume, which comes through at a 50% variable margin. So that accounts for about $35 million. There is then about $15 million to $20 million of impacts from oil in the back half of the year, concentrated more in the second half than in the second quarter. So that $50 million is roughly $35 million from volume and the balance from oil-based costs. Ketan Mamtora: Perfect. This is very helpful. And then, Jason, you talked about expanding the dealer network. There was a recent partnership with Sherwood Lumber on the East Coast. Can you talk about how you are thinking about your existing distribution partnerships—how you are thinking about them, those relationships, and where you have opportunity to penetrate more? Jason Ringblom: Appreciate the question, Ketan. We have really good access to market through our traditional two-step distributors. Typically, in most markets, we have two distributors; in some, there might be overlap where we have three. Those two-steppers provide supply to many of the pro dealers and one-steppers. That is where our access to market could be improved in some regions and really is the focal point of our enterprise program strategy—to build out that pull-through demand in underpenetrated markets so we can build our stocking dealer network with those pro dealers, one-steppers, etc., to grow our business with contractors and builders beyond those programs. Operator: Thank you. Our next question comes from the line of Steven Ramsey with Humphrey. Your line is live. Steven Ramsey: Hi. Good morning. I wanted to think about the cross-selling to builders. Clearly it seems like success winning share with builders. Can you parse out how much of that is success cross-selling OSB and Siding, or is this pure Siding wins? Jason Ringblom: Thanks for the question, Steven. It is both. I believe that the integration of our two businesses that occurred roughly a year ago at Louisiana-Pacific Corporation is allowing us to be more creative, more flexible, and more responsive when it comes to addressing the needs of our customers. These programs are not cookie-cutter in nature. They are tailored to meet the needs of each respective customer. We are in the early stages. We have one of the most robust portfolios of products or solutions in the industry, and we are in a unique position to leverage that to drive value for targets in the marketplace. Steven Ramsey: Looking at Siding, it seems like the implied second-half margin is a bit lower than the first half. How much of that is more builder series from these builder wins, or higher ExpertFinish volume, which I know is a mix negative for margin even though it is on an upward trajectory itself? Can you talk through the second-half dynamics of Siding margin? Jason Ringblom: Steven, I would say both of those factors are relatively small compared to the overall volume decline and the raw material price increases that Alan mentioned earlier. Operator: Our next question will come from Sean Steuart from TD Cowen. Your line is open. Sean Steuart: Thanks. Good morning, everyone. A couple of questions. The $200 million earmarked for strategic growth capex—that was consistent quarter over quarter. Can you remind us how much of that is ExpertFinish growth and how much, if any, would be earmarked for Maniwaki work, presuming you advance that project? Is any of that total earmarked for that project? Alan J. Haughie: There is close to $100 million in here for ExpertFinish expansion. Not all of it is the new mill—some of it is the New York upgrade and completion of the New York facility. So about $100 million there. There is $20 million to $30 million on the next major Siding mill. Call it $130 million of Siding capacity expansion—about three-quarters of it is ExpertFinish. Sean Steuart: Thanks for that. And then, Alan, you touched on the log inventory build in Q1, which I guess is Canada and the Northern U.S. That seemed to be a bit larger than normal. Can you go into some of the factors there and how we should think about the unwind through the remainder of the year? Alan J. Haughie: The unwind will be just the normal course of consumption. We did do some forward logging as oil prices rose, and I am very pleased with the efforts of the team to get ahead of some of the freight costs, because once we get the spring breakup, there is very little we can do. So we got a little bit ahead of it. The majority of the remainder is in anticipation of Siding maintenance projects that mean we need to get a little bit ahead on finished goods as well. It is actually a piece of cost mitigation that really triggered it. Operator: Our next question will come from Kurt Willem Yinger from D.A. Davidson. Your line is open. Kurt Willem Yinger: I wanted to unpack the full-year Siding sales outlook. By my math, it is a high-single-digit decline in volume. I think maybe a couple of points of that would have been the destock in Q1. How does that underlying mid-single-digit volume decline compare to what you are expecting from the overall market, and what should we infer from that in terms of market share expectations? Alan J. Haughie: High level, we think we are going to perform relatively well as in growth in both off-site and ExpertFinish—this is fundamentally gaining market share. The rest of the product lines—everything that is not off-site and ExpertFinish—is going to be down high teens. That is where you see the greatest impact of the underlying weak market. So assume off-site and ExpertFinish are going to have modest growth, and high-teens decline in everything else. That is the shape we see emerging. Kurt Willem Yinger: Got it. On ExpertFinish, the flattish volumes in Q1 and the mid-single-digit outlook for the year—is that a function of capacity constraints, or how do we unpack that deceleration versus what we saw last year? Jason Ringblom: We are still dealing with a little bit of the ExpertFinish allocation hangover, if you want to call it that. We came off allocation in February, and now that we have visibility into channel inventories, we have noticed that they are a little bit higher than where we would like them to be, which is not uncommon when you come off a managed order file. We believe the first half is going to be a little bit weaker than the second half, due to our channel partners bleeding down inventories to more normal levels. Operator: Our next question will come from Mark Adam Weintraub from Seaport Research Partners. Your line is open. Mark Adam Weintraub: Just wanted to follow up on the last question. Alan, you mentioned for primed and for some of the other businesses some growth, but down in the mid- to high-teens in some of the other businesses. Is that because customers, in part, are moving from the businesses where you see yourselves being down mid- to high-teens into the areas where you are flat or growing, or are there two different dynamics going on here? Jason Ringblom: The biggest dynamic we were dealing with—though we are mostly through it—was related to the shed segment and how much inventory carried over into the new year. I would say we are 85% of the way through that; there is still a little bit of excess inventory there. We have really good visibility into our order file for Q2, but beyond that, there is a tremendous amount of uncertainty looking into the back half of the year. We feel good about what we are doing in the new construction segment and feel like we can outpace housing starts in that segment. In repair and remodel, ExpertFinish being up mid-single digits will be reflective of a better performance than the R&R segment as a whole. Mark Adam Weintraub: So it sounds like it is really shed where the source of relative performance is going to be soft this year versus your historical algorithms against overall market growth. Is that fair? Jason Ringblom: Yes, I agree with that. We pay close attention to sell-through rates in that segment. We get data from our distributors, and we are pleased to see that those sell-through rates have held up quite well. So it is really just an inventory dynamic that is playing out in 2026. Mark Adam Weintraub: One last real quick one—Maniwaki. Can you remind us, is that particularly well positioned if growth in primed continues to be a main focus, or not necessarily? Jason Ringblom: Maniwaki is certainly an option for us. If we went that direction, it would be the largest OSB plant that we have converted to Siding. It would end up being our largest primed Siding facility. We are still assessing all of our options and are pursuing parallel paths in some cases. Operator: Our next question comes from Susan Marie Maklari from Goldman Sachs. Your line is live. Susan Marie Maklari: My first question is on the Siding side of the business. Can you talk about how you are thinking of price elasticity, and within the mid-single-digit growth you are expecting in ExpertFinish, how much of that is the underlying strength of the consumer relative to your share gains and some of those new products that are gaining momentum? Jason Ringblom: Thanks for the question, Susan. Looking at price elasticity, if you look back at our history, we typically implement a price increase one time annually. There may be a few times in our history—COVID being one—where we had a second price increase. We monitor both raw materials and broader competitive dynamics to determine where we need to position pricing. In the current environment, we are taking a wait-and-see approach, no different than our approach to tariffs last year. We do not want to make a knee-jerk decision due to what could be short-term circumstances in raw material pricing. Our focus is on playing the long game and being as consistent and predictable as possible for our customers amidst all the factors impacting our pricing decisions for Siding. We are pleased with what we realized in terms of the annual price increase that Alan spoke to earlier, and right now we are holding steady. Susan Marie Maklari: Shifting gears to OSB, can you talk about your plans for production there? Do you still expect that the industry will see capacity come online this year, or has the housing backdrop perhaps changed those plans? Could we see something shift in terms of OSB as we move through the balance of 2026? Jason Ringblom: Your guess is as good as mine in terms of new capacity coming online. I can speak to one of our competitors taking out a plant—or plants—coming offline as we speak right now in Western Canada. As it relates to OSB at Louisiana-Pacific Corporation, our strategy has not changed. We are proud of the way our team is navigating the current OSB environment—focused on operating with discipline and agility. Over time we have proven our ability to manage and control costs and continue to improve OEE and efficiency. It is a cyclical business, but I am confident that we will be ready to take advantage of the next upward step in the cycle whenever demand improves. Operator: And our next question will come from Adam Baumgarten from Vertical Partners. Your line is open. Adam Baumgarten: Hey, everyone. Good morning. Can we get some color on how Siding sell-through trended throughout 1Q and into 2Q so far? Any major change in trend? Jason Ringblom: We get data from our distributors on sell-through rates. We talked a lot about the inventory build from Q4 to Q1, and that Q1 would look a little bit weaker due to the amount of inventory that was held at the two-step level. That ended up being largely true, and most of that inventory, as mentioned earlier, has been depleted. Sell-through rates have more or less mirrored what we saw this time last year, just down slightly as it relates to the underlying market conditions in the new residential construction segment. No concerning trends at this point. We are seeing the normal seasonal uptick in those rates and are hopeful that will continue. Adam Baumgarten: Thanks. We were chatting at the Builder Show—there was some commentary around being pleasantly surprised about the interest in ExpertFinish from some of the builders. Did that play any role in the partnerships that you mentioned? Jason Ringblom: It is playing more of a role than ever, but it is still a relatively small percentage of the business that is bundled in these programs. There is a macro trend in our favor. Labor is tight and expensive. Builders are focused on job site cycle times, and I think all of that plays into our favor as it relates to ExpertFinish and the new ExpertFinish Naturals two-tone line. We believe that will be a trend that continues, and it is why we are investing more in Green Bay, Bath, and North Branch, Minnesota, going forward. Operator: Thank you. I am showing no further questions from our phone lines. I would now like to turn the conference back over to Aaron Howald for any closing remarks. Aaron Howald: Thanks, everyone. With no further questions, we will bring the call to a close there. As usual, we will be available for follow-ups. Stay safe, and we will look forward to connecting again in the next quarter. Thank you. Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect. Everyone, have a wonderful day.
Operator: Hello, everyone. Thank you for joining us, and welcome to the Everus Construction Group, Inc. First Quarter 2026 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Paul Bartolai. Please go ahead. Paul Bartolai: Thank you. Good morning, everyone, and welcome to Everus Construction Group, Inc.'s First Quarter 2026 Results Conference Call. Leading the call today are CEO, Jeff Thiede and CFO, Maximillian J. Marcy. We issued a news release yesterday detailing our first quarter 2026 operational and financial results. This release and the accompanying presentation materials are available on our website at investors.edris.com. I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements, which, by their nature, are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results could differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the Risk Factors section of our latest filings with the SEC. Additionally, please note you can find reconciliations of historical non-GAAP financial measures in the news release issued yesterday and in the appendix of today's presentation. Today's call will begin with prepared remarks from Jeff, who will provide a review of our recent business performance and an update on the progress against our strategic priorities, followed by Max, who will provide a more detailed financial update before wrapping up with guidance. At the conclusion of these prepared remarks, we will open the line for your questions. With that, I will turn the call over to Jeff. Jeff Thiede: Thank you, Paul, and good morning to everyone joining us today. We are very pleased with our strong start to the year as we delivered another quarter of record revenues, maintained our strong execution, and made important progress against our strategic priorities highlighted by the acquisition of SE and M, our first transaction as a stand-alone public company. Turning to our quarterly highlights, beginning with Slide 4. We delivered first quarter revenues of $1 billion, up 25% from the prior-year period, driven by growth across both our E and M and T and D segments. Our strong top-line performance was complemented by another quarter of solid execution as first quarter EBITDA increased 44% from the prior-year period and EBITDA margin was up 110 basis points. I am extremely proud of our track record of strong project execution. It is a direct reflection of our commitment to our operational playbook and our team's focus on executing jobs safely, on time, and on budget. I would like to thank all of our team members across the organization. None of this would be possible without their hard work and dedication. Our backlog at the end of the first quarter was a record $3.7 billion, up 20% from the same period last year, with strong growth across both T and D and E and M. We continue to benefit from favorable end-market trends across diverse markets including data center, hospitality, high-tech, transmission, and undergrounding. I am also excited to report that our backlog included the first award related to the new geography we recently entered in support of a new high-tech client. This is a perfect example of what we look for when we decide to move forward into a new geographic location. We see strong long-term opportunities in this region, have an exciting anchor project to build from, and are working alongside a general contractor with whom we have a successful long-term partnership. We are excited by the opportunities in market, and we will look to repeat this type of growth as we focus on expanding our geographic reach through both acquisitions and organic expansion. Our strong financial results reflect our disciplined focus on our strategic priorities, and I would like to highlight some of our recent progress on our key initiatives. As a reminder, our value creation framework is based on targeted commercial growth, operational excellence, and disciplined capital allocation. In terms of commercial growth, we have clearly benefited from strong end-market trends, notably the data center submarket. However, our growth is not just data center work, as we continue to benefit from our diversified end markets with solid trends in hospitality, high-tech, and utility. I just mentioned the high-tech project award in our new geography, which is another example of our diversification and highlights our position in the attractive high-tech market. In addition to our organic growth, a key aspect of our acquisition of SCNM is their expertise in pharma and healthcare, which are areas we expect to be strong growth drivers for years to come. We remain committed to a diversified approach to growth and believe we are very well positioned to benefit from favorable trends across our end markets given our strong customer relationships, track record of execution, and our highly skilled workforce. Now turning to operational excellence. We continue to benefit from execution upside with our first quarter performance further building on our strong 2025 results. While the positive project closeouts get attention, it is our broader execution across all 40 thousand-plus projects we do in a year that enables us to deliver execution upside. This means it is just as important, if not more important, to avoid problem contracts as it is to deliver closeout benefits. We take great pride in our ability to exercise disciplined project selection and successful execution represented by the stability in our margins over time. There are a lot of factors that go into our ability to deliver consistent execution over the long term, such as our focus on our operational playbook and the dedication of our team. Another key factor driving our performance is our diversified and balanced approach to project size and contract type. As we have discussed in the past, we are evenly balanced across project sizes and by contract type, with about half of our projects being fixed price and about half being cost plus. We like to maintain this balance throughout our company. We often get asked, why do we not do more fixed price work to enable margin upside? When we have an opportunity to do a project on a fixed price basis that is in the area of our expertise, with a customer we know and where we are confident in the details of the contract, we will certainly look to pursue and win additional fixed price work. But in general, we like to maintain a balance between fixed price and cost plus because on large, complex projects there could be more risk. Cost plus contracts, especially on very large, complex projects, help mitigate that risk. Also, as we have discussed in recent quarters, we are often being brought into project discussions very early, before the ultimate scope and design of the project is fully known, which makes it difficult to bid at a fixed price. Being selected early on a project before design is completed provides a great opportunity to execute work at a high level and build relationships. We will always look to convert cost plus projects to fixed price when it makes sense, but generally we will look to execute large, complex projects on a cost plus basis. We have a long track record of delivering stable margins that increase modestly over time. We are always looking to deliver execution upside, but our primary focus is steady margin improvement and no surprises. End markets are strong right now, and perhaps there are opportunities to do more with customers in the near term to drive margins. That is not our objective. Our strategy is to build long-term relationships, win the next project and the next one, and deliver steady, modestly higher margins over time. This is what we have done successfully and we remain confident in our ability to continue going forward. And finally, our focus on disciplined capital allocation. Clearly, the highlight so far this year has been our acquisition of SCNM. Acquisitions are a critical part of our capital allocation and growth strategy, so we are very excited to have completed our first transaction as a standalone company. As we have detailed, our acquisition strategy is focused on expanding our geographic footprint, diversifying our business, and deepening our market presence. We think SCE and M checks all these boxes. SCE and M is headquartered in North Carolina and expands our footprint in the very attractive Southeast region. This is a geography that is experiencing strong growth across a wide range of end markets that SCNM serves, including pharma, healthcare, and complex industrial. SCNM is a leading provider of mechanical, electrical, and plumbing services with about two-thirds of its revenues coming from mechanical services. Additionally, the company generates more than 60% of its revenue from service work, and renovation and retrofit work, which provides a stable and profitable revenue stream. SCNN is led by an experienced management team and, importantly, their current leaders, Zach Bynum, Patrick Rogers, and Alex Bynum, as well as other team members of their team, are remaining with the company. We are very excited to have SCNM as part of the Everus Construction Group, Inc. family. While it has only been a few weeks since the deal closed, integration is on track and they are fitting in nicely with our team. After the SCE and M transaction, our pro forma net leverage as of April 2 was approximately 0.5 times, which gives us ample flexibility to continue executing on our growth strategy. Our acquisition pipeline remains active, and we are hard at work looking for the next company to add to the Everus Construction Group, Inc. family. In summary, we are encouraged to see the strong momentum from 2025 carry into this year, and we are certainly very excited to get our first acquisition completed. Based on our strong start to the year, with the inclusion of SCNM, we are pleased to be raising our 2026 guidance, which Max will discuss in more detail. We remain committed to our forever strategic priorities and remain highly confident in our ability to deliver on our long-term financial goals. With that, I will turn it over to Max. Maximillian J. Marcy: Thank you, Jeff, and good morning, everyone. I will provide additional details on the quarter, give an update on our liquidity and balance sheet, and wrap up with our updated guidance. Beginning on Slide 11 of the presentation, revenues for the first quarter were $1.04 billion, an increase of 25% compared to the same period last year. The increase was driven by growth in both E and M and T and D segments. Total EBITDA was $88.9 million during the first quarter, an increase of 44% from the same period in 2025, driven by solid revenue growth, continued strong project execution, and some favorable weather. As a result, our first quarter EBITDA margin was 8.6%, up 110 basis points from 7.5% in the prior-year period. At March 31, total backlog was $3.68 billion, up 20% from March 31 last year. Our T and D backlog was up 10% compared to last year due to increases in the utility end markets, specifically transmission and undergrounding work, while our E and M backlog was up 22% reflecting growth in data center and hospitality as well as the first large award relating to the new geography we entered last year. We remain encouraged by the favorable trends in several of our key end markets and we remain confident in our ability to generate continued backlog growth. Now turning to our segment results. First, E and M, where our first quarter revenues increased 29% to $835.1 million. The increase was driven primarily by growth in our commercial market with continued strength in our data center submarket. Our E and M EBITDA was $75.3 million in the first quarter, an increase of 52% compared to 2025. The increase was driven by our strong revenue growth and higher gross margin due to project timing and efficient project execution. As a result, our E and M segment EBITDA margin was 9%, up 140 basis points compared to 7.6% in 2025. Our first quarter T and D revenues were $204.4 million, up 10.5% from the first quarter of last year, driven by growth in utility end markets and more favorable weather as we had limited weather disruptions in the early part of the year. T and D segment EBITDA was $27.1 million in the first quarter, up 35% from the prior-year period due to the higher revenues and strong execution. As a result, T and D segment EBITDA margin was 13.3%, up 240 basis points compared to 10.9% in the same period last year. Turning to our balance sheet and liquidity. As of March 31, we had $275 million of unrestricted cash and cash equivalents, $281.2 million of gross debt, and $222.8 million available under the credit facility. We had virtually no net debt at the end of the first quarter. However, our pro forma net leverage, defined as net debt to trailing twelve-month EBITDA, as of April 2 after completing the SE and M transaction, was approximately 0.5 times. Operating cash flows were $143.7 million for the first quarter of 2026, compared to $7.1 million in the same period last year, due to the strong operating results and favorable working capital timing. CapEx was $15.5 million for the first quarter, down slightly from $18.5 million in the prior-year period. While we continue to expect higher capital spending to support our organic growth strategy for the full year, the comparison during the first quarter reflects the purchase of the new Kansas City FreeFab facility in the first quarter of last year. We generated free cash flow of $131.9 million in the first quarter of 2026, up from a use of cash of $8.1 million in 2025. Our first quarter free cash flow reflects some timing benefits. We still expect a more normalized free cash flow conversion for the full year, with our forecasted growth in operating results largely offset by our higher levels of growth investments. Now wrapping up with guidance. We are encouraged by the solid start to the year, which included another quarter of strong execution and some favorable weather. It is also worth highlighting that given our shift in revenue mix due to the strong growth in E and M, we should see more muted seasonal patterns to operating results in 2026. We did not really see any seasonal dip in the first quarter, so we do not really expect much of a seasonal step-up through the year. Based on our strong first quarter results, as well as the inclusion of SCNM, which closed in the second quarter, we are raising our full-year 2026 guidance. We are not providing explicit guidance on SCNM, but as a reminder, in 2025 the business generated $109 million of revenues, with high-teens EBITDA margin. As a whole for Everus Construction Group, Inc., we are now forecasting 2026 revenues in the range of $4.3 billion to $4.4 billion and EBITDA in the range of $345 million to $360 million. At the midpoint of our range, our guidance implies EBITDA margins of 8.1%, which reflects the execution upside from Q1 as well as the margin accretion from SE and M. For the balance of the year, our guidance continues to assume EBITDA margins of right around 8% for the legacy business. Operator, we are now ready for the question and answer portion of our call. We will now open the call for questions. Operator: We will now begin the question and answer session. Please limit yourself to one question and reenter the queue for any additional follow-ups. If you would like to ask a question, please press star 1 to raise your hand. And to withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q and A roster. Your first question comes from Brian Brophy with Stifel. Your line is open. Please go ahead. Brian Daniel Brophy: Appreciate you taking the question. Nice margin this quarter. Jeff, you mentioned in your opening comments that this was the first award associated with the new geographic expansion. Does that imply some visibility into additional awards with this high-tech customer that you are referencing, or are you just kind of expecting more awards in that new geographic region with other customers? Thanks. And then on the strong cash flow, curious to what extent better payment terms are driving some of the strength and, outside of the quarter and bigger picture, whether you are seeing better payment terms generally and if we should expect that to sustain into the future? Jeff Thiede: Good morning, Brian. We are expecting more awards as the project continues to develop and design develops. The key is that we had line of sight in working with a long-term general contractor customer in a new geography with a new end user. This was exciting to us. We were able to plan for core resources to be able to mobilize and to be able to take on and ramp up slowly so we could execute successfully. So we continue to see more opportunity on that site as we focus on that project and the backlog that we have generated and the backlog that we see in the near future. In addition, we are looking for additional business as it becomes available in that new geography. On payment terms, through our contract reviews and our selection of projects and contract terms and conditions, those are top-of-the-list items for us to be able to negotiate good payment terms in addition to other T’s and C’s. We have seen improvement and movement from our customers over the last several years. Billing ahead on cost-plus jobs and making sure that we are anticipating when those costs hit our books is something that we have focused on through our operational excellence initiative, and we are seeing the results in that. Maximillian J. Marcy: And, Brian, I would just add, it is a very strong cash quarter. I think it is a lot due to timing rather than a persistent result like that in every single quarter. So more timing this quarter, maybe more normalized as the year progresses. Operator: Your next question comes from Joseph Osha with Guggenheim. Your line is open. Please go ahead. Analyst: This is Mike [inaudible] on for Joe. Just a question on the backlog. That obviously grew pretty nicely. Are you able to provide a little bit more color on the composition in terms of the percent for data centers, hospitality, and high-tech? Jeff Thiede: Thanks for the question. The delivery of our services and our ability to execute at a high level puts us in a great position for future work. We are still seeing a similar level of competition that we have seen over the last couple of years, and our ability to target and select projects in a disciplined manner so we can deploy those resources and bring those returns and that success of our safety and production metrics is something that we have gotten better and better at. So the competition is still about the same as it has been for the last couple of years. But as we continue to get better and build and strengthen our relationships through execution, we see a lot of opportunity to be able to achieve the backlog that we need to be able to support the growth of our business. Maximillian J. Marcy: We do not break out the percentage of data center in the backlog, but the growth did come across a number of markets. It was not just data center. It was across our commercial segment and our industrial segment. So we have good growth in our backlog across our business. Operator: Your next question comes from Cantor. Your line is open. Please go ahead. Analyst: Good morning, Jeff, Max, and team. This is Shweta here on behalf of Manish. Congrats on a very strong quarter and the very first acquisition. Jeff, a question for you on the contract mix and the risk discipline. As customers bring you in earlier on large, complex work, should we now expect cost plus to remain a larger share of major projects, and does that cap margin upside but improve margin consistency? And then on SCNM, I know you are not giving explicit guidance, but the business generated $109 million of revenue in 2025 at a high-teen EBITDA margin. Should investors now assume a similar annualized revenue base post close? Any integration costs or seasonality we should consider for 2026 contribution? Maximillian J. Marcy: We really appreciate our mix of contract type. We want to manage that cost plus versus fixed price. As Jeff said in his comments, it helps us manage the downside and that, along with project selection, really helps to manage our margins incrementally up as we go forward. Our goal is not to really change that mix. Our goal is to grow with our customers and continue to balance that mix. Jeff Thiede: I would add that if you think about the medium- and small-sized projects, which generally speaking have a higher margin, those are incredibly important to us. And sequentially, our service group, which is a smaller part of our business yet a very important part of our business, has seen backlog increase from this past quarter to the previous quarter. On SCNM, it is forecasted to contribute between mid-teens and high-teens EBITDA margin for 2026, and that covers most of our guidance lift. Our stronger core performance and confidence in our ability to build upon our operational excellence complete the balance of our updated guide. Maximillian J. Marcy: On seasonality, there are no seasonality factors that we are thinking of there. We gave you 2025 revenue when we did the deal, and you could assume probably some mid- to high-percentage growth rate on their revenue, and then, as Jeff said, maintaining those margins that we disclosed earlier. Operator: Our next question comes from Wolfe Research. Your line is open. Christopher Senyek: Hi, guys. Great quarter, again. Couple questions. Given the very strong E and M backlog and strong data center end market, I was surprised you did not raise yearly EBITDA guidance beyond the actuals and the acquisition. Is that just a matter of being early in the year or conservativeness, or is there anything else we should be thinking about as we model it for the remainder of the year? And second, are you seeing incremental transmission and utility investment tied specifically to powering large data centers? In other words, is there a meaningful pull-through demand benefit in the T and D segment from the same AI infrastructure trends that are driving the E and M growth? Lastly, on labor availability, given your exceptional revenue growth rates and strong end demand in E and M, are you coming across labor availability issues as you scale, and could that become a constraint? Jeff Thiede: It is early in the year. When you look at our line of sight on some of the projects and our record backlog and the timing of that, we are going to take another close look throughout the quarter and be able to report that in future quarters. Our record backlog includes jobs that we were just awarded, and for us it is very important to make sure we have the right profile and the right model. On T and D, we are seeing increased opportunities in those areas, and in fact, our transmission backlog has increased sequentially for the quarter. We are really confident in our ability to pursue medium- and large-sized transmission projects. We are going to be very selective. It has to be in our core geographies, and we have to have the available resources. We also do not want to abandon our customers on the MSA work, which is between 55%–60% of our T and D revenue and a very important part of our business. So we do see increased opportunities. We are going to be selective so we can execute and continue with the success on our really strong margins in our T and D segment. On labor, qualified available labor has always been a challenge for us. We put more and more emphasis on outreach, and once we are able to bring people into our record employment levels, we focus on thorough orientation, training, and development so we can continue to attract, retain, and build upon our record employment. We put more emphasis on it, we are really good at it, and we do not take this lightly. We want to make sure that we have high performers to support our growth projections, and I am confident that we can scale because of our team of people that focus on our operations and our people business. Maximillian J. Marcy: As a reminder on guidance, as we said last quarter, we had some good visibility to execution early in the year. You can see, especially with our cash flow and the timing of that, some projects coming to a close, so some of that good did come forward. That is why, for the remainder of the year, our guidance has margins reverting back towards more of our core margins for the remainder of the year. It is more timing than anything, not a step change in profitability. Operator: There are no further questions at this time. I will now turn the call back to Jeff Thiede for closing remarks. Jeff Thiede: Thank you, operator, and thank you all again for joining us today. We will be attending several upcoming investor events including the Oppenheimer Industrial Growth Conference as well as the Stifel and KeyBanc conferences in Boston. If we are not able to connect during the next few months, we look forward to speaking with you on our next quarterly earnings call. Thank you for your time and interest in Everus Construction Group, Inc. This concludes today's call. Operator: Thank you for attending. You may now disconnect.
Operator: Hello, everyone. Thank you for joining us, and welcome to SmartRent, Inc. first quarter 2026 earnings release. After today's prepared remarks, we will host a question-and-answer session. To withdraw your question, press 1 again. I will now hand the conference over to Kelly Reisdorf, Head of Investor Relations. Please go ahead. Kelly Reisdorf: Hello, and thank you for joining us today. My name is Kelly Reisdorf, Head of Investor Relations for SmartRent, Inc. I am joined today by our President and Chief Executive Officer, Frank Martell, and Daryl Stemm, Chief Financial Officer. Before the market opened today, we issued an earnings release and filed our Form 10-Q with the SEC, both of which are available on the Investor Relations section of our website. Before I turn the call over to Frank, I would like to remind everyone that the discussion today may contain certain forward-looking statements that involve risks and uncertainties. Various factors could cause our actual results to be materially different from any future results expressed or implied by such statements. These factors are discussed in our SEC filings, including in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. We undertake no obligation to provide updates regarding forward-looking statements made during this call, and we recommend that all investors review these reports thoroughly before taking a financial position in SmartRent, Inc. Also, during today's call, we will refer to certain non-GAAP financial measures. A discussion of these non-GAAP financial measures, along with the reconciliation to the most directly comparable GAAP measure, is included in today's earnings release. We would also like to highlight that our quarterly earnings presentation is available on the Investor Relations section of our website. And with that, I will turn the call over to Frank. Frank Martell: Good morning, everyone. My remarks today are going to focus on the more notable financial and operational accomplishments the team delivered in the first quarter. This progress builds on the momentum we achieved in the second half of 2025. I will also provide some important color on the progress that we are making driving our imperatives that underpin our Vision 2028 strategic plan. Daryl will close out our prepared remarks today with a more detailed discussion. Over the past three quarters, we have focused aggressively on strengthening our leadership team, rightsizing our cost structure, driving increasing levels of operating leverage through process reengineering and automation, and finally, investing in our go-to-market and technology capabilities. I believe that the benefits of this focus were evident in our first quarter operating and financial results. From my point of view, some of the more important proof points of our progress are the following. First, we grew our IoT footprint 10% in Q1 from the prior year. As of March 2026, SmartRent, Inc.'s industry-leading IoT technology solutions are now deployed in over 911,000 rental units across the U.S. These units provide our owner and operator customers with a proven rate of return on their investment while significantly enhancing the experience of their residents. We expect to eclipse the 1 million level for IoT unit installations in 2027. Second, ARR grew 9% year over year to $1 million, or approximately 39% of our total revenue. We expect to drive higher levels of ARR and profitability over the medium to longer term as we continue to expand our deployed IoT footprint. Third, gross profit and margin for Q1 totaled $15 million and 39%, respectively. Gross margins were up 630 basis points in Q1. The upswing in gross profit and margins was driven by a year-over-year reduction in cost of sales and a 32% reduction in operating expenses. Fourth, we delivered positive adjusted EBITDA of approximately $0.4 million in Q1. This was our second consecutive quarter of positive adjusted EBITDA. Our net loss on a GAAP basis fell from $40 million to $4 million year over year, benefiting from significantly lower cost run rates and a 2025 non-cash impairment charge that has no counterpart in 2026. And finally, we ended March 2026 with $99 million of cash and no debt, providing us with financial flexibility to execute against Vision 2028 with confidence. Our focus and accomplishments so far in 2026 are part of a longer-term strategy, which we call Vision 2028. I discussed Vision 2028 in some depth on our last earnings call. As you may remember, it is a three-year program built around two clear priorities. First, accelerating profitable growth by expanding our installed IoT footprint at a compound double-digit growth rate from 2026 through 2028 and, at the same time, expanding our portfolio of data-driven insights and solutions that deliver industry-leading customer ROI. Second, achieving higher levels of profitability and cash flow through accelerated growth and a highly scalable operating model. We will operationalize these priorities through five strategic pillars. First, growing our installed base at a double-digit pace. Second, scaling a world-class go-to-market organization. Third, deepening platform integration with data, analytics, and AI. Fourth, simplifying our hardware architecture while investing in next-generation capabilities. Lastly, strengthening our internal operating rigor to drive sustainable profit and free cash flow. I will provide more detail on each of these strategic pillars during subsequent calls. On this call, I plan to touch on our focus relative to accelerating profitable growth. Specifically, I believe that SmartRent, Inc. has a number of significant opportunities in the following areas. Our first opportunity is centered around deepening our penetration in the portfolios of our existing customers. Currently, our installed base of 911,000 IoT units serves roughly 600 customers who collectively own or control more than 6 million units in the U.S. That means we have deployed smart technology in roughly 15% of the addressable portfolio within our existing customer base, and 85% remains a significant expansion opportunity. Our March to 1 million initiative is first and foremost a story about converting that white space. As our installed base matures, we are also focused on a second key growth opportunity, which is establishing a cadence of hardware refreshes, which is a natural milestone for a platform at our scale and one that deepens our relationships with our longest-tenured customers. Our IoT platform currently stands at over 911,000 units installed with smart hubs connected to more than 3 million devices across approximately 3,500 properties. Equipment deployed in the company's early years is now approaching end of life. We are working proactively with customers to plan refreshes in an organized way. This ensures customers continue to benefit from our latest hardware and insights, and it gives SmartRent, Inc. a sizable hardware revenue cadence as the business matures and equipment is replaced. The third opportunity we have is expanding our reach to small and medium multifamily owners and operators as well as merchant builders through a dedicated SmartRent, Inc. team supplemented by the value-added reseller, or VAR, program that we recently launched. That program is designed to access this opportunity in a capital-efficient way, leveraging partners with established market presence rather than scaling a direct sales force to effectively address this segment. And our fourth growth opportunity is expanding our software and hardware solution sets that are powered by AI as well as our unique data repository. SmartRent, Inc.'s market leadership has been built on delivering measurable and significant ROI for its customers. We believe that we can expand the benefits within our existing footprint and for new customers through the introduction of solutions that leverage the unique insights from our data collected from millions of connected devices. We are accelerating our use of AI and other techniques that make the adoption of additional solutions in the near to medium term a significant opportunity for the company. Looking forward to the remainder of this year, we remain laser-focused on expanding our footprint of installed IoT units in line with our March to 1 million program. Despite current market headwinds, we are pushing to accelerate the growth of our core revenues while delivering positive adjusted EBITDA and cash flow for the full year. In terms of the market, although many of our customers remain cautious, we believe our solutions provide compelling ROI in all market conditions and that the long-term demand picture for our platform remains positive, as market fundamentals gradually improve. Daryl will provide additional color around market conditions in a couple of minutes. To wrap up my prepared remarks today, I want to acknowledge the hard work and dedication of the SmartRent, Inc. team as well as the support of our shareholders. Over the past three quarters, we have made significant progress on many critical fronts and are now increasingly well positioned to achieve the goals that we have outlined in our Vision 2028 strategic plan. With that said, I will now turn the call over to Daryl. Thank you, and good morning, everyone. Daryl Stemm: Today, I will walk you through our first quarter financial results in more detail, covering revenue, margins, operating expenses, and cash, and then offer some perspective on how we are thinking about the rest of the year. Total revenue for the first quarter was $38.7 million, a decrease of approximately 6% from $41.3 million in 2025, driven primarily by a $2.6 million decline in non-cash hub amortization revenue and a hardware comparison against an especially strong prior-year quarter. Although total revenue was down 6%, importantly, cost of sales was down by 15%, primarily driven by our cost alignment actions in 2025. Excluding non-cash hub amortization, core revenue was $36.6 million, essentially flat to the $36.7 million in the prior-year quarter, and we believe that is the more representative measure of the underlying volume of our business. Within the revenue mix, SaaS revenue was $0.2 million, up 9% year over year; SaaS revenue now represents 39% of total revenue. Hardware revenue was $15.4 million, down 18% year over year from $18.8 million, which reflected an unusually large customer order that contributed to an elevated prior-year comparison. Professional services revenue was $6 million, up 55% year over year from $3.9 million in the prior-year quarter, reflecting improved deployment volume within our installation teams. Before I move to margins, I want to address bookings, which were 16,592 units, down 9% year over year. Four things drove the shortfall. First, our new enterprise reps are still ramping. Q1 reflects early-stage output from a team that is not yet at full productivity. Second, our contract renewal work shifted some signings into later quarters. Third, hardware refresh conversations with long-tenured customers consumed sales capacity that would otherwise have gone towards new bookings. Fourth, the broader market environment has operators being deliberate about capital deployment decisions in a way that affects the timing of new commitments. These are timing and ramp issues. In other words, these are cyclical and not structural demand issues. Total gross profit was $15.1 million compared to $13.6 million in 2025, with total gross margin expanding 630 basis points year over year to 39.1% from 32.8%. This improvement reflects the structural cost actions we took in 2025, better operating discipline, and a more favorable revenue mix as SaaS becomes a larger share of the total. Professional services gross profit improved dramatically from a loss of $3.4 million in the prior-year quarter to approximately breakeven in Q1 2026. This is now our third consecutive quarter of positive professional services margins, reflecting genuine structural improvement in how we are executing installations and durable ARPU increases. Hardware gross margin was 18.2%, down approximately 760 basis points year over year, reflecting product mix and lower shipment volumes. Operating expenses in the first quarter were $20.2 million, a decrease of 32% from $29.9 million in the prior-year quarter. That $9.7 million year-over-year reduction is the direct result of the cost alignment actions taken in 2025 and also reflects the elimination of one-time costs primarily related to concluded legal proceedings. At the same time, we are actively reinvesting in our go-to-market organization, and we believe the sales and marketing line on our income statement will increase as we add headcount and build out the commercial infrastructure Frank described in connection with the fulfillment of our Vision 2028 imperatives. Net loss for the first quarter was $4.4 million compared to $40.2 million in 2025. The prior-year figure included a $24.9 million goodwill impairment charge that does not have a current-year counterpart. Excluding that, operational net loss improved from $15.3 million to $4.4 million year over year, meaningful improvement driven by both margin expansion and the lower cost structure created by actions taken in 2025. Adjusted EBITDA was $0.4 million and was positive for the second consecutive quarter compared to a loss of $6.4 million in the prior-year quarter, reflecting the combined effect of SaaS margin expansion, cost discipline, and improved professional services execution. We ended the quarter with $99 million in cash, no debt, and an undrawn $75 million credit facility. Cash decreased by approximately $6 million from approximately $105 million at the end of 2025. As we communicated previously, cash use in the first quarter was expected, as these results reflect the timing of annual incentive compensation payments. We view this use of cash as seasonal rather than a go-forward cash consumption level. Working capital remained healthy. Accounts receivable declined to $36.8 million from $47.4 million at year-end, reflecting strong collections resulting from continued workflow changes executed in the quarter. Inventory came down to $24.4 million from $26.7 million, consistent with our more disciplined approach to hardware procurement and forecasting. We remain confident in our ability to deliver positive adjusted EBITDA and positive free cash flow on a full-year basis. Before opening the call for questions, I want to offer a few comments related to how we are thinking about the rest of the year. On revenue, we expect continued ARR growth primarily driven by expansion of our installed base. Hub amortization revenue will continue to decline, and we expect it to be less than $5 million for the full year. It was $2.1 million in Q1, which creates a modest headwind to reported total revenue but improves the quality of our revenue mix as non-cash revenue becomes a smaller component. We expect revenue to improve as the year progresses, primarily driven by our sales team reaching fuller productivity and our VAR channel beginning to contribute. We are not providing quarterly guidance, but we expect the second half of the year to be stronger than the first. Our expectation is to be adjusted EBITDA profitable for the full year, and on cash, we expect to be free cash flow positive on a full-year basis, with Q1 seasonal use not reflective of our expected annual results. We will now open the call for questions. Operator: We will now begin the question-and-answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question. And if you are muted locally, please remember to unmute your device. Your first question comes from the line of Ryan John Tomasello from KBW. Please go ahead. Ryan John Tomasello: Thanks. I was hoping you could elaborate on the initiatives underway to scale the sales organization—just maybe any parameters around how many sales reps you currently have, the hiring plans, and just overall, Frank, the strategy there to build out more capacity and improve the productivity. Thanks. Frank Martell: Sure. Thanks, Ryan. We are going to double the on-staff sales team. We have been recruiting very heavily the last six months. We are trying to make sure that we get the highest-quality people on board, so that takes a little bit of time, but we are going to add about 25% in the next three months. We have those candidates identified, so that is ongoing. Secondly, I would say that Daryl mentioned it, but we have had a very heavy period of resetting the original founder contract base that we have, which will make up a significant difference in the profitability of the company going forward, and Daryl alluded to that. So there has been adding people but also freeing up people that have been really focused on the effort to renegotiate those contracts, and we are making significant progress there, but it takes a bit of time. We launched a VAR program, and it is a very focused program around geographic white space and using primarily installation partners that we feel really good about. We will not limit it to that, but that is the focus initially. We are getting good traction there. That is really focused on getting an economical shot at the smaller mid-market. As I mentioned in my remarks, we have a pretty good opportunity in the existing base that we have, but also we have a lot of white space in the mid-mass market. We are very hopeful, and I think we are ramping up. We should have a couple more partners. We have one on board now that we have worked with for many years, and that is, I think, immediately accretive from an order book standpoint. The plan is to get to eight to ten as we progress over the next four quarters. So it is internal and external, and we are cleaning up the prior contractual regime, so all that is underway. I would expect that we will have an impact on Q2 and then progressively thereafter a more significant impact on the bookings rate. Daryl Stemm: Frank, thanks. I wanted to add one point with regard to the renewal activity. The renewal activity had no impact on the Q1 financial results; however, the completion of our first three renewals from early-stage customers by the end of this year should have a positive impact on our SaaS ARPU of about $0.05 per unit per month. That is a pretty significant improvement. It goes through to the bottom line, so a nice accretive impact to our profitability. It also sets the stage for further SaaS ARPU improvements in the following years because those renewals have both escalation clauses built into them as well as, as these customers expand across their portfolios, it will have an increased impact as a result of more of their units being on the newer, higher prices. Ryan John Tomasello: And then maybe just dovetailing on those legacy contracts, Daryl, the $0.05 uplift is nice to hear. But maybe if you could elaborate more broadly on approximately how many units those legacy contracts relate to, where the pricing stands on those, and how you are thinking about the magnitude of what those renewal uplifts could look like, including on the three that you have gotten so far? Daryl Stemm: The three on average have about a 33% increase on their original pricing. The primary impact is simply to bring those early customer contracts more in line with current market pricing. They received large discounts when they originally signed because they were early adopters, and also these are relatively large customers, so they are going to enjoy the benefit of discounts based on their volume. Again, the notion is simply to bring them more in line with current market pricing. We had very aggressive growth between the years 2019 and 2023, and so those units that are on our platforms are really subject to these renewals. Different customers have different lengths of subscription agreements, and we are just now entering the first phase of these renewals. One last reminder is that most of these customers, due to the size of their portfolios, rolled out deployments over multiple years. The reason why we do not see the impact of these renegotiations all at once is that, over a period of multiple years, their individual community subscriptions will expire and then be renewed at these new higher prices. I would say, just rough order of magnitude, we are talking about one-third of the current deployed units—approximately 300,000 out of roughly 900,000 in total—are subject to these renewals. Ryan John Tomasello: Great. And then just last one for me before I hop back in the queue. But, Daryl, it looks like, despite the sequential growth in installed units, ARR actually declined sequentially and SaaS ARPU declined sequentially. Anything to call out there in terms of drivers? Thanks. Daryl Stemm: I would say the primary driver is two counterbalancing items. One is we experienced some churn off of our Smart Operations solution that had a negative impact on SaaS ARPU of about $0.11. The addition of new deployed units mitigated about half of that reduction. As a reminder, we have tended to experience higher churn on Smart Operations and virtually no churn off of the IoT portion of our solution set. We would expect that we will continue to make up ground off of the Q1 losses through the continued deployment of new units as well as the impact of these renewal rates. Operator: A reminder, if you would like to ask a question, please press star 1. At this time, there are no further questions. Thank you all for attending. You may now disconnect. Goodbye.
Operator: Good day, and thank you for standing by. Welcome to the Weyco Group, Inc. First Quarter 2026 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your first speaker today, Judy Anderson, Chief Financial Officer. Please go ahead. Judy Anderson: Thank you. Good morning, and welcome to Weyco Group, Inc.'s conference call to discuss first quarter 2026 results. On the call with me today are Thomas W. Florsheim, chairman and chief executive officer, and John W. Florsheim, president and chief operating officer. Before we begin to discuss the results for the quarter, I will read a brief cautionary statement. During this call, we may make projections or other forward-looking statements regarding our current expectations concerning future events and the future financial performance of the company. We wish to caution you that these statements are just projections and that actual events or results may differ materially. We refer you to the section entitled Risk Factors in our most recent annual report on Form 10-K, which provides discussion of important factors and risks that could cause our actual results to differ materially from our projections. These risk factors are incorporated herein by reference. They include, in part, the uncertain impact of U.S. trade and tariff policies, which remain highly dynamic and unpredictable; the impact of inflation on our costs and consumer demand for our products; increased interest rates; and other macroeconomic factors that may cause a slowdown or contraction in the U.S. or Australian economies. Overall net sales for 2026 were $68 million, flat compared to 2025. Consolidated gross earnings were 44.2% of net sales compared to 44.6% of net sales last year. Earnings from operations were $7.5 million for the quarter, up 7% from $7 million in 2025. Net earnings totaled $6.1 million, up 10% from $5.5 million last year. Diluted earnings per share were $0.64 in 2026, up from $0.57 in the prior year. Net sales in our North American wholesale segment totaled $53.6 million for the quarter, down 1% from $54.3 million last year. Florsheim sales were up, but the increase was more than offset by lower sales of the Stacy Adams and BOGS brands. Nunn Bush sales were flat for the quarter. Wholesale gross earnings as a percent of net sales were 38.7% and 39.4% in 2026 and 2025, respectively. Gross margins continued to be negatively impacted by incremental tariffs, partially offset by selling price increases instituted in the second half of last year. Wholesale selling and administrative expenses totaled $13.8 million, or 26% of net sales, versus $14.8 million, or 27% of net sales, last year. The decrease in 2026 was largely due to lower employee costs. Wholesale operating earnings totaled $7 million for the quarter, up 5% from $6.6 million in 2025, mainly due to lower selling and administrative expenses. Net sales in our retail segment totaled $8.8 million for the quarter, up 2% from $8.7 million in 2025 due to increased sales of our e-commerce businesses. Retail gross earnings as a percent of net sales were 66.1% and 66.6% in 2026 and 2025, respectively. Retail operating earnings totaled $800,000 for the quarter versus $600,000 last year. Our other operations consist of our retail and wholesale business in Australia and South Africa, collectively referred to as Florsheim Australia. Net sales of Florsheim Australia were $5.6 million in the quarter, up 10% from $5.1 million in 2025. The increase was due to the appreciation of the Australian dollar relative to the U.S. dollar, as Florsheim Australia's net sales in local currency were flat for the quarter. Florsheim Australia's gross earnings as a percent of net sales were 62.9% and 62.7% in 2026 and 2025, respectively, and its quarterly operating losses totaled $200,000 in both periods. In February 2025, the U.S. imposed reciprocal and retaliatory tariffs on certain imported goods under the International Emergency Economic Powers Act, also known as IEPA. We paid a total of approximately $9.198 million in IEPA tariffs in 2025 and 2026. The IEPA tariffs increased the cost of our products by 19% to 50%, resulting in gross margin compression. On 02/20/2026, the U.S. Supreme Court ruled that IEPA had not authorized the president to impose tariffs, declaring the IEPA tariffs invalid. In April 2026, U.S. Customs and Border Protection, or CBP, commenced a phased process to accept claims for potential refunds of IEPA tariffs previously paid. The refund process formally opened on 04/20/2026, and on that date, we submitted claims covering our phase one entries totaling $18.6 million. The timing for submitting claims related to our phase two entries totaling $1.2 million has not yet been established. The timing and amount of any recoveries remain uncertain and subject to execution by the CBP. Following the Supreme Court's ruling, the president announced the implementation of a new across-the-board tariff under a separate statutory authority currently set at 10%, although the scope and rate remain subject to change. U.S. trade policies continue to evolve and remain unpredictable, creating near-term gross margin uncertainty. We have mitigation strategies in place and will continue to adjust as appropriate in response to future policy developments. At 12/31/2026, our cash and marketable securities totaled $93.9 million, and we had no outstanding debt on our $40 million revolving line of credit. During the first three months of 2026, we generated $17.4 million in cash from operations and used funds to pay $23.9 million in dividends. We also had $600,000 of capital expenditures. We estimate that annual capital expenditures in 2026 will be between $2 million and $3 million. On 05/05/2026, our Board of Directors declared a cash dividend of $0.28 per share to all shareholders of record on 05/19/2026, payable 06/30/2026. This represents an increase of 4% above the previous quarterly dividend rate of $0.27. I would now like to turn the call over to Thomas W. Florsheim, chairman and CEO. Thomas W. Florsheim: Thanks, Judy, and good morning, everyone. Our overall company sales were flat for the quarter, with wholesale segment sales down 1%. Given the uncertainty in the economic environment, we believe we are holding our position within our competitive market segments, with Florsheim continuing its strong performance streak. Our legacy business, which includes Florsheim, Nunn Bush, and Stacy Adams, was flat for the quarter. The Florsheim division was up 5%, driven by strong sales in the traditional dress category. As discussed in previous conference calls, while the overall dress footwear market has been trending downward over time, Florsheim continues to gain market share. Retailers see the brand as the go-to choice to meet consumer demand in this category. From a design perspective, we continue to invest in developing fresh shoe concepts and believe we can leverage Florsheim's heritage to expand our penetration in hybrid and casual footwear. We are making steady inroads in both categories and feel confident about our long-term growth prospects. Nunn Bush was flat for the quarter. We believe the brand is well positioned as a leading value option in comfort casual and comfort dress footwear in an economy where many consumers are feeling stretched to cover day-to-day expenses. In the current market, the biggest competition comes from private label footwear that retailers import to pursue higher margins. Nunn Bush provides a compelling alternative with a trusted brand name, proven comfort technology, competitive pricing, and in-stock inventory that retail partners can use to match demand. Our Stacy Adams division was down 9% for the quarter. At retail, Stacy Adams sell-throughs have been solid; however, retailers are not investing in fashion dress shoes as they have in the past. This is especially true in department store and family footwear channels. We are focused on diversifying the Stacy Adams product assortment to be less centered on dress shoes, with more casual offerings that align with today's lifestyle. Our BOGS brand was down 11% for the quarter. We anticipate a strong second half of the year as cold weather and precipitation last winter in the Midwest and East Coast helped clear excess inventory of weather boots. We are also encouraged by the launch of new, less-insulated spring footwear, which is selling well and paving the way for more year-round BOGS business. This spring, BOGS implemented a marketing reset focused on storytelling with an emphasis on user authenticity and real-world use of the brand's products. The campaign highlights what differentiates BOGS from a performance standpoint and is being featured across multiple channels, including social media, as well as streaming on YouTube. Net sales in our retail segment were up 2% for the quarter, led by strong Florsheim e-commerce sales. In 2025, we were still working through excess inventory across various areas of our branded portfolio. This year, we had less closeout inventory to sell through our websites, resulting in higher web margins as we sold more full-price footwear. We continue to invest in our e-commerce platform to better showcase our brands and drive long-term growth in direct-to-consumer sales. Florsheim Australia's net sales were up 10% for the quarter but flat in local currency. Consumers in these markets, including Australia, New Zealand, South Africa, and other Pacific countries, are facing many of the same pressures as in North America. As a result, sales remain somewhat soft. We are focused on keeping expenses in line as we work to return to a growth trajectory. Our overall gross margins were 44.2% for the quarter. Our first-quarter margins are down approximately 50 basis points compared to the same period in 2025. With all the remaining uncertainty surrounding tariffs, it is hard to know how the margin picture will play out for the remainder of the year. Our overall inventory as of 03/31/2026 was $50.5 million compared to $65.9 million at 12/31/2025. Our inventories are also down about $18 million compared to March 31 last year. The decrease in inventory was due to timing, and our inventory is expected to get back into the $60 million to $70 million range as we move through the year. This concludes our formal remarks. Thank you for your interest in Weyco Group, Inc., and I would now like to open the call to any questions. We will now open the call for questions. Operator: Thank you. And so at this time, again, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press 1-1 again. And please stand by while we compile Q&A questions. Okay. At this time, we have David Wright of Henry Investment Trust. Your line is now open. David Wright: Good morning, everyone. Good morning. I commend you for a surprisingly good quarter given the environment, and thanks for raising the dividend. I also commend you for some really outstanding, clear disclosure about your tariff picture; that is appreciated. Judy, a question. If you receive tariff refunds, what is the tax treatment? Judy Anderson: We will be taxed on them. David Wright: Yes, right. So you had a deduction when you paid the tariff, and you have income when you get a refund. Judy Anderson: That is correct. It was part of our cost of sales last year, and so when we get a refund this year, it will be a credit in our cost of sales, and we will have to pay taxes on it. David Wright: Okay. Can you give any sense of the annualized run-rate tariff burden at the current 10%? Thomas W. Florsheim: Well, at 10%, if it was 10% all year, it would be about an extra $10 million over and above what we normally pay in tariffs, and those normal tariffs are baked in, but the tariffs in the shoe industry are actually high compared to a lot of other categories. The problem, David, is the administration has said that their intent is to get these tariffs back up to where they were under IEPA, and so it makes planning very difficult, but we are assuming that will happen. They are doing these 301 investigations, which they say are going to be complete by July, and then we are going to find out what the incremental tariff rate will be under Section 301 for the different countries where we import shoes. And so it is not a clear picture, which is why we did not really want to commit to where margins are going to be this year. We are happy to answer any additional questions about that because we are well versed. We have been studying it. David Wright: Well, just kind of big picture, I assume you are communicating somehow through a trade group or directly with, I guess, the Commerce Department. Does anybody in the administration really think that shoe manufacturing is coming back to America? Thomas W. Florsheim: We actually do have a very good trade group called the FDRA, and they have been holding regular conference calls about this. And they are trying to talk to the administration about exactly what you just asked about. I think they are aware that virtually no shoes—less than 1%—are made in the U.S., and we are really hoping that the 301 tariffs are going to be more targeted than these IEPA tariffs or the tariffs that they have in place right now under Section 122, which are just 10% across the board, all countries, on all products. It would make sense to have this more targeted in our opinion, and we are trying to get that message across to the administration. But we do not know if these 301 tariffs will be done in a more strategic way. David Wright: Okay. I just have a couple more. It seems like your price increases were pretty well absorbed because that is what the results suggest. Would that be your observation as well? Thomas W. Florsheim: We raised our prices 10% July 1, so it does not really cover what we were paying in IEPA tariffs. It does cover—right now, the extra tariff is 10%, so that is looking better. And so our margins have come back somewhat. We are still below where we were the last couple of years before the tariffs, and we have really been watching the expense side of the business. John W. Florsheim: The other thing that is going on, David—this is John—is our inventory is pretty clean. Last year, we had some heavy closeout inventory in a couple of brands, and it has been cleaned up, and that helps from an overall wholesale market perspective. Thomas W. Florsheim: That is a very good point. That definitely plays into this, and it impacts in a positive way both our wholesale margins and our retail margins. And we also have cleaner inventories in Australia, which helps our margins there. David Wright: Okay. And then last one would be on SG&A. I mean, you took $1 million out of SG&A year over year. That is a lot. You highlighted lower employee costs. Was that staff reduction or less compensation? How was that accomplished? Judy Anderson: The lower employee cost was really lower employee benefit costs, and it was a combination of a few different categories. For example, last year, we did not give out annual bonuses in the first quarter, and therefore we had less FICA expense. So it was just something as mundane as that. Our health insurance costs were down, the FICA cost was down. It was a few things that added up in the first quarter. Thomas W. Florsheim: In the warehouse, our overall costs are down because we used fewer temps. David Wright: Yeah, correct. So you have not reduced headcount here, though? Thomas W. Florsheim: We have not reduced headcount. David Wright: So your workforce flexes a little depending on your inventory level? Thomas W. Florsheim: Depending upon our needs, especially in the distribution center. We were able to operate more efficiently this last quarter versus a year ago. David Wright: Okay. Well, efficiency is a good word. You just continue to deliver great results, so great job, and thanks for taking my questions. Thomas W. Florsheim: Thanks, David. We appreciate your interest. David Wright: Thank you. Operator: And at this time, we are not showing any further questions. If anyone has a last question, please hit 1-1 on your telephone. Okay. This concludes the question-and-answer session. I would like now to turn it back to Judy Anderson for closing remarks. Judy Anderson: Thank you. I just wanted to wish everybody a great day and a good rest of your week, and we will talk to you next quarter. Thomas W. Florsheim: Thank you. Operator: Thank you. That concludes our program. You may now disconnect, and thank you for participating in today's conference.
Operator: Good morning. My name is Kara, and I will be your conference operator today. At this time, I would like to welcome everyone to The Timken Company's first quarter earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press star then number one on your telephone keypad again. Thank you. Mr. Frohnapple, you may begin your conference. Neil Andrew Frohnapple: Thank you, operator, and welcome, everyone, to our first quarter 2026 earnings conference call. This is Neil Andrew Frohnapple, Vice President of Investor Relations for The Timken Company. We appreciate you joining us today. Before we begin our remarks this morning, I want to point out that we have posted presentation materials on the company's website that we will reference as part of today's review of the quarterly results. You can also access this material through the download feature on the earnings call webcast link. With me today are The Timken Company's President and CEO, Lucian Boldea, and Michael Discenza, our Chief Financial Officer. We will have opening comments this morning from both Lucian and Michael, before we open up the call for your questions. During the Q&A, I would ask that you please limit your questions to one question and one follow-up at a time to allow everyone a chance to participate. During today's call, you may hear forward-looking statements related to our future financial results, plans, and business operations. Our actual results may differ materially from those projected or implied due to a variety of factors which we describe in greater detail in today's press release and in our reports filed with the SEC which are available on thetimkencompany.com. We have included reconciliations between non-GAAP financial information and its GAAP equivalent in the press release and presentation materials. Today's call is copyrighted by The Timken Company, and without express written consent, we prohibit any use, recording, or transmission of any portion of the call. Finally, just a reminder, we are hosting an Investor Day on Wednesday, May 20, in New York City. We hope that you will join us either virtually or in person. With that, I would like to thank you for your interest in The Timken Company. I will now turn the call over to Lucian. Lucian Boldea: Thanks, Neil, and good morning, everyone. We appreciate your interest in The Timken Company and for joining us today. I would like to start by thanking our Timken team for their hard work to deliver an excellent start to 2026. We are gaining momentum and making great progress executing our strategic priorities, including two recent actions to advance our 80/20 portfolio work. Our financial performance is strong, and we are pleased to have achieved double-digit earnings growth and margin expansion in the first quarter. Turning to our results for the quarter, total sales were up 8% from last year, and organic revenue grew more than 4% driven by higher pricing and volume growth in the Industrial Motion segment. We expanded EBITDA margins to 18.8% in the quarter, and adjusted earnings per share increased nearly 20% year over year to $1.67. With respect to capital allocation, we repurchased approximately 280 thousand shares and acquired Bijur Delimon, which I will talk about more in a moment. We ended the quarter with a strong balance sheet and net leverage of only 2.1 times, giving us continued flexibility to pursue our balanced approach to capital allocation. While Michael will take you through the details of our 2026 outlook, we are raising our guidance for organic revenue, margins, and earnings. Our outlook now implies 13% adjusted EPS growth at the midpoint of our range compared to the 8% we previously guided, and includes a more positive price/cost impact related to tariffs. We saw improved customer demand across most end markets, which was reflected in our recent order activity. Our backlog at the end of the quarter was up both sequentially and year on year, continuing the positive momentum we experienced in the back half of last year. These trends support the increase in our organic sales outlook for the year to 3% growth. Despite continued volatility around trade and geopolitics, our team is operating with urgency to execute our strategic priorities and deliver stronger performance in 2026. As I mentioned earlier, we are deeply engaged in advancing our 80/20 strategic initiative, including optimizing our portfolio as we are prioritizing actions that will have the greatest impact to company margins and growth. Last quarter, we announced that we are extending the 80/20 discipline across our entire enterprise to reduce complexity and streamline operations. While still early in the process, we are moving quickly. We have established a transformation office with dedicated 80/20 teams responsible for leading the execution of major workstreams. We have completed comprehensive training across many areas of the business and as of today, nearly 300 Timken leaders are fully trained and putting 80/20 principles into action. Our focus on these initiatives has driven two recent actions. On May 1, we announced the sale of our Belts business to Gates. This divestiture is expected to simplify our portfolio, free up resources to redeploy to our growth initiatives, and structurally improve margins for the Industrial Motion segment. We expect to complete that transaction in the third quarter. Secondly, we acquired Bijur Delimon, which strengthens The Timken Company's Industrial Motion portfolio in key markets and is expected to be accretive to Industrial Motion segment margins after synergies. The Timken Company is the natural owner of this business, and it scales our automated lubrication systems platform to nearly $400 million in total revenue. These two portfolio moves are aligned with 80/20, and the net result is a higher-margin, faster-growing Industrial Motion segment. Our teams around the world are energized by the power of 80/20, and we are confident it will be a major driver of value creation over time. I remain confident about the opportunity to raise The Timken Company's organic growth trajectory by focusing on the fastest-growing verticals and regions. This includes driving synergies through the global expansion of our acquired businesses, and we are gaining traction. For example, we saw double-digit organic growth during the first quarter in our linear motion platform in The Americas, driven by new business wins within factory automation. We are excited about the many opportunities like this ahead to leverage The Timken Company's strength and create new ways to drive higher performance. Before I turn over the call to Michael, I want to touch on the leadership transition we initiated for our Engineered Bearings segment and thank Andreas Trugan for his many years of service to The Timken Company. An external search is underway for a permanent successor. During this time, Tim Graham, our President of Industrial Motion, will serve as interim President of Engineered Bearings. Tim spent decades leading teams within Engineered Bearings, including most recently as Vice President of Operations. His deep knowledge of our operations and customers across Engineered Bearings will ensure a seamless transition. Our bearings business set the foundation for The Timken Company more than 125 years ago and remains critical to our future. Together with Industrial Motion, we have a very compelling customer value proposition. I am focused on building the right leadership structure to best position our teams around the world for even greater success. With that, let me turn the call over to Michael for a more detailed review of the results and outlook. Michael? Michael Discenza: Thanks, Lucian, and good morning, everyone. For the financial review, I am going to start on slide 8 of the materials with a summary of our strong first quarter results. Overall, total revenue for the quarter was $1.23 billion, which was up 8% from last year. Adjusted EBITDA margins increased to 18.8%, and adjusted earnings per share for the quarter was $1.67, up significantly versus last year. Turning to slide 9, let us take a closer look at our first quarter sales. Organically, sales were up 4.3% from last year. The increase was driven by higher pricing across both segments and higher demand in the Industrial Motion segment, while volumes were relatively flat in Engineered Bearings. Looking at the rest of the revenue walk, foreign currency translation contributed 3.4% growth to the top line. The acquisition of Bijur Delimon, which closed in mid-March, added a small amount of sales to the quarter. On the right, you can see first quarter performance in terms of organic growth by region. In The Americas, our largest region, we were up 6% driven by growth across both segments in North America, while Latin America was relatively flat. In EMEA, we were up 5% from last year, driven by solid growth across both segments. And finally, we were down 1% in Asia Pacific, as growth in India was slightly more than offset by lower demand in China. Turning to slide 10, adjusted EBITDA was $231 million, or 18.8% of sales in the first quarter, compared to 18.2% of sales last year. Organically, incremental margins were approximately 35%, so solid operating performance from the team during the quarter. Let me comment a little further on a few of the different drivers on the EBITDA bridge you can see on this slide. Starting with the impact from mix, it was a notable year-on-year benefit driven by relatively stronger performance by several of our most profitable platforms within Industrial Motion. With respect to pricing in the quarter, it was positive $32 million and added nearly 3% to the top line as we continued to put through pricing actions to recover the margin impact from tariffs. As you can see on the slide, tariffs were a $20 million headwind versus last year. Looking at material and logistics, costs were lower versus last year driven mostly by savings tactics in the Engineered Bearings segment and material cost deflation in Asia Pacific. With respect to the manufacturing cost line, the increase from last year reflects labor and other cost inflation, as well as a timing impact related to inventory accounting. Moving to the SG&A and other line, expenses were up from last year driven by higher incentive comp and spending on strategic initiatives. Now let us move to our business segment results. Starting with Engineered Bearings on slide 11, Engineered Bearings sales were $806 million in the quarter, up 6% from last year. Organic sales were up 3% driven by higher pricing, while currency translation added another 3%. Among market sectors, aerospace and heavy industries achieved the strongest gains versus last year. We also posted growth in general industrial, off-highway, and renewable energy. Revenue was relatively flat across the distribution and on-highway sectors, while rail shipments were down from last year. Engineered Bearings adjusted EBITDA was $159 million, or 19.7% of sales in the first quarter, compared to 20.9% of sales last year. Margins in the quarter were negatively impacted by higher operating costs compared to last year. Now let's turn to Industrial Motion on slide 12. Industrial Motion sales were $425 million in the quarter, an all-time quarterly record for the segment and up 12% from last year. Organically, sales increased 7% driven by higher demand across most sectors and higher pricing. Currency translation was a benefit of 4.2%, while the Bijur Delimon acquisition added 0.8%. The segment saw growth in the quarter across all product platforms and was led by double-digit gains in The Americas. Among market sectors, automation, distribution, and heavy industries achieved the strongest gains versus the prior year. We also generated growth in the off-highway and aerospace sectors, while solar sales were down. Industrial Motion's adjusted EBITDA margins came in at 21.5% of sales in the first quarter, up significantly from last year. The increase in segment margins reflects strong operational execution by the team, as well as the impact of higher volumes and favorable price/mix. Moving to slide 13, you can see that we generated operating cash flow of $39 million in the first quarter, and after CapEx, free cash flow was slightly positive. Keep in mind that the first quarter is typically our seasonally low quarter for free cash flow, and we expect cash flow to step up significantly as we move through the rest of the year. From a capital allocation standpoint, we returned $53 million of cash to shareholders through share buybacks and dividends in the first quarter. Note that the board recently approved a new five-year share repurchase authorization for 10 million shares. Looking at the balance sheet, we ended the first quarter with net debt to adjusted EBITDA at 2.1 times, which is near the middle of our targeted range. Now let us turn to the current outlook for full year 2026 with a summary on slide 15. We are increasing our outlook across the board. Starting with net sales, we are raising our full-year outlook to an increase of 4% to 6% in total, up from the prior range of 2% to 4%. Organically, we now expect revenue to be up 3% at the midpoint, a one-point increase from the initial guide. The current outlook also adds 1% for M&A to include the expected revenue for the Bijur Delimon acquisition. We are still planning for currency to contribute around 1% to our revenue for the year, unchanged from our prior outlook. On the bottom line, we expect adjusted earnings per share in the range of $5.75 to $6.25, up $0.25 at the midpoint versus the prior outlook. Note that the outlook assumes year-over-year earnings growth every quarter this year. The current earnings outlook implies that our 2026 consolidated adjusted EBITDA margin will be approximately 18% at the midpoint, up from 17.4% in 2025 and slightly higher than the prior guidance. Note that the midpoint of the ranges implies an incremental margin of approximately 30% for the full year. For the second quarter, we expect organic revenue, adjusted EBITDA margins, and adjusted EPS to all be higher than last year. However, we expect adjusted EPS to be modestly lower sequentially compared to the first quarter to reflect incremental inflation and some customer activity we saw pulled forward from Q2 related to the uncertainty around the situation in The Middle East. Moving to free cash flow, we expect to generate $350 million to $375 million for the full year, or approximately 105% conversion on GAAP net income at the midpoint. On slide 16, we provide an updated view on our 2026 organic sales outlook by market sector, which includes the impact of both volumes and pricing. Note that we are raising our outlook for the heavy industries and off-highway sectors based on stronger-than-expected year-to-date performance and the positive trends we see in the order book. Moving to slide 17, here we provide a bridge of the $0.25 per share increase to our 2026 adjusted EPS outlook at the midpoint. First, you can see a $0.20 positive impact from the organic sales change. Next, we are estimating an incremental $0.15 per share tailwind from tariffs versus our prior guide. This primarily reflects the lower tariff rate on India, and a modest net positive impact from the changes to Section 232 on April 6. And finally, we are factoring a $0.10 headwind into guidance to account for potential incremental cost inflation over the rest of the year. In summary, the company delivered better-than-expected first quarter results, and the team is committed to delivering the increased outlook for 2026. Let me turn it back over to Lucian for some final remarks before we open the line for questions. Lucian Boldea: We entered 2026 with momentum, and this quarter reinforces our confidence in the path ahead. Our portfolio is becoming sharper, our 80/20 initiatives are accelerating, and we are executing with urgency to position The Timken Company for stronger growth and higher margins in 2026. I look forward to sharing more details with you soon at our Investor Day on May 20 in New York City. Neil Andrew Frohnapple: This concludes our formal remarks. We will now open the call for questions. Operator: Thank you. We will now begin the question and answer session. As a reminder, if you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, press 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 Stephen Edward Volkmann with Jefferies. Your line is open. Please go ahead. Stephen Edward Volkmann: Hey. Good morning, everybody. Thank you for taking the question. I am going to dive in on the changed guidance, Michael, your slide 17, I guess. And I am curious about the tariffs, the $0.15 benefit. I assume that is mostly IEPA in India. Is there any scenario where you get, you know, rebates on what you have paid? And how are you thinking about that? And then, is there also some potential for additional tariffs as we go through these 301 kind of studies through the summer? Thanks. Michael Discenza: Great. Well, good morning, Steve. Thank you for the questions. You sized it up right on the India part. We previously had talked about that, and so the change on IEPA and because India represents a large part of our imports into the U.S., that was one of the bigger impacts. And then the small net impact from the Section 232 change. So those are the big drivers on tariffs. As it relates to IEPA, the process is unfolding. We are following the process, and if and when we have something to communicate on that, we will relay that later. But nothing is assumed in our guidance for anything related to IEPA refunds. As far as additional tariffs, it is a fluid situation. Related to February, we think we have sized it up as best as possible, so I do not anticipate anything further. But, of course, as the administration announces further changes, that could impact us. And again, we would communicate that if and when that was appropriate. Lucian Boldea: Good morning, Steve. Let me take your question on the $0.10 cost inflation. It is somewhat of a placeholder. I will tell you the degrees of what we are seeing today. It depends by region. In India, you are already experiencing an inflationary environment as we sit today. In China, not really, almost somewhat in the opposite direction. In Europe, you are starting to see signs of it, and in the U.S., not as much. Where we are already seeing the increases, we are underway with price increases, in some cases first round, in some cases second round. This is now for us not a new muscle. It is a well-exercised muscle. Customers understand. When you drive to the gas pump and the price of gasoline is higher, you understand that everything else is going up. There is a level of understanding and appreciation that we are in this environment. We will continue to work with customers closely, and it is our best guess of what it can be at this point. We are seeing parts of it already, and we are taking action. We are prepared, and we are in communications with our customers to be sure that we overcome this headwind. Stephen Edward Volkmann: Great. That is helpful. Thanks. I will pass it on. Operator: Your next question comes from the line of David Raso with Evercore. Your line is open. Please go ahead. David Raso: Hi. Thank you for the time. I was just curious. With the rest-of-the-year guide implying somewhat notably slower organic, right, about 2.5% versus the 4.3% in the first quarter, given a lot of the positive commentary around the end market, can you maybe help us a little bit? How much business do you think got pulled from Q2 to Q1? Or should we look at the organic guide as maybe some level of conservatism? And I just wanted also to ask, just given the meeting coming up in two weeks, anything you wanted to put out there as what we should expect at the meeting, especially given the 80/20 rollout now being a little broader and the recent M&A in the last week or so? Just curious if things have changed a little bit in how you are thinking about timing of actions and so forth since when you first joined The Timken Company. Thank you. Michael Discenza: Let me take the first part on the slower organic. Hard to say exactly how much was pulled from second quarter to first quarter, but from a top line standpoint, maybe about 1% top line. Normally, seasonally, we would step up from the first quarter to the second quarter a couple percent. We are now seeing that more flat. So we think about 1% was pulled forward. As it relates to the rest of the year, there is still a lot of uncertainty. Certainly, the Iran conflict creates further uncertainty. We do not have a lot of sales in The Middle East, so it is not necessarily a direct impact, but the impact around the world on the macroeconomies could pull down that organic growth. We are still expecting growth year over year for the rest of the year, but we are taking into account a bit of that Iran conflict impact. Lucian Boldea: If you look at normal seasonality as you head from Q1 to Q2, you would normally expect a couple percent step up. As Michael said, we have pulled maybe 1% out of Q2 into Q1. Something more flattish is probably more consistent with historic seasonality by the time you account for that pull-forward. The good news is we do not yet see demand destruction from the conflict. We see inflationary pressure, but we do not see demand destruction. The pipeline remains robust. The order book remains very robust. The order book was up year over year and also grew sequentially, which is very encouraging. All in all, we remain cautiously optimistic. To your second question on Investor Day, the main objective is to detail our strategy and the long-term vision, and then give you a double click on how we are doing on our transformation, what that looks like, and the execution discipline behind it. We will provide more detail on the actions we have already taken on 80/20, try to quantify those on the portfolio, and provide a roadmap on where we are headed, plus financial targets and a multiyear projection. We are very excited to share all that with you on May 20. Operator: Your next question comes from the line of Robert Cameron Wertheimer with Melius Research. Your line is open. Please go ahead. Robert Cameron Wertheimer: Yes. Hi. Good morning. You had a few things go right to help raise the full-year outlook, and I wonder if you could attribute that to end-market strength or some of the 80/20 and other initiatives that are already paying off? That is the first question. Lucian Boldea: We outlined a few things, and no doubt market demand helped. We communicated in Q3 and Q4 that we were seeing positive momentum on book-to-bill and building the order book. That definitely helped. But we have done quite a bit of self help as well. One of the growth vectors I was most bullish about from day one—and with every day that goes by, I am more excited about it—is regional growth. We have an entire portfolio in the Industrial Motion acquired businesses that are more regional in nature. Taking those businesses into new regions is an important vector. For example, the linear motion business is primarily a German and Italian business. Taking that to the rest of Europe and into The Americas provides a significant growth factor. That linear motion business alone is growing double-digit in The Americas off a lower base, and we are winning in warehouse automation and other applications that are outgrowing. It is a combination of self help and the market. On 80/20, the impact right now is less on quantitative simplification and more on mindset. We have adopted the mindset of doubling down in the markets and industries where we are winning and investing less where we are not. That is already paying off. We have reorganized our commercial teams, verticalized them, and built regional teams with autonomy to operate under a global framework. Those things are already showing. In some regions we are defying gravity a bit versus competitors—nice run in Europe, continuing good run in places like India and the U.S.—driven in part by focus. Operator: Your next question comes from the line of Angel Castillo with Morgan Stanley. Your line is open. Please go ahead. Angel Castillo: Hi. Good morning, and thanks for taking my question. Lucian, I was hoping we could unpack a little bit more of the backlog. You said it is up sequentially and year over year. Any way to quantify that for us and any particular pockets around markets where you are seeing more of a boost in the backlog? Would love any color on order activity in April versus March. I think you mentioned you are seeing activity more flattish in Q2 versus Q1 due to some pull forward. Are you seeing that reflected in your orders, and how does that compare as we think about the degree of conservatism on how much was pulled forward versus underlying demand? Lucian Boldea: The order book was up significantly year over year. The leaders are off-highway, aerospace, rail, and wind—those are the four verticals most contributing. Significant momentum in The Americas, Europe doing pretty well, India doing quite well, China still a little soft. We are encouraged that the order book was up sequentially versus Q4. Translating order book math into precise quarterly revenue math is challenging because of shorter- and longer-cycle businesses, but over time when the order book is up significantly, that flows through revenue, which is why we are encouraged. In Q1 we saw strong activity across both segments. The Americas was a big region for that. Power gen was strong, metals was strong, general industrial was strong. We have been cautious not to hang our hat on this too early because the market may not be fully taking into account The Middle East disruption; the order books and demand are not reflecting it. We see inflationary pressure, but no impact on demand yet. History would say there might be some impact at some point, which gives us a reason for caution. As for April, it is off to a good start—about where we thought we would be. Whatever dynamic drove March being a little stronger—customers realized they are in an inflationary environment and an environment of supply chain uncertainties, so more product sooner is better—persists in April. The pull-forward was modest, about 1%. April is consistent with what we expected in terms of revenue and continued strength in building the order book. Angel Castillo: Thank you. And then to take this together and think about the segments and the cadence you ultimately expect for sales and margins from Q2 through Q4, could you help at the segment level? And on price/cost, you indicated the $0.10 is baking in potential inflation. Are the price increases you are starting to action also assumed in guidance, or are you waiting to see how those go through before embedding them? Lucian Boldea: We have only embedded prices that we already see in the guide. Part of that $0.10 is probably embedded with corresponding price, but not all yet. There is timing on when you get the inflationary increase and when prices actually flow through the P&L. It is more prudent not to have all that perfectly matched yet. For the rest of the year, we expect the trend to continue where you see a little more growth in Industrial Motion than in Engineered Bearings. Looking at the first half being up around 2% to 3%, that is what we expect right now when we look at the drivers and how those are reflected in the two segments. Operator: Your next question comes from the line of Kyle David Menges with Citigroup. Your line is open. Please go ahead. Kyle David Menges: Thank you. I was hoping we could talk a little bit more about the portfolio transformation and maybe the M&A pipeline. I know we will hear more at the Investor Day, but Lucian, do we already have a pretty good idea of the focus areas for M&A? How is that pipeline building now that I am assuming you have a pretty good idea of where you want to expand inorganically? Lucian Boldea: Thank you. It is still a work in progress. There are different phases to portfolio transformation. First, with an 80/20 lens, identify portions of the portfolio where we are not the natural owner and take action. We committed about a quarter ago to take action on up to a single-digit percent of the portfolio. If you look at actions already communicated—around auto OEM and the divestiture of the Belts business—that is now the majority of that single-digit percent. From a divestiture standpoint, we have tackled the majority of what needs to be tackled. From an acquisition standpoint, in the short term, until we have our strategy fully defined and laid out, we will be a little more middle-of-the-fairway and opportunistic. Bijur Delimon is a great example—it became actionable mid to late Q4, and we moved with speed. From first discussions to close was around 90 days. It fits naturally in our portfolio. It is hard to find who are the Bijur people and who are The Timken Company people because they are in the same industry with complementary market coverage, product lines, and regional coverage. We want more of those. To the extent opportunities on our list become available, we are prepared to act quickly. Opportunistic ones you will see us act quickly. More transformational moves will be post communicating our strategy, outlining growth verticals, and positions we are trying to build. We will highlight at Investor Day a time-horizon approach to transformation. In the short to medium term, the M&A playbook is to build out platforms—our lubrication platform is now $400+ million with a runway to $500 million, our linear motion platform is comparable—building these $0.5 billion platforms across the enterprise with market-leading positions. Kyle David Menges: That is helpful. And then more color on the Belts divestiture—how it came together, anything you are willing to share on the financial profile of that business as well, and after this is sold, does that also reduce the tariff impact for The Timken Company? Lucian Boldea: Belts is very consistent with our near-term strategic priorities and 80/20, and it is a great example of a business ending up with a natural owner. I am happy for our Timken team members in the Belts business to be part of Gates. We will quantify more at Investor Day, but it will structurally increase profitability two ways: it mixes us up, and it allows redeployment of resources to faster-growing areas. It will structurally increase adjusted EBITDA margins of the Industrial Motion business. Keep in mind practicality: we expect close sometime in Q3. There is an element of stranded cost to address to get the full benefit. There will be a mix lift on day one, but to get the full lift, we have some self help to do, which we will move on quickly. Operator: Your next question comes from the line of Robert Stephen Barger with KeyBanc Capital Markets. Your line is open. Please go ahead. Robert Stephen Barger: Thanks. First one for Michael. Going back to the cadence for the quarters and the sequential decline in Q2 EPS, will Q2 still be the high point for the next three quarters? Or will Q2 and Q3 be relatively even before the normal seasonal step down in Q4? Michael Discenza: Morning, Steve. Thanks for the question. We would expect a normal seasonal step down from Q2 to Q3 and then Q3 to Q4. We do have typical seasonality built in. Since EPS is coming down sequentially from Q1, Q1 would be the high point, Q2 a little lower, and then normal step downs. Robert Stephen Barger: Got it. Thanks. And then for Lucian, it is kind of a two-speed industrial world with aerospace and defense, data center, grid infrastructure all showing great demand, and a more restrained general industrial. Are there standout opportunities where The Timken Company currently does not participate? And can you talk about humanoids given increasing news flow and investor interest? Lucian Boldea: We do participate in some of those verticals, but we have upside. I have been bullish on power generation and utilities from the day I got here and continue to be. We have a better footprint than we have talked about. Those verticals drive the need for infrastructure, which pulls through heavy equipment and off-highway. On humanoids, the problem they are solving is the skill gap in labor, both quantity and quality, due to demographics and how people want to live and work. Automation in general fills that need, and humanoids are a subset. In industrial automation, the portfolio we have built through acquisitions is remarkable. Our internal CAGR has been double-digit in that market since 2018. We decided to double down on it. How we participate: think about Cone Drive and Spinea offering harmonic and cycloidal drives, Rollon offering linear actuators that create the seventh axis, medical robots via CGI precision gearing, Timken bearings and Cone Drive harmonic solutions, AGVs via Cone Drive and Rollon, and humanoids and exoskeletons where Cone Drive and Timken bearings are already present. We will have our newly appointed Chief Technology Officer talk more at Investor Day about the opportunity and how we plan to go after it. We are nicely positioned to benefit. Robert Stephen Barger: That is really good color. Thanks. Just one quick follow-up. Are you seeing the secondary infrastructure play come through in off-highway specifically, or is that more cyclical recovery? Lucian Boldea: It is hard to fully separate. Regionally there is an uptick, and net growth is driven by those macro trends. Data centers and utilities require significant construction and infrastructure, which requires heavy equipment. Our customers highlight that as a big driver. From our chair, we see the order book beefing up and the pipeline getting stronger from those customers. It is a combination of recovery and macro trends. Michael Discenza: Maybe add some color. In addition to the infrastructure Lucian highlighted, we are seeing some green shoots in ag. Part of off-highway—the ag business, which we have talked about as being down—we are starting to see green shoots there as well. Operator: Your next question comes from the line of Tomo O'Sano with JPMorgan. Your line is open. Please go ahead. Tomo O'Sano: Hi. Good morning, everyone. Thank you for taking my questions. Slide 16 shows improved outlooks across nearly all end markets, but your full-year organic growth guidance was raised to 3%. In Q1, most of the organic growth appeared to be price driven rather than volumes. Given the broader-based end-market improvement and the PMI of about 50, should we expect a greater contribution from volume in the coming quarters, or will organic growth remain primarily price led? Lucian Boldea: You have two factors. Year-over-year pricing comparisons will dampen because we picked up price during last year, so you get less contribution from that, and you also get less contribution from FX. The proportion of growth that comes from volume will be a little higher for the reasons you mentioned, and that is true for organic growth as well. Tomo O'Sano: Thank you. And on the ongoing 80/20 initiatives and portfolio rationalization, is there any intentional short-term restraint on volume growth as you focus on higher-margin products and customers? Lucian Boldea: The intent of 80/20 is growth, not to prune and shrink to perfection. We will share more specific data at Investor Day, but very little pruning of revenue is required to dramatically affect complexity. The price of simplicity is a lot lower than you would expect in our portfolio. With the 300 people trained and our focus, there is way more energy on the eighties than on the twenties. We will take care of simplification, but it comes down to what happens when you double down and focus. A high percentage of our revenue is concentrated with a small number of customers. How do you serve those differently? Timing is perfect: order books are up, customers are motivated to find product, and there is geopolitical and supply chain uncertainty. Customers are receptive to being treated differentially and committing more volume to us as we commit better service to them. I do not expect to see volume declines related to 80/20; I expect dramatic simplification and possibly volume increases. When you simplify your product slate in a factory, you reduce changeovers for short runs and run more efficiently for large customers with consistent demand. We will not go to high volume/low complexity, but even with our existing mix, getting more share of wallet will make a big difference. The whole motivation of 80/20 is growth. Operator: Your next question comes from the line of Timothy W. Thein with Raymond James. Your line is open. Please go ahead. Timothy W. Thein: Thank you. Good morning. I wanted to touch on price versus variable cost as we go through the year—how you are thinking about that. Historically, when markets inflect in more inflationary environments, there are some contractual constraints that limit timing and your ability to push price. Is that analogous now, and how do you expect price versus variable cost to behave for the balance of the year? Lucian Boldea: This is a well-exercised muscle for us. The situation today is slightly different from before. When we started from no tariffs to tariffs, there was only one move on price—up for everybody everywhere. Now you have multiple dimensions that smooth out the curve: in some cases, tariffs going away where prices may be sticky, and in other cases inflation coming in where you have to price up. You have both areas under the curve—up and down—offsetting each other. There may be a little margin expansion in some cases, and short-term margin compression in others as you get prices up. It is a modest number compared to what we dealt with before. We put $10 million as a placeholder, but as of today we are not looking at that full amount. Smaller amounts and dynamics in both directions should allow us to do a better job than when it was a one-time big hit of tens of millions. Timothy W. Thein: Understood. Thank you. And on Industrial Motion and the growth outlook there, I historically think of that as being more European exposed, which could be a concern given the current conflict and second-derivative impacts like higher oil. What underpins the outlook for Industrial Motion? Lucian Boldea: Within Industrial Motion, linear motion and lubrication are majority European and together roughly half of the segment. But Cone Drive, Philadelphia Gear, and CGI are primarily U.S. businesses. Averaging it all out, it is not as heavily European as you might think. Philadelphia Gear is heavily exposed to defense/marine and is growing strongly. In Q1, linear motion growth was driven by The Americas—automation projects in the U.S. drove it. For lubrication, historically a European business, Bijur Delimon brings a heavy Asia footprint, a lot in India, and rail—where we did not have as strong a footprint—which provides a growth vector. Being up in off-highway and general industrial helps lubrication. Ag picking up helps Industrial Motion through chain and other products. Couplings, clutches, and seals for off-highway and industrial distribution also help, and those are more U.S.-based. We feel good about Industrial Motion’s position and how Industrial Motion and Engineered Bearings are coming together. We will spend time at Investor Day explaining how the combined sales motion creates a unique customer value proposition. Operator: Your next question comes from the line of Michael Shlisky with D.A. Davidson. Your line is open. Please go ahead. Michael Shlisky: Hello. Thanks for taking my questions. On ag and the green shoots you are seeing, is it replacement demand and parts versus OEM? Are you getting any commentary from the OEMs—are some of your customers looking to increase production in the fourth quarter of this year in advance of making 2027 models or a better outlook for 2027? Michael Discenza: Hey, Mike. Thanks for the question. On the last part first, we cannot really comment on how fourth quarter is shaping up beyond our guidance framework, and as it gets closer to 2027, we will be able to give you some outlook. As it relates specifically to ag, we are seeing increasing order books. It is hard to know if it is restocking versus OEM. I would assume a little of both. It is just now turning from what has been a pretty long down cycle. We will see what that turns into, but right now it is just beginnings of green shoots. Lucian Boldea: Year-over-year math looks compelling, but on a longer time horizon, part of it is comp off a very low base. It is hard to draw long-term conclusions based on that, but it is certainly no longer a year-over-year headwind; it is now more of a tailwind. Michael Shlisky: Understood. And a quick housekeeping question. The Belts business sold to Gates has not technically closed yet. Is that still part of the guidance, and because it is currently a headwind to EBITDA margins, once it is officially closed would you increase your margin outlook again? Michael Discenza: That is correct. Until the transaction closes, it is part of our guidance. As we said, we expect a structural improvement to Industrial Motion margins post-closing. At Investor Day, we will lay this out more clearly so you can see the exact margin impact. Lucian Boldea: Keep in mind practicality. We expect close in Q3, and then we will address stranded costs to get the full benefit. There will be a mix lift day one, but to get the full lift, we have some self help to do, which we will move on quickly. Operator: There are no remaining questions at this time. Sir, do you have any final comments or remarks? Neil Andrew Frohnapple: Thank you, operator, and thank you, everyone, for joining us today. If you have any further questions after today's call, please contact me. Thank you, and this concludes our call. Operator: Thank you for participating in The Timken Company's first quarter earnings release conference call. You may now disconnect.
Operator: Good day, and welcome to the Hyster-Yale Materials Handling, Inc. First Quarter 2026 Earnings Conference Call. All participants will be in a listen-only mode. To ask a question, you may press star then 1 on your touch tone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Andrea Saba, Director, Investor Relations and Treasury. Please go ahead. Andrea Saba: Good morning, and thank you for joining us for Hyster-Yale Materials Handling, Inc.'s First Quarter 2026 Earnings Call. I am Andrea Saba, Director of Investor Relations and Treasury. Joining me today are Alfred Marshall Rankin, Executive Chairman, and Rajiv K. Prasad, President and Chief Executive Officer. Yesterday, we filed our first quarter 2026 earnings release, which provides a detailed overview of our financial results and performance. Today’s discussion is intended to supplement that release by offering additional insights and context. The earnings release, along with a replay of this webcast, is available on the Hyster-Yale Materials Handling, Inc. website where the replay will remain accessible for approximately twelve months. Before we begin, I would like to remind you that today’s call includes forward-looking statements that are subject to risks and uncertainties which could cause actual results to differ materially from those expressed or implied. These risks are described in our earnings release and SEC filings. We will also reference adjusted financial measures, which we believe provide useful supplemental information to GAAP results. Reconciliations to the most directly comparable GAAP measures are included in our earnings release and investor presentation. I will start with a brief overview of our first quarter performance and outlook, then turn the call over to Rajiv to discuss operations with a strategic update for the business. During the first quarter, bookings improved sequentially, increasing 7% from the fourth quarter as we moved from the cyclical low reached in 2025. Backlog increased modestly although shipments have not yet reflected this improvement. From a cash perspective, operating cash flow followed typical seasonal patterns with $33 million of cash used in operations, representing a slight improvement compared to the same period last year. Inventory management continued to improve with meaningful year-over-year reductions from better alignment of production with demand. Finished goods inventory declined compared to last year, improving efficiency and positioning us for higher production later in 2026. Revenue declined to $795 million, driven primarily by the normalization of excess backlog and a shift towards lighter-duty, lower-priced trucks. This shift reflects a broader and more persistent change in behavior. Customers increasingly select the right truck for their specific application, prioritizing standard configuration, near-term affordability, and fit-for-purpose solutions. In response, we have introduced new core counterbalance models built on our modular and scalable platform to address growing demand for standard and value offerings. While these actions strengthen our competitive position, the transition reduced shipments of higher-priced traditional models and contributed to the year-over-year revenue decline in the quarter. Tariffs also remained a significant headwind affecting profitability. In the first quarter, we reported an adjusted operating loss of $26 million, which included approximately $30 million of gross tariff costs. While pricing and cost actions provided partial offsets, tariffs and the shift to lighter-duty, lower-priced trucks more than impacted results. Looking ahead, we expect 2026 to improve compared to 2025 with profitability in the second half of the year. We anticipate the second quarter to represent the low point for both operating profit and net income. Tariff costs are expected to increase in the second quarter before mitigation actions take effect. At the same time, stronger bookings, backlog growth, and ongoing cost reduction are expected to drive meaningful improvement in the second half of the year. Based on this progression, we expect to deliver a modest consolidated operating profit for the full year despite a loss in the first half. With that overview, I will now turn the call over to Rajiv. Rajiv K. Prasad: Thank you, Andrea, and good morning, everyone. With that context on our first quarter performance and near-term outlook, I would like to step back and focus on how we are positioning the business and the progress we are making on our transformation as we navigate this phase of the cycle. I will begin with tariffs. Given recent legal and policy developments, tariffs have already had a significant impact on our cost structure. Since Liberation Day in 2025, we have incurred approximately $130 million of direct tariff-related costs excluding indirect effects such as supplier price increases and higher steel costs. With a predominantly built-to-order manufacturing model, there is an inherent lag between tariff implementation and corresponding price realization. As a result, cost recovery occurs over the order and delivery cycle, not immediately. In February 2026, the U.S. Supreme Court invalidated tariffs imposed under the IEPA tariff regime. While that decision created a pathway to pursue refunds, it did not reduce the overall tariff burden on our business. Subsequent action by the administration introduced new higher tariffs, including a 10% global tariff under section 122 and expanded tariffs under section 232 that now apply to the full import value of certain steel derivative products, including finished forklifts and components. Based on current conditions, we expect our effective tariff rate in 2026 to increase by approximately 6% compared with 2025. With respect to refunds, we have applied for approximately $40 million related to previously paid IEPA tariffs through the U.S. Customs and Border Protection CAPE process. We also plan to seek approximately $15 million to $20 million in reimbursements from suppliers. These potential refunds were not included in our first quarter results or reflected in our outlook. The timing and ultimate amount of any recovery remains uncertain. Even if recovered in full, these refunds would represent only a portion of the tariff costs we have incurred. Consistent with our prior communication, we expect any refunds ultimately received would be used to mitigate ongoing and future tariff impacts. Turning to the broader operating environment, the lift truck market continues to favor lighter-duty, lower-priced equipment. This shift has been both more pronounced and longer lasting than in prior cycles. Rather than viewing this solely as a near-term headwind, we see it as a clear signal of how the market is evolving. Our transformation is intentionally designed to strengthen our position in these value-oriented segments while preserving the ability to scale margins and earnings as volumes recover. Against that backdrop, our focus remains on executing our transformation initiatives to lower our cost base, improve flexibility, and reduce earnings volatility across the cycle. These are not short-term responses to current conditions, but structural changes intended to improve performance as market conditions normalize. Our transformation is centered on four priorities. First, product evolution. As customer preferences continue to shift towards standard and value configurations, we have begun introducing these offerings within our core 1 to 3.5 ton counterbalance product line, where demand for lighter-duty applications is increasing. These products are built on our modular scalable platforms, enabling common architecture, shared components, and flexible manufacturing. This improves cost efficiency, supports competitive price points, and allows us to respond more quickly as demand continues to evolve. While this transition has reduced shipments of higher-priced traditional models in the near term, our new products are gaining traction. We expect to continue moving in this direction with additional product introductions planned as we align our portfolio to customer needs and support future volume growth. Second, operational and cost structure transformation. Operating costs declined year over year in the first quarter, reflecting restructuring actions initiated in 2025, including Nuvera strategic realignment and broader workforce reductions. We began to see early benefits in the quarter with meaningful margin improvement expected as volumes recover. In parallel, our longer-term manufacturing footprint optimization continues with the largest financial benefits expected in later periods. Third, end-to-end digital enablement. We continue to better align product development, manufacturing, and commercial execution through more integrated systems and processes. This is improving decision-making, execution speed, and life cycle management across the organization. Fourth, commercial and go-to-market execution. We remain focused on disciplined pricing, dealer execution, and improving aftermarket, attachments, and service penetration over time to strengthen mix, cover tariffs, and improve life cycle economics. A key enabler across all four priorities is our integrated individual product line management model, which brings together product, engineering, operations, and commercial teams with clear accountability. This model is designed to sharpen decision-making and translate strategy into measurable financial outcomes as market conditions normalize. With that foundation in place, I want to outline how these efforts are translating into early customer traction and acceptance of our strategy. One example comes from a new conquest opportunity with a large warehouse club customer that had concerns about pedestrian safety during after-hour stocking. We demonstrated our proximity detection and related safety technologies, highlighting their effectiveness in blind corners and high-traffic environments. Following those discussions, the customer engaged directly with our innovation team and elected to move forward with an initial purchase for a greenfield site as a test deployment. Beyond safety, we are also seeing acceptance of our new product platforms designed to improve productivity and address labor constraints. In warehouse trucks, we introduced a new three-wheel stand-up counterbalance truck featuring technology-driven ergonomic and productivity enhancements that are resonating with customers. In direct store delivery, customer evaluation of the Hyster and Yale Route Runner and nested pallet truck with a detachable motorized unit demonstrated operational efficiency gains, including delivery efficiency, reduced labor reliance, and improved route time. We view this as a differentiated solution addressing an underserved market. Commercially launched in April, the Route Runner has already secured orders from several large beverage distributors. Taken together, these examples reinforce the direction of our strategy: delivering high-value, differentiated solutions that address real needs, support growth opportunities, reduce cyclicality, and improve operating margins over time. With that perspective, I will turn the call over to Al for closing remarks. Thank you. Alfred Marshall Rankin: As you have heard today, the industry remains in a difficult phase of the cycle. Demand has been constrained by macroeconomic uncertainty, including the impact associated with the Iran conflict, the changing mix of trucks which customers want and need, tariffs which continue to be a material headwind, and customers who have remained cautious as they work through receipt of equipment ordered in prior time periods. At the same time, we are beginning to see early signs of improved demand led by enhanced customer engagement and increased focus on fleet replacement. Against that backdrop, the actions our Hyster-Yale Materials Handling, Inc. team has taken and continues to take to transform Hyster-Yale Materials Handling, Inc. have the capability of repositioning Hyster-Yale Materials Handling, Inc.'s profit structure and growth prospects. Over the past year, we have focused on strengthening the fundamentals of the business by expanding our product lines, lowering our structural cost base, improving operational flexibility, sharpening our focus on cash generation, and investing in marketing the products and capabilities that matter most to our customers. These actions are not short-term responses to a difficult environment; they are deliberate structural changes designed to improve how the company performs as volumes recover and market conditions improve. Importantly, they are consistent with the transformation Rajiv described. We are optimistic that 2026 represents a turning point. We expect bookings to improve, backlog to rebuild a bit, and cost reduction actions to take hold, and we expect all this to strengthen financial performance significantly in the second half. We remain disciplined in our execution activities and prudent in our capital allocation. Hyster-Yale Materials Handling, Inc. has navigated many cycles over its history, and that experience gives us the confidence of experience, not complacency. The actions underway today are designed to transform Hyster-Yale Materials Handling, Inc. to build a higher growth, higher margin, and less cyclical business. As a result, we believe the company will then be well positioned for significant shareholder returns over time. That concludes our prepared remarks. We will now open the call for questions. Operator: We will now open the call for questions. To ask a question, you may press star then 1 on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question will be from Ted Jackson from Northland Securities. Please go ahead. Rajiv K. Prasad: Thank you. Good morning. Hi, Ted. Ted Jackson: I am going to start with unit mix with regards to the modular equipment and the more value-oriented trucks. This is the strategy you have been going for, but could you unpack the mix in the lift truck business between older legacy units and the newer modular product, where that trend came from, where it was as you rolled through last year to where it is now, and where you see it going? And behind that, on a like-for-like basis, what would be the difference in terms of price point, and is there any difference in margin? I do not want this to be a huge multipoint question, and I have a couple more. Rajiv K. Prasad: I will not be quite as specific for some data that we do not typically publish. We certainly do not talk about volumes. Firstly, the majority of the trucks that are now modular scalable are the 1 to 3.5 ton trucks, especially the internal combustion engine trucks, although we are in the process of launching our electric version of the 1 to 3.5 ton trucks. The two most important series have been launched already: what we call our 2 to 3 ton DBB and the 2 to 3 ton CBB. The start of production for the DBB has already begun in Europe, and the CBB will start soon. The internal combustion engine trucks in that range are now fully modular scalable. The only trucks we are shipping in that range are the modular scalable trucks. That shipment has started this year, especially into our EMEA territories with emission controls, so that is North America and Western and Eastern Europe. We have been shipping those trucks for quite a while into Asia-Pacific and the Middle East and Africa, including South Africa, but now they are fully implemented globally, and the legacy version of that truck is now out of production apart from one model that is going into some of the emerging markets. The 1 to 3.5 ton truck is the largest part of the market, especially if you take out the small pallet trucks, and for us it is typically around a third of our volume. For some of the other product lines, what we are introducing are not trucks on the same platform, but trucks that fill that gap. For example, in our 4 to 9 ton truck range we are introducing a low-intensity product, and later in the year, probably early in the fourth quarter in North America, we will introduce a more standard version of the truck. In some markets, those are already available. Ultimately, we will have a modular scalable version in the 4 to 9 ton range, but that is still a few years away and has just initiated development right now. I would say that currently somewhere around 40% of the market we have covered with some level of scalability. Alfred Marshall Rankin: I would like to discuss the lag between the introduction of the models and the full uptake both with our national accounts and with our dealers because that really has not occurred yet. So I think the other part of your question is where are the shipments today, and the bottom line is we are getting ready to really ship lots of these, but in the market they are just getting started as far as looking backwards is concerned. I think that is correct, Rajiv. Rajiv K. Prasad: That is right. The bookings have been there since the early part of this year. The shipments are basically happening now onwards. Dealers will receive those trucks, customers will get demonstrations and try them out in their applications, and then more orders will come in. There is that cycle, which seems to take us somewhere around four to six months, although the seed orders are already there. Alfred Marshall Rankin: That is a really important point because we have really good dealers, especially in North America and parts of core Europe, and we have a sound structure in other parts of the world. When they get the product, they will sell it. It is unrealistic to think that we could get the share we traditionally get before those products really get out there in the marketplace. We feel that the strength of our dealership and our own efforts with our national accounts and large accounts, as we have these trucks more fully in the pipeline and available for customer application, are going to really start to move, especially in the second half. Rajiv K. Prasad: In terms of margin, we feel we have designed each of these trucks to hit their target margin requirements, and so we expect that this will have a positive impact on our margin. Ted Jackson: If I recall, the whole strategy with the modular trucks is to be more competitive, given some of the Asian products coming in very inexpensively, so that you can be price competitive with them and be able to produce at comparable margins to what you have had in the past. The combination should enable you to take share because you have had some competitive issues on pricing. You will have at worst an equivalent product, probably a better one, with an architecture that allows you to keep your margins and be more competitive. Is that the right way to think about it? Alfred Marshall Rankin: Think of the market as having three segments, to oversimplify it: value, standard, and premium. We have historically had great strength in premium and continue to do that. We had some entries in standard, and now we are introducing a full line of standard and value trucks, which are growing segments in the marketplace because customers, given high prices in general, are looking for more cost-effective solutions. It is less a matter of being directly competitive with our old trucks and more a matter of filling gaps in the product line that have become much more important than they were. Rajiv K. Prasad: The customer’s application always really required them to have the right level of capability. For instance, in retail, these trucks do 500 to 750 hours a year. You do not need a very sophisticated truck for that application, and a low-intensity truck is more than capable of handling those applications. In light manufacturing, you have more of a standard truck, and that is a pretty big market. In the past, we sold premium trucks into that market and had lower margins because the customers did not really need all the capability. That is what gets rectified. We were not in any significant way in the value part of the market, so now we can participate across the board and have good margins in each of those segments. Ted Jackson: The timing is nice because you are hitting it when the market is going to be coming out of a cycle. Shifting to tariffs, you talked about a $30 million impact in the quarter, the second quarter will be something greater than that, and then it will start to tail off because of mitigation strategies. How do you mitigate the tariffs? What are the strategies? How are you going about that? Is it just pricing? Rajiv K. Prasad: The two primary strategies are pricing and cost. First, pricing: either embedded in core price for some tariffs that have been there a long time, such as section 301, and now even some of section 232 are in core price; and for others like section 122 and the IEPA, which we thought was more temporary, we put a surcharge in place. We have to be conscious of the market price, so we have a sophisticated pricing program to determine how much pricing we can put in. Whatever remains, we then take action on the cost side: go back to our suppliers, work with them to get components located in regions where the tariff is more manageable, and focus on cost reduction. Roughly two-thirds will be pricing and about one-third cost. The cost readjustment takes a little longer, and so does pricing because we build to order. Our backlog has been somewhere around four to six months depending on the truck. That is why revenue was reduced in the first quarter due to the low point in bookings in 2025 flowing through, and now it is going to start building back up. Ted Jackson: My last question is an update on where you are in the CFO search. Rajiv K. Prasad: We are talking to our board about the type of person we are going to look for, and then we will launch it immediately after our board meeting in a couple of weeks. We have been doing a full evaluation of our finance team and rearranging a few things, which has given us a better idea of the capabilities we need in our new CFO. Ted Jackson: Do not rearrange Andrea too much because I like working with her. Andrea Saba: Thank you. Operator: Thank you. Our next question will be from Chip Moore from Roth. Please go ahead. Chip Moore: Good morning. Thanks for taking the question. Maybe you could expand on the dynamics you are seeing around pent-up demand with aging fleets and the need to replace. It sounds like you have a fair degree of confidence that things improve in the back half, and you have new products coming out that align with some of the inflationary pressures. Could you dive in there? Rajiv K. Prasad: At a high level, we had a low point in bookings in the third quarter at about $380 million. That was very low for us and a really tough quarter for us and everyone else. Then we rose to about $540 million in 2025. The first quarter was around $585 million. I am talking units revenue only, not parts or technology, because that is the driver for our business; all the other stuff comes from that. We expect that to continue going up, and that has been consistent with conversations with our customers. A few dynamics are going on. Over the last couple of years, we did a lot of deliveries in 2023 and 2024 to customers who had been waiting. Some of those orders were put in during 2022 that we delivered in 2023, and some orders put in during 2023 that we delivered in 2024. That has stabilized. As we talk to customers, the average age of their fleets is a little higher than they or we would like, but utilization is also down a bit because manufacturing in North America and Europe is down due to the economy. We expect that to build back up. We are seeing increasing RFQs going out to the field, quoting activity is going up, and engagement with our customers is going up—these are leading indicators. We have seen the same from our dealers. Dealer inventories are back to normal conditions. Those are good indicators for what is coming. We are seeing more stock orders come in from our dealers for our high-flow, ready-to-sell business. Dealers are more confident. Alta, one of our public dealers, has been talking about that as well, which is compatible with what I am saying. Looking at some of our large customers and their plans, we see that they have significant plans for the third and fourth quarters. That gives us confidence that both shipments and bookings will continue rising into the second half of the year. Chip Moore: Very helpful color. Maybe talk a bit around automation—are you gaining share in warehouse and the role there? And lastly, an update on the battery strategy. Rajiv K. Prasad: We are doing well in warehouse, especially with our reach truck, and we have just launched the new three-wheel stand-up product, which is getting excellent feedback from large customers. We continue to demonstrate our automation solution. Since April, we have been out there selling—or really renting—it as a material handling as a service model for our automated truck, and we have had a couple of really good wins. At MODEX, we introduced an early version of our stacker. The tow tractor obviously pulls trailers, and the stacker lifts to typically first and second levels and can also pull things off production lines or set things on distribution lines. We had very positive response at MODEX. We will start demoing that with what we call our friendly core customer base in the third quarter and then release it for sale in the fourth quarter. In the background, there is work on automating some of the other warehouse products, especially the reach truck and also our counterbalance trucks, which will come in 2027–2028. On batteries, we are starting to ship our own lithium-ion batteries to customers, especially in Europe, and we will initiate that in North America at the beginning of the third quarter. We have pretty large growth plans for the second half of the year, and it will be a significant part of our business in 2027. We will talk more about that at our Investor Day planned for the fourth quarter and bring along some of the things we are doing on the energy and technology side as well. Chip Moore: Great. I look forward to that in November. Thanks very much. Operator: Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Andrea Saba for any closing remarks. Andrea Saba: Thank you for your questions. A replay of our call will be available online later today, and the transcript will be posted on the Hyster-Yale Materials Handling, Inc. website. If you have any follow-up questions, please feel free to reach out to me directly. My contact information is included in the press release. Thank you again for joining us today. Operator: To access the digital replay of this conference, you may dial +1 (855) 669-9658 or +1 (412) 317-0088. Replay begins at 2 PM Eastern Time today. You will be prompted to enter a conference number, which will be 938-7098. Please record your name and company when joining. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
Ben Malcolmson: Thank you, and welcome to Trinity Capital Inc.'s First Quarter 2026 Earnings Conference Call. Speaking on today's call are Kyle Brown, Chief Executive Officer; Sarah Stanton, General Counsel and Chief Compliance Officer; Michael Testa, Chief Financial Officer; and Gerald Harder, Chief Operating Officer. Also joining us for the Q&A portion of the call is Ronald Kundich, Chief Credit Officer. Earlier today, we released our financial results which are available on our website at ir.trinitycapital.com. Before we begin, please note that certain statements made during this call may be considered forward-looking under federal securities laws. Please review our most recent SEC filings for further information on the risks and uncertainties related to these statements. With that, allow me to turn the call over to Trinity Capital Inc. CEO, Kyle Brown. Kyle Brown: Thanks, Ben, and thank you everyone who is joining us today. Trinity Capital Inc. continues to perform because of our diversified lending platform of five complementary verticals, our ever-expanding managed funds platform that delivers incremental income to Trinity Capital Inc. shareholders, and our internally managed structure that ensures total alignment between investors and employees. To start off, here are some highlights from Trinity Capital Inc.'s performance during the first quarter. Our net asset value grew 7% quarter-over-quarter and 40% year-over-year to a record $1.2 billion. Platform AUM increased to more than $2.9 billion, up 36% year-over-year. Our originations engine remained robust, achieving $306 million of fundings and $396 million of commitments. We maintained strong credit with nonaccruals at 1% of the portfolio at fair value. Furthermore, I would like to spotlight some shareholder-focused results from Q1. We are paying a $0.17 monthly dividend through the end of Q2, and Trinity Capital Inc. shareholders have now been the beneficiaries of more than six consecutive years of a consistent distribution. Also, we are scheduled to announce our Q3 dividend in June, subject to board approval. Trinity Capital Inc.’s year-to-date total return leads the BDC space, and since our IPO five-plus years ago, Trinity Capital Inc. has delivered a cumulative return of 119%, far outpacing the S&P 500’s 86% over the same time period. Our return on equity remains one of the best in the BDC space, achieving 15.8% in Q1. Our managed funds platform continues to grow at a calculated pace, and income generated from that platform contributed $0.04 to our $0.53 per share net investment income in Q1. Looking forward, we have 197 warrant positions in 127 portfolio companies which have the potential to provide incremental upside to our shareholders. We continue to grow strategically and thoughtfully. In Q1, we funded $306 million, 39% more than in 2025. The investment pipeline remains robust: $1.2 billion in total unfunded commitments and $300 million of term sheets accepted as of March 31. As a point of emphasis, 94% of our unfunded commitments remain subject to rigorous ongoing diligence and investment committee approval, while only 6% of these commitments are unconditional. Our originations activity reflects consistent performance across the lending verticals within the Trinity Capital Inc. platform. Driven by our experienced team of originators and underwriters, as a direct lender with a proprietary pipeline, we do not rely on syndicated deals and maintain immaterial overlap with other BDCs, providing our investors with access to a highly differentiated portfolio across our five complementary lending verticals. At the same time, we remain firmly committed to disciplined underwriting and strong credit performance, which are essential to our long-term success. The only notable intersect with some other BDCs is through our newly announced joint venture with Capital Southwest, a vehicle that is focusing on first-out senior secured loans in the lower middle market. This partnership with a fellow internally managed BDC allows us to diversify into a new segment of the lower middle market with a proven partner, while minimizing risk and providing stable income for our investors. To briefly touch on the AI and software topic, enterprise SaaS is currently 10% of our portfolio. Many of those are PE-backed lower middle market companies that have successfully integrated AI to enhance their offerings, increasing their value, not eroding it. The strongest companies continue to adapt and execute. We are not seeing deterioration in our software exposure. Rather, companies with top-tier management teams, durable moats, and flexible strategies are increasingly distinguishing themselves. With respect to AI itself, we are not trying to pick winners at the application layer. Our exposure is focused on the infrastructure side through our equipment financing platform, which has deep experience financing data centers, GPUs, CPUs, and power assets. That is the backbone of the AI ecosystem, and it benefits regardless of which applications win. We remain focused on building a diversified portfolio that consistently delivers strong returns across all macroeconomic cycles. Our consistent performance is driven by three defining strengths: our differentiated structure, disciplined underwriting, and world-class team. Our five complementary verticals—sponsor finance, equipment finance, tech lending, asset-based lending, and life sciences—provide meaningful diversification while keeping us firmly within our core competencies. Each vertical is powered by dedicated teams of originators, underwriters, and portfolio managers, forming a scalable, highly efficient operating model that drives results. Structurally, as an internally managed BDC, there is no external manager collecting fees, and our employees, management, and board all own the same shares as our investors, increasing alignment and a shared commitment to consistent dividends and long-term value creation. We operate like shareholders because we are shareholders. Our structure also supports premium valuation because investors own the management company and the underlying assets. The management incentive fees generated through our managed fund business flow to the BDC, creating incremental income and enhancing value and fueling growth, all for the benefit of our shareholders. Our people are the foundation of everything we have built at Trinity Capital Inc. Our high-performance culture is rooted in humility, trust, integrity, care, and continuous learning. With an entrepreneurial spirit, this culture enables us to consistently attract and retain the best people who are the driving force behind our sustained growth. Since we started Trinity Capital Inc., the goal has never changed: out-earn the dividend, grow the business, and do it the right way. That means originating our own deals, underwriting them to our own rigorous standards, and making important decisions as one internally managed team whose interests are fully aligned with our shareholders, not third-party managers. What we have built and continue to build is a platform with real breadth and growing scale. And with our managed funds platform continuing to expand, we are adding scale and diversification in ways that few BDCs can replicate. That is not an accident. It is structural. We did not stumble into this position; we have strategically built it. The pipeline is active. Our underwriting discipline is intact. We believe our capitalization strategy positions us well to grow earnings power as the market continues to evolve. Trinity Capital Inc. is not your typical BDC. That is precisely the point. We are differentiated by design and built to last, regardless of market conditions. Now, to provide a more fulsome update on our managed funds platform, I would like to turn the call over to our General Counsel and Chief Compliance Officer, Sarah Stanton, who is spearheading many of our corporate development initiatives. Sarah? Sarah Stanton: Thank you, Kyle. We are encouraged by the strategic and steady growth of our managed funds business, which diversifies our capitalization sources and generates fee income that benefits Trinity Capital Inc. shareholders. AUM for our managed funds now sits at $400 million across four vehicles, with meaningful new funding capacity coming from our recently announced SBIC fund as well as expansion into the lower middle market with the addition of our Capital Southwest joint venture I will discuss in a moment. Our managed funds platform continues to enhance returns for Trinity Capital Inc., contributing $0.04 per share of NII in Q1, roughly 8% of the $0.53 total. We continue to thoughtfully raise managed funds to fuel our growth and minimize public shareholder dilution. Q1 brought two noteworthy developments in our managed funds platform. First, we held an initial close of $45.3 million in equity commitments to our new SBIC fund, constituting more than half of our target of $87.5 million of equity commitments. The SBIC fund will benefit from attractive low-cost leverage from the Small Business Administration at a two-to-one debt-to-equity ratio and is expected to add more than $260 million of incremental capacity to the platform once it is fully scaled. Earlier this week, we announced our final license approval from the SBA, and we expect to begin deploying out of the fund this quarter. Second, as Kyle mentioned, we entered into a joint venture with Capital Southwest, which provides an efficient avenue for Trinity Capital Inc. to expand into a new, complementary segment of the lower middle market while maintaining strong credit underwriting alongside a highly respected partner in the space. With this new JV, we now co-manage several co-investment vehicles that diversify our capitalization sources and allow us to strategically expand our originations power without diluting shareholders. Our managed funds business is generating new income above and beyond the interest income and equity return from our BDC’s portfolio investments, all to the benefit of Trinity Capital Inc. shareholders. These initiatives demonstrate our ability to strategically grow, expand investment capacity, and further diversify our capital base. I would now like to turn the call over to CFO, Michael Testa, to discuss our financial results in more detail. Michael? Michael Testa: Thank you, Sarah. Our operational and financial performance remained strong in the first quarter. We generated $90.1 million of total investment income, a 38% year-over-year increase, and $44.5 million in net investment income, or $0.53 per basic share, representing 104% coverage of our quarterly distribution. Estimated undistributed taxable income is approximately $68 million, or $0.78 per share, which is equivalent to more than four months of distributions. We continue to reinvest the spillover for the benefit of our shareholders while maintaining consistent and meaningful distributions. Our platform continues to deliver best-in-class performance. In Q1, we generated a 15.8% return on average equity and a 15.8% weighted average effective portfolio yield, both of which are at the top of the BDC sector. PIK continues to be an immaterial function of our business, with 1% of our income based on PIK. And lastly, approximately two-thirds of our debt portfolio is either fixed rate or already at its interest rate floor, making us less sensitive to rate cuts than many of our peers. Total net assets grew 7% to a record $1.2 billion, up 40% year-over-year. NAV per share moved from $13.42 to $13.27. The decrease reflects realized and unrealized losses in the quarter and the dilutive impact of our annual restricted stock award issuance, partially offset by accretive ATM issuances and out-earning our distributions. NAV per share remains up 2% year-over-year. Turning to our capital position, we raised $78.4 million through our equity ATM program during the quarter at an average premium to NAV of 12%. Our net leverage ratio decreased to 1.15x from 1.18x quarter-over-quarter. Total platform liquidity stood at over $500 million as of the end of Q1, including capacity across our managed funds. To discuss our portfolio performance in more detail, I will now pass the call over to our COO, Gerald Harder. Jerry? Gerald Harder: Thank you, Michael. Our portfolio continues to demonstrate exceptional strength, driven by broad diversification across 22 industries, with no single borrower representing more than 4% of total exposure. Our largest industry concentration, finance and insurance, accounts for 14.5% of the portfolio at cost, and is diversified across 25 portfolio companies. Portfolio quality remained consistent quarter-over-quarter, with 99% of debt investments performing at fair value. On our one-to-five scale, where five indicates very strong performance, the average internal credit rating was 3.0, a slight improvement over last quarter and reflecting broad-based strengthening across the book. Before discussing our realized and unrealized activity for the quarter, I want to remind everyone of Trinity Capital Inc.’s quarterly asset valuation process, which is performed in conjunction with third-party valuation firms. These specialists provide an independent assessment of our asset valuations; their conclusions, along with the Trinity Capital Inc. team’s internal assessments, are subject to approval by our board of directors and review by our independent auditor. This rigorous process tests our assumptions and methodologies and provides healthy checks and balances, all of which are in place to give investors confidence in our asset valuations. With that context, our Q1 results included approximately $10 million of net realized losses and $5 million of net unrealized depreciation. The realized loss was primarily driven by the equity conversion of two loans, partially offset by the exit of one warrant position. The net unrealized depreciation reflected a combination of broader market valuation dynamics and mark-to-market adjustments on certain positions. During the first quarter, we saw strong portfolio churn with $114 million in early repayments. This figure is a slight increase over the 2025 quarterly average early repayments of approximately $83 million. Additionally, our loan book continues to skew toward a greater number of new portfolio companies. Sixty percent of our portfolio at cost has been originated since the start of 2025, and investments from pre-2024 vintages now comprise less than 12% of the portfolio at cost. Quarter-over-quarter, the number of portfolio companies on nonaccrual went from four to five. During Q1, one debt financing that was on our watch list in Q4 was placed on nonaccrual status. As of March 31, nonaccruals represented approximately 1% of the total debt portfolio. At quarter end, 88% of total principal was secured by first-position liens on enterprise value, equipment, or both. For enterprise-backed loans, the weighted average loan-to-value was 19%, consistent with previous quarters. Across our five business verticals, the approximate breakdown of our fundings in Q1 was as follows: 41% to life sciences, 22% to equipment financing, 13% to sponsor finance, 13% to tech lending, and 11% to asset-backed lending. Looking ahead, our portfolio remains defensively positioned with a strong first-lien bias and low loan-to-values. Our disciplined underwriting culture and diversified platform allow us to continue delivering consistent dividends and net asset value growth. With a shareholder-first mindset, our team remains focused on building a best-in-class BDC that generates sustained long-term value for our investors. Before we conclude our call, we would like to open the line for questions. Operator? Operator: At this time, if you would like to ask a question, please press 1 on your keypad. To leave the queue at any time, press 2. Once again, that is 1 to ask a question. We will now open the call for questions. Our first question will come from Finian O'Shea with Wells Fargo Securities. Please go ahead. Finian O'Shea: Hey, Kyle. I was interested in the opening commentary on your AI focus. That is where a lot of the money is going in VC, and maybe it is a little risky from a debt perspective for the companies that do not work out, but there is also presumably a ton of upside on the equity perspective. Do your originators see those rounds and is that an opportunity to construct a portfolio of those names—maybe a few losers, but a few spectacular winners as well? And as a follow-up, on originations, life sciences was the leader this quarter. Is there anything to that—team buildout versus market opportunity—and how might that trend? Kyle Brown: Thanks for the question, Finian. As it relates to AI, we are not making many, if any, venture debt investments tied to AI. Almost everything we are doing relative to AI is in lower middle market, small public companies, private equity-backed deals, and primarily all the equipment financing that goes around that. We see this as a great opportunity for a couple of reasons. One, we have mission-critical equipment as our collateral—GPUs, CPUs, power generation equipment—and they have real value in any environment. We like that we can finance equipment that does not depend on whether a company becomes the next disruptor. So most of our investments there are focused on equipment or at-scale private equity-backed lower middle market companies. On your follow-up, I would not read any long-term trend into life sciences leading the quarter. Deal flow can be idiosyncratic from quarter to quarter, some of it driven by activity at J.P. Morgan early in the year. The life sciences team had a great Q1, but I would not necessarily expect that trend to continue. The benefit of our diversified platform is that our five verticals are very complementary, and we can see outsized performance from any one of them in a given quarter. Finian O'Shea: Very good. All for me for now, and thanks, everybody. Operator: Thank you. Our next question will come from John Hecht with Jefferies. Please go ahead. John Hecht: Hey, good morning. Thanks for taking my questions. First, a brief modeling question: anything to think about regarding expense requirements or human resource requirements given your growth into new fund vehicles, or should we think of it as linear growth as the company grows? And second, given your diversification across sectors, for the pipeline now, are you seeing different sectors where deals are getting done more smoothly than others and/or pricing has moved outward more than others? Michael Testa: Hey, John. It is Mike. Having the benefit of these all being investment vehicles, we are using the same resources—the same origination platform, portfolio management, and credit underwriting. There is limited back office and operations support for these new vehicles, but that is minimal. It is really the benefit of co-investing along the Trinity Capital Inc. platform. We have built this platform intentionally to scale long term, and we continue to hire and invest in people, systems, and infrastructure. A lot of the leverage you get with SBIC—we started with an SBIC asset manager—means it is a vehicle we know how to operate. Kyle Brown: On sector dynamics, there has been decreased activity in software, but significant increases in manufacturing, infrastructure, AI, and everything that goes along with that. That market is robust. We like the space because we can generate outsized returns. It is complicated, with problems to solve, so it is not a race to the bottom in pricing. We can generate higher fees and wider spreads by getting smart and understanding the space at a granular level, like we have in areas such as space and defense. Everything around space, AI infrastructure, and manufacturing in the U.S. is booming for us right now. Operator: Thank you. Our next question will come from Brian Mckenna with Citizens. Please go ahead. Brian Mckenna: Great, thanks. Your managed funds business generated about 120 basis points of ROE on an annualized basis in the quarter. As this platform continues to scale, how should we think about the overall contribution to firm-wide ROE over the next several years? And as you launch new strategies over time, how much on-balance-sheet capital do you plan to invest to help seed some of these newer vehicles? Also, on the lower middle market opportunity, I appreciate the comments on the new JV and the partnership with a leader in this part of the market, but what else can you do here? How are you thinking about building versus buying versus partnering, and could the lower middle market ultimately end up becoming the sixth vertical at Trinity Capital Inc.? Kyle Brown: Our goal is for you to think of us one day as a publicly traded fund management business. That requires us to do two things very well: continue to build out bespoke manufacturing in the verticals with products where we can generate outsized returns, and then provide a sampling of offerings to private investors—pension funds, banks, and retail. We have created multiple funds that meet those investors where they are and give them access to our bespoke manufacturing. It is difficult to raise capital, and we are grinding away at it, but money finds good deals. Over time, we plan to continue building out those funds to create NAV accretion through the manager and new income for shareholders. On the lower middle market, I will not give forward-looking guidance, but historically we have done a very good job building businesses—five unique businesses that all run independently. Partnering with someone who has been doing this for a very long time, with joint decision-making, gets us into that business with a great partner and track record, giving us exposure and the ability to diversify some of our assets into a new, stable space that provides great new income. Our strategy is not changing. Operator: A reminder, that is star one to ask a question. Our next question will come from Erik Zwick with Lucid Capital Markets. Please go ahead. Erik Zwick: Thanks. You described the pipeline as robust earlier in your prepared comments. Could you provide more color on how that looks across your lending verticals and where spreads are today in the pipeline for what you are underwriting and adding to the portfolio compared to the existing portfolio? And any thoughts on how spreads look in the market relative to the existing portfolio? Kyle Brown: Anything around manufacturing and equipment is booming right now. Across the platform, we have been growing deployment at a 30% to 40% annual rate, and I do not see that changing anytime soon. Each vertical is growing at a different pace depending on scale, but lower middle market should continue to be robust. The baby boomer transfer of ownership is real; we are seeing it, and it is in our sweet spot for $20 million to $100 million check sizes. On spreads, it depends on the vertical. We are seeing a little more pressure in tech lending or life sciences, but we are seeing very attractive returns in the lower middle market and in equipment financing. Overall, nothing notable one way or the other across the entire book. Erik Zwick: Thanks. Looking at the income statement, fee income has really ramped up the past two quarters, and I think some of that is due to your success on the managed fund side. Was there anything nonrecurring in 1Q, or is that a good number to build off going forward? Kyle Brown: We did see elevated repayments this quarter. Those are hard to predict, but looking at least one quarter ahead, we feel comfortable that they will continue to be higher than normal. With prepayments, you get the benefit on more recent deals—the accelerated OID and prepayment penalties. Those do reoccur, but yes, there was some of that coming in during Q1. Operator: Our next question will come from Christopher Nolan with Ladenburg Thalmann. Please go ahead. Christopher Nolan: Hey, guys. On the new vehicles, are they going to be co-investing in the same portfolio companies as Trinity Capital Inc.? Also, can we expect higher leverage ratios as you finance the new SBIC sub? And is the outlook for growing in the lower middle market area to start making equity investments in these companies and possibly taking control positions? Sarah Stanton: Thanks for the question. With respect to the SBIC fund, that will be a co-invest vehicle with deals originated by Trinity Capital Inc., taking a piece of every deal that is eligible for an SBIC fund in accordance with our allocation policy. There are nuances with SBIC eligibility—for instance, the portfolio company has to be located in the United States. With respect to the Capital Southwest joint venture, those will largely be transactions originated by Capital Southwest—first-out senior loans placed into that JV. We will be underwriting those alongside Capital Southwest with 50/50 governance, so we will have a say on what assets go into that vehicle. Kyle Brown: On leverage, that is not the plan. We did something different with the SBA fund—different than BDCs have done historically. We went out and raised third-party capital. Utilizing our adviser that Trinity Capital Inc. shareholders own 100% of, we were able to raise third-party equity which we can then leverage two-to-one, providing us with approximately $270 million of new AUM that we can charge management and incentive fees on, which we started April 1, and we will use those to co-invest alongside Trinity Capital Inc. We did not approach it the same way most groups do—taking our own equity off the balance sheet to get more leverage. We are utilizing other people’s money because we have the ability to do that, and that is our strategy with the Trinity Capital Inc. adviser. As for equity and control positions, we are focused on being a lender. For twenty years, our returns have been primarily rates and fee income. The vast majority of our income is not based on equity upside or warrants, and that strategy is not changing. Operator: Our next question will come from Paul Johnson with KBW. Please go ahead. Paul Johnson: Does the SBIC fund that was recently attained for the RIA fund mean that it is unlikely going forward that there would ever be an SBIC license eligible for the BDC on balance sheet, or is it just way more valuable within the RIA to allow you to raise capital under that type of structure? Kyle Brown: Good question. For us, it is way more valuable because we do not have to issue new shares at Trinity Capital Inc. to pull together that approximately $70 million of equity, and generating management and incentive fees on new capital is new revenue without issuing new shares. This is the strategy, and we want to deleverage the Trinity Capital Inc. BDC over time. Doing more off-balance-sheet vehicles like this gives us more liquidity and new income so that we can deleverage over time, putting us in a great spot to have liquidity and the ability to be opportunistic. The more off-balance-sheet vehicles we can ramp, the more control it gives us and it de-risks the BDC. Operator: This does conclude our question and answer session. I would like to turn the call back over to Kyle Brown, CEO, for closing remarks. Kyle Brown: On behalf of the entire team, thank you for joining the call today. We appreciate your continued interest and investment in Trinity Capital Inc., and we look forward to updating you on Q2 results during our next earnings call on August 5. Have a great day. Thanks. Operator: Thank you, ladies and gentlemen. This brings us to the end of today’s meeting. We appreciate your time and participation, and you may now disconnect.
Operator: Hello, and welcome to NiSource Inc. First Quarter 2026 Earnings Conference Call. Please note that this call is being recorded. After the speakers' prepared remarks, there will be a question and answer session. Thank you. I would now like to turn the call over to Durgesh Chopra, Head of Investor Relations. Please go ahead. Durgesh Chopra: Good morning, and welcome to NiSource Inc.'s first quarter 2026 investor call. Joining me today are President and Chief Executive Officer, Lloyd M. Yates; Executive Vice President and Chief Financial Officer, Shawn Anderson; Executive Vice President of Technology, Customer, and Chief Commercial Officer, Michael S. Luhrs; and Executive Vice President and Group President of NiSource Utilities, Melody Birmingham. Today, we will review NiSource Inc.’s financial performance for the first quarter and share updates on operations, strategy, and growth drivers. Then we will open the call for your questions. Slides for today’s call are available in the Investor Relations section of our website. Some statements made during this presentation will be forward-looking. These statements are subject to risks and uncertainties that could cause actual results to differ materially. Information concerning such risks and uncertainties is included in the Risk Factors and MD&A sections of our periodic SEC filings. Additionally, some statements on this call relate to non-GAAP financial measures; please refer to the supplemental slides, segment information, and full financial schedules for information on the most directly comparable GAAP measures and reconciliations. With that, I will turn the call over to Lloyd. Lloyd M. Yates: Thank you, Durgesh, and good morning, everyone. We appreciate you joining us today. I will begin on slide 3. At NiSource Inc., our mission is to deliver safe, reliable, and competitive energy that drives value for our customers. Our disciplined capital deployment, operational excellence, and constructive regulatory frameworks remain the foundation of our business strategy. 2026 reflects continued execution of this strategy, supported by a robust regulatory foundation, ongoing operational improvements, and a commitment to our customers. NiSource Inc.’s value proposition is anchored in regulated utility operations across six highly constructive jurisdictions, providing diversification in both asset mix and regulatory environment. As we continue to modernize our electric and gas infrastructure, we are delivering on our core objectives by advancing innovative solutions such as NIPSCO Genco, partnering with Amazon and now Alphabet, to recognize higher and faster savings to customers. In addition to the announcements made a few weeks ago, I am pleased to share another expansion: an incremental 400 megawatts of capacity serving Amazon. Given the present inflationary climate, the value of these partnerships is tremendous, unlocking cost savings totaling approximately $1.4 billion for our existing customers over the next 15 years. Moving to slide 4, collaborative regulatory and stakeholder relationships, while operating with excellence, pave the way for NiSource Inc. to execute on its financial commitments. We continue to work alongside stakeholders through regulatory processes to ensure resources are available for critical investments to protect our system, serve our customers reliably, and grow local economies, all while balancing the impact these investments have on our customers. Working collaboratively with stakeholders, we are able to support enhanced ratemaking practices in our jurisdictions and advance legislative priorities, such as Indiana House Bill 1002 and Ohio Senate Bill 103, to help ensure fair, balanced outcomes for our customers and our communities. A key tenet to our operating plan is to work efficiently and improve our systems and processes, leveraging AI and technological upgrades to improve both efficiency and reliability for our customers. Today, we reported first quarter 2026 consolidated adjusted EPS of $1.06, which accounts for 52% of our projected midpoint earnings guidance. We are reaffirming our 2026 consolidated adjusted EPS guidance of $2.02 to $2.07 per share, and we are increasing our consolidated adjusted EPS CAGR by 100 basis points for 2023 to 2033 to 9% to 10%, with performance tracking toward the high end of that range through 2030, driven by the robust portfolio of investment opportunities supporting data centers. Turning to slide 5, safety remains our top priority and the foundation of operational excellence, and our first quarter results reflect the strength of that commitment. We delivered the safest first quarter on record for employee injuries dating back to 2016 through strong winter preparedness and disciplined field execution. We also continue to advance our proactive risk reduction programs across the system, completing over 11 thousand miles of leak survey in the quarter, helping identify and mitigate 113 large-volume leaks, well above plan. We exceeded our targets for both electric pole inspections and replacements for the quarter and maintained strong execution in our cross-bore program, reinforcing the long-term resilience of our infrastructure. These results underscore the operational discipline of our teams and our continued commitment to delivering safe, reliable service across our footprint. The Apollo continuous improvement team is focused on boosting operational efficiency via programs like Fleet Focus to reduce idling and right-size fleets, streamlining IT applications, and using AI to improve permitting, invoicing, and locate screening. AI and analytics are improving NiSource Inc.’s operations via the work management intelligence platform. Enhanced spend visibility in supply chain enables faster procurement, while AI contract tools have increased productivity over 20%. These solutions are expanding to customer and back-office functions for greater efficiency and service quality. We continue to engage proactively with stakeholders and regulators in all jurisdictions, as shown on slide 6. Our regulatory strategy is informed by thoughtful, careful consideration of customer affordability and cost pressures, ensuring we proceed in a manner that balances these concerns. As a strategic organization, we adapt to evolving sensitivities, ensuring we operate with both efficiency and effectiveness as we navigate new opportunities and challenges. We remain committed to engaging transparently throughout the regulatory process, providing timely updates to stakeholders on our investment plans and priorities only as they advance through proper channels. Leveraging riders, as consistently practiced in Ohio and other states, enables us to address affordability issues by minimizing the need for frequent rate cases and by better timing capital allocation and recovery. We also support legislation such as Indiana House Bill 1002 that adopts measures like levelized billing to protect customers from bill fluctuations caused by weather-related usage spikes. In Pennsylvania, we have flexibility in our plan to address system modernization at a pace and method of recovery which reflects stakeholders’ feedback, while also ensuring service can be safely delivered. In March, NIPSCO received a second federal order requiring the continued operation of our Schahfer coal plant. Our plan incorporates flexibility to accommodate this directive, reflecting our commitment to full regulatory compliance, maintaining customer affordability, financial stability, and reliability. We are driving direct savings to our customers by entering into strategic partnerships with data center customers. By leveraging the Genco regulatory model, our agreements with Alphabet and Amazon are expected to deliver annual savings up to $124 per year for residential customers, offering greater benefits on an accelerated timeline versus initial forecasts. Our priority is delivering sustainable solutions that fulfill present and future demands while maintaining our promise of value and excellence in service. With that, I will turn it over to Michael S. Luhrs to dive deeper into the data center strategy. Michael S. Luhrs: Thanks, Lloyd. I will begin on slide 7. Genco was designed for speed and flexibility to support growing energy demand in Northern Indiana while simultaneously achieving cost savings for existing customers and driving economic growth in the communities we serve. We have recently made several advances on this initiative that now total $1.4 billion in customer savings: a new energy infrastructure agreement with Alphabet, two expansions on the Amazon agreement to accelerate and increase our service, and the creation of the pooled resources approach, which enables both new and ongoing customer needs. These developments highlight Genco’s unique, innovative approach to serving data centers by providing speed to market, shielding retail customers from investment costs while reducing their monthly bill, and strengthening shareholder value. Now on slide 8, we are launching a new partnership with Alphabet. By employing 340 megawatts of pooled resources, including advanced battery solutions and utilizing available market resources, we will begin service this summer and expect to achieve full ramp by 2030. This 15-year contract will provide faster access to energy than previously anticipated and accelerate savings benefits to customers. Moving to slide 9, Amazon has continued to emphasize investing in the state of Indiana. We are pleased to report both an expanded collaboration with Amazon and an accelerated timeline to deliver energy to Amazon. Over 400 megawatts of contracted generation will serve enhancements to the existing Amazon data center strategy, helping our retail customers realize savings faster and ultimately grow their total bill savings up to $124 per customer per year. To support growing large-load demand, we are pursuing a pooled generation strategy that allows us to efficiently develop and manage a diversified portfolio of resources accessed through Genco, as shown on slide 10. The pool operates as an aggregation of assets, similar to a traditional utility portfolio, matching large-load customer demand with a flexible asset base. As we add new data center customers, the asset pool scales accordingly. This initial pool of approximately 800 megawatts is sized to meet load requirements plus applicable reserve margins. Importantly, the structure ring-fences cost and risk so that the costs associated with these large loads are isolated from our broader retail customer base and are recovered through our bilateral contracts, while still allowing us to optimize resources, cost, and system reliability. The incremental and accelerated megawatts of these agreements will increase savings to existing customers. These investments will also drive economic development by creating new jobs, expanding the tax base, and supporting the development of a skilled workforce in Indiana. We have a strong pipeline to serve new and existing customers, as shown on slide 11: approximately 3 gigawatts in strategic negotiations and line of sight to approximately 2 gigawatts of developing opportunities, even after securing approximately 800 megawatts of additional capacity for Alphabet and Amazon. Slide 12 shows our progress on regulatory and construction milestones. The original Amazon contract is pending commission approval, expected in June, ahead of civil site work later this year and load energization beginning in 2027. Upon IURC approval of the Amazon contract settlement, our new Alphabet and Amazon agreements will be subject to an expedited regulatory review process of 90 to 120 days for approval, resulting in anticipated orders later this year. With that, I will turn the call over to Shawn. Shawn Anderson: Thank you, Michael, and good morning, everyone. I will pick up with our data center business. The Genco business model offers differentiated flexibility to achieve speed to market for new customers, disciplined savings for our existing customers, and local economic development. As we pursue opportunities to serve data center customers, we have designed these strategies with multiple layers of risk protection to safeguard shareholders and existing customers. Rate structures and contractual terms are designed to provide full cost recovery and achieve appropriate risk-adjusted returns. Revenue strategies such as minimum demand charges and long-term commitments help establish a secure revenue floor. Credit and counterparty risk is managed through credit support requirements and by diversifying exposure across highly rated counterparties. Contractual protections allocate construction, operating, and market risks to the parties best positioned to manage those. We have embedded risk management into our framework for contracted capacity purchases while reducing reliance on future market volatility. Importantly, the structure is designed to ring-fence this activity from the core regulated business, preserving balance sheet strength and minimizing volatility, while enabling disciplined capital deployment into a strategic and growing plan. Now to slides 13 and 14 and our financial results. First quarter consolidated adjusted EPS was $1.06, an $0.08 per share increase versus the $0.98 reported in the same period last year, an 8% year-over-year increase primarily driven by regulatory execution across our base business recovering capital investments from 2025’s capital and regulatory plans. By achieving 52% of our midpoint earnings guidance through Q1, NiSource Inc. is well positioned to achieve our full-year financial objectives. On slide 15, our five-year capital investment remains unchanged for our base business at $21 billion, which includes $2 billion in upside opportunities. Our consolidated plan is now enhanced by $7.6 billion in Genco and data center-related capital. We are actively advancing incremental investment opportunities shown on slide 16, which include electric generation, gas and electric transmission and system modernization, MISO long-range transmission projects, FEMA compliance, and advanced metering infrastructure. These initiatives are not part of our base or upside plans, yet present significant potential for long-term value creation. Reviewing slide 17, the NIPSCO system continues to experience significant progress through consistent addition of generation capacity with a substantial pipeline underway, and an increased figure for signed Genco contracts. Turning to slide 18, we are reaffirming NiSource Inc.’s consolidated adjusted EPS guidance range for 2026 of $2.02 to $2.07 per share. We have increased our long-term guidance by 100 basis points and expect to deliver 9% to 10% consolidated adjusted EPS compound annual growth through 2033, with performance tracking toward the high end through 2030, supported by projected 9% to 11% rate base growth. We have started 2026 strong and are confident in our plan. We are committed to keeping O&M costs steady during the planning period. Our plan remains highly executable, projecting modest customer demand of less than 1% across all customer classes and applying conservative financing assumptions through 2030. Looking ahead, slide 19 reflects our improved outlook for Genco, with increased 2030 Genco EPS of $0.25 to $0.35 per share and a 2033 outlook of $0.40 to $0.60 per share. Slide 20 highlights our five-year funding plans. We are reaffirming 14% to 16% FFO to debt in all years of the plan. A balanced mix of cash from operations, new long-term debt, and $400 million to $600 million of equity each year is expected to further strengthen the balance sheet. This reflects a $600 million increase in our CapEx plan and a strengthening pipeline of investment opportunities. Finally, slide 21: we remain on track to achieve our 2026 financial targets. With that, Operator, please open the line for questions. Operator: We will now open the call for questions. Operator: Your first question comes from the line of Shar Pourreza of Wells Fargo. Your line is now open. Analyst: Hi. Thank you. This is actually Andrew Kadavian for Shar. Thanks for taking my questions. Can you talk about what you are seeing in discussions with potential customers that has allowed you to firm the 1 to 3 gigawatts in your strategic negotiations bucket to 3 gigawatts? Lloyd M. Yates: Yes, Andrew. Today, we have signed approximately 4 gigawatts of capacity for data centers. When you couple that with our current engagement with multiple counterparties and strong demand, those facts support our confidence in advancing the 3 gigawatts of pipeline opportunities that are in active negotiations. The Genco model represents a compelling opportunity and competitive advantage to serve this large-scale growth while benefiting our existing customer base, so we are very confident in our ability to execute. Analyst: Thanks. And then with only $600 million of CapEx to serve the incremental 1 gigawatt of hyperscaler load, it is a pretty capital-light construct. With the market capacity you are making, how do you earn on those purchases? Can you give us some detail on how that flows through to earnings? Lloyd M. Yates: Shawn, do you want to address that? Shawn Anderson: Yes. We look at the total amount of capacity we will generate, what the cost is for that, and what an appropriate risk-adjusted return is. When you net those two, that is what creates the earnings per share. As you mentioned, some of that is through capacity purchases, and some will be through constructing assets. The net of that is what we guide to in the Genco guidance. Analyst: Thank you. I will leave it there. Operator: Your next question comes from the line of Bill Apicelli of UBS. Your line is now open. Analyst: Hey, good morning. Along similar lines, thinking about the incremental needs to service what could be part of the additional megawatts to come under strategic negotiations, how should we think about the resource mix in terms of additional generation to be built versus purchases? And related, how should we think about the incremental earnings benefit? Is this more linear, or does the accretion improve as you scale Genco? Lloyd M. Yates: Shawn? Shawn Anderson: I do not think it is linear. It is project-specific and largely driven by what a customer needs and when they need it. From there, we find the most attractive resource that is appropriate to serve that demand, both short term and long term, at the most reasonable cost on a long-term risk-adjusted basis. Analyst: So you will update as you announce, and it will be bespoke for each deal in terms of the earnings benefit? Lloyd M. Yates: That is correct. The Genco model allows us to provide bespoke solutions to our counterparties. As we add to that pool, we will make it clear that we are adding capacity and how we are serving that customer. Analyst: Under the framework of affordability, you have increased customer benefits today. How is that resonating with the customer base and stakeholders on the political and regulatory front? Lloyd M. Yates: We believe it is being well received by customers and regulators. We are providing $1.4 billion of benefits back to customers, which is $124 per year of real money going back to customers. At the same time, we are building in Indiana, creating jobs, and benefiting the communities we serve. We think this model is a competitive advantage, compelling, and well received by our stakeholders. Operator: Your next question comes from the line of Steven Isaac Fleishman of Wolfe Research. Your line is now open. Analyst: Good morning. With these two recent deals, you are providing time-to-power availability, which is hard to find and people pay for. How much more time-to-power access in the next few years could you feasibly do? Because that clearly is something customers want. And then, on the 9 gigawatt total, is that some kind of limit on the opportunity in the region or on your transmission system, or could it be larger over time? Also, switching gears, on the recent governor letter to utilities in Pennsylvania, how are you interpreting that and what does it mean for your future rate case strategy and investment in Pennsylvania, if anything? Michael S. Luhrs: We have not disclosed the exact amounts we could do, but we continue to be very active in the commercial supply chain, focused on speed to power. We ensure the capabilities, resources, and constructs are there, from site development through execution. We are focused on executing effectively on current commitments and continuing to provide speed to power in the near term, which underpins our confidence in the 3 gigawatts in strategic negotiations. On the 9 gigawatts, I would not view it as a limit. We are disciplined and methodical in progressing our pipeline and negotiations. Indiana is a very strong territory for developing opportunities given the geography, proximity to Chicago, the 345 kV transmission backbone with redundancy, and gas supply. The 9 gigawatts is our current focus, not the ultimate opportunity. Lloyd M. Yates: Regarding Pennsylvania, we are actively engaged with all stakeholders as we develop a response to Governor Shapiro’s letter. Last December we had a constructive regulatory outcome for our rate case, and we are evaluating future regulatory mechanisms, including trackers, to support capital investments. Our five-year financial plan is built with flexibility to adapt to opportunities and challenges. We will continue to emphasize safety and compliance with federal and state requirements, invest to operate the system reliably, and maintain a strong balance sheet to support critical investments. Operator: Your next question comes from the line of Julien Patrick Dumoulin-Smith of Jefferies. Your line is now open. Analyst: Good morning, team, and nicely done yet again. On the earnings composition, how do you think about bifurcating the $0.15 to $0.18 move up in guide between rate base and owned generation versus contracts? More critically, what is the ability to own more of that generation over time? You talk about an 800 megawatt pool—would you in-house that over time, and is that another element of compounding growth beyond 2030 to 2033? Lloyd M. Yates: As we add customers and provide bespoke generation solutions, we will own some of that generation—likely a significant amount—while providing the best solution to the customer as we negotiate contracts. Michael S. Luhrs: When we say bespoke solutions, we ensure within the Genco model that we have the capability to serve 3 thousand megawatt increments and also 300 megawatt increments. The pooled resources are the mechanism by which we will own the resources provided to NIPSCO to meet resource adequacy. Our focus has been to avoid commodity risk or market exposure. We secure contracted generation capacity one way or another and bring it into the portfolio to serve customers holistically with speed to market. Shawn Anderson: Because it is not functioning directly off a return-on-rate-base model, the accretion we guide to—short term and long term—and the potential for value creation do not require us to own all assets. We monetize capacity attributes in a way that is attractive to stakeholders—exemplified by the $1.4 billion in savings to retail customers—and to shareholders, with expected return on and of the cost of those assets over the life of the customer agreements. Analyst: On the 3 gigawatts in strategic negotiations, what are the gating items for conversion? Is it dependent on getting approvals for Amazon and Alphabet, and is there a serial nature to putting this in front of the IURC? Also, on the ATM, how much latitude do you have for more deals now that you raised the ATM range, or is that effectively utilized with the CapEx increase? Lloyd M. Yates: These are complex transactions and negotiations take time. I would not limit this to Amazon and Alphabet—we are talking to multiple counterparties. We have structured our organization to execute more efficiently and effectively, which gives me confidence we will get these done. Shawn Anderson: We absolutely have a lot of latitude in our financing plan. The $400 million to $600 million annually that we disclosed today is already contemplated in the filed ATM structure. We have the capacity to handle that volume without impact. Operator: Your next question comes from the line of Eli Johnson of JPMorgan. Your line is now open. Analyst: Good morning. On speed to market within the resource mix for the pool strategy, is there a resource priority list to execute that speed to market? And more broadly, do you have an update on where you are in terms of land and equipment acquired for the new assets? Also, can you provide more color on next procedural steps with the IURC and the timeline for review, and any color on development in La Porte County? Michael S. Luhrs: On speed to market, beyond meeting reliability, MISO accreditation, and IURC requirements, we deploy resources across a broad spectrum—CCGTs, batteries, contracted generation, and confirming market capabilities—bringing them into the pool to ensure speed and reliability. It is not a prioritization of any single asset type; it is ensuring they meet reliability and accreditation and that they can meet customer timelines. We are very active and consistent in growing that mix. On process and timeline, slide 12 is a good representation of progression through the regulatory process, including zoning approvals, the acceleration amendment filed with the IURC, and the potential for expedited approval of special contracts within 90 to 120 days following settlement approval. We have confidence in the approvals and will continue to execute. We will provide updates as projects move into construction phases beginning in 2026. Operator: Your next question comes from the line of Nicholas Amicucci of Evercore ISI. Your line is now open. Analyst: Good morning. Given timelines and the data center horizon through 2035, and the expedited approval process, when we think about up to 2 gigawatts of developing opportunities that are later-dated, how quickly would those need to be brought into the fold to be COD by 2035? Also, to clarify, in the increased guidance, there is no consideration of the 3 gigawatts in strategic negotiations embedded, correct? Lloyd M. Yates: Those 2 gigawatts are developing opportunities. How quickly they move into strategic negotiations remains to be seen. Demand in Indiana for hyperscalers and data centers is significant. We will continue to work opportunities methodically as resources and equipment allow and will update the pipeline as projects progress. Michael S. Luhrs: As noted, we will continue the disciplined methodology and update which gigawatts are in which portion of the pipeline as negotiations advance. Lloyd M. Yates: That is correct—our increased guidance includes only signed customer contracts, not strategic negotiations. Operator: Your next question comes from the line of Paul Fremont of Ladenburg. Your line is now open. Analyst: Thanks. I would like to better understand the role of Schahfer generation potentially under a PPA in that 800 megawatt pool. Do you have the ability to shift operating costs that are now being picked up by retail customers to the data center customers? Also, how long would it take to supply generation to prospective new customers, including the expansion for AWS and Alphabet? And since Genco is growing as a percent of your total contribution, when can we expect to see separate financials? Lloyd M. Yates: Regarding Schahfer, as I mentioned, we received a second federal order, and we consider the Schahfer units part of our retail customer capacity. Our goal is to continue to recover costs through the FERC process. There has been no consideration of shifting that into a PPA. Michael S. Luhrs: That is correct. Schahfer is not a Genco asset; it is a NIPSCO regulated asset, not part of the pool and not contracted to the pool. Lloyd M. Yates: On timing, every Genco solution is bespoke with defined ramp rates, and those considerations drive timing and the type of generation we provide. Shawn Anderson: We will break out Genco once it represents a more material contribution to NiSource Inc.’s ongoing financial results. Operator: Your next question comes from the line of Travis Miller of Morningstar. Your line is now open. Analyst: Thank you. On the pool strategy, do you need approval from the IURC for any new assets or any contracts outside of approval for just the data center contracts? Essentially, are you able to serve that data center contract with any assets and purchases without separate regulatory approval? Also, to clarify, the 9% to 10% growth includes only the existing Amazon, Amazon expansion, and Alphabet—none of the pipeline, right? And finally, the mechanism for flowing savings back to customers—the $1.4 billion—how does that actually get back to NIPSCO customers? Michael S. Luhrs: Under the existing process, Genco files special contracts with the IURC for approval. In those filings, we provide information on what assets are being added to the system to serve the contract. The special contract is approved, and those asset details are typically within the special contract; separate CPCN approvals are not required for those pooled resources. The pool strategy is effectuated through Genco’s special contracts that the IURC approves. Shawn Anderson: Correct—the 9% to 10% EPS growth includes only signed customer contracts and not any projects in strategic negotiations. Michael S. Luhrs: The $1.4 billion of savings is defined within each special contract and distinctly lays out how funds are accrued and then provided back to the NIPSCO base. It is a credit against the bills of those retail electric generation customers—not a volumetric reduction—applied as a credit from the contractual mechanisms. Operator: Thank you. I would now like to hand the call back to Lloyd M. Yates for closing remarks. Lloyd M. Yates: I want to thank all of you for your questions and your continued interest in NiSource Inc. We appreciate it. Have a great day. Operator: Thank you for attending today’s call. You may now disconnect. Goodbye.
Operator: Greetings, and welcome to the Viemed Healthcare, Inc. First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Trae Fitzgerald, Chief Financial Officer. Thank you. You may begin. Trae Fitzgerald: Thank you, and good morning, everyone. Please note that our remarks in this conference call may include forward-looking statements under the U.S. federal securities laws or forward-looking information under applicable Canadian securities legislation, which we collectively refer to as forward-looking statements. Such statements reflect the company’s current views and intentions with respect to future results or events and are subject to certain risks and uncertainties which could cause actual results or events to vary from those indicated in forward-looking statements. Examples of such risks and uncertainties are discussed in our disclosure documents filed with the SEC or the securities regulatory authorities in certain provinces of Canada. Because of these risks and uncertainties, investors should not place undue reliance on forward-looking statements. The forward-looking statements made in this conference call are made as of today, and the company undertakes no obligation to update or revise any forward-looking statements, except as required by law. The first quarter financial supplement and financial news release, as well as the related financial statements, are available on the SEC’s website. With that, I will now turn the call over to our Chief Executive Officer, Casey Hoyt. Casey Hoyt: Alright. Thank you, Trae, and good morning, everyone. Appreciate you joining us today. This past quarter demonstrated what consistent execution looks like across our entire platform. Our sleep business continues to scale and differentiate itself. Maternal health is performing ahead of plan. Our free cash flow profile has improved meaningfully year over year. Also, in ventilation, we are starting to see the operational trends that we have been envisioning. In aggregate, these results exemplify a business that is growing, diversifying, and becoming more capital efficient. And it is the direct result of the disciplined execution this team brings every single day. First quarter revenue was $75.4 million, up 28% over the prior year. Following what was a record fourth quarter for Viemed Healthcare, Inc., matching that performance low in Q1 is an achievement we are proud of and one that is consistent with exactly what we communicated as planned for the year. Q1 carries a predictable seasonal pattern, and the business executed right in line with our internal plan. As we move into the second quarter and the balance of the year, we feel very good about the current and future quarters. Sleep continues to be one of the strongest growth drivers in the business. PAP therapy patients grew 57% year over year, and the set of activity we have driven over the past several quarters is translating into a larger and steadily expanding base of resupply patients. We now have nearly 36,000 PAP patients on the platform. As that base expands, it brings greater visibility into future revenue and a more stable growth profile. Beyond those numbers are tens of thousands of patients who are sleeping better, feeling better, and living healthier lives because of the care we are delivering. As sleep continues to scale, it provides increasing visibility into future revenue and becomes a more meaningful contributor to the overall growth profile of the business. On resupply, quarterly patient counts were down from the fourth quarter, consistent with the seasonal pattern we see every year. Activity typically moderates as deductibles reset coming out of Q4, and we saw that dynamic play out again this quarter. Importantly, the underlying trend remains intact, with resupply patients up 47% year over year. The long-term demand picture for sleep remains very strong. Obstructive sleep apnea continues to be significantly underdiagnosed, and the broader focus on metabolic health, including increased use of GLP-1 therapies, is driving more patients into diagnosis and treatment. The PAP base we are building today is what drives resupply growth over time, and we continue to feel very good about that pipeline. Sleep is not the only place where our platform leverage is being realized. On our last call, we talked about the potential that excited us most about maternal health—not just in terms of Lehan’s offerings and capabilities, but what we could do with them within the Viemed Healthcare, Inc. platform. I want to update you all on that because the early results are exceeding our expectations. Lehan continued to perform well. The integration has been smooth, and the business has been accretive since day one. A more important development this quarter is what we are seeing outside of Lehan’s original markets. During the first quarter, we serviced just under 4,000 new maternal health patients under the Viemed Healthcare, Inc. contracts in markets where Lehan previously had no presence. That is a critical early indicator of how the model can scale. The payer relationships, intake and billing infrastructure, and compliance capabilities already existed. We were able to extend that existing platform into a new product offering, and the team delivered. This gives us confidence in our ability to continue expanding maternal health into additional Viemed Healthcare, Inc. markets as we move through 2026. Turning to ventilation, we are seeing a couple of important dynamics play out at the same time. First is that new patient startup momentum is building faster and stronger than we expected. Referral sources are getting more comfortable with the updated criteria, the documentation process is maturing, and the setup pipeline is responding in a way that is genuinely encouraging. This is the inflection point we have been working towards, and it is arriving ahead of schedule. March was a particularly strong month for ventilator setups with 759 starts compared to 692 a year ago. Our 100% ALJ success rate on Medicare Advantage denials continues to validate the appropriateness of the patients we serve, and we are seeing more of those denials resolved earlier in the process. Second is that the patient setup cohorts under the new NCD criteria are now reaching required compliance evaluation points, and the turnover rate for those patients is higher than pre-NCD. That is creating some near-term pressure on the net patient census number, which ended the quarter at 12,089 patients. However, I want to be direct: this is not a demand issue. It is not a competitive issue. It is a compliance dynamic that is a requisite of the new system, and it is something we advocated for, anticipated, and will become industry-best at under these new compliance standards. What gives us confidence that both trends are moving in the right direction: compliance among active ventilator patients has improved by nearly 20% since the NCD went into effect. That is a meaningful development and reflects patients and physicians adapting to the new standards. It also supports our view that, given our differentiated high-touch, high-tech model, compliance rates should continue to improve as the NCD matures. I also want to address an area where we continue to advocate on behalf of our patients. Under the current NCD compliance framework, a patient who experiences a noncompliance episode can lose access to their ventilator. In practice, these are patients with serious chronic respiratory conditions who rely on ventilation as a prescribed life-sustaining therapy. When compliance is interrupted—whether due to illness, caregiver changes, or clinical challenges—the current rules can result in a loss of access to that therapy. We believe this is an area where the policy can continue to evolve. The clinical need does not change because of a temporary compliance interruption, and the patient should have uninterrupted access to therapy when appropriate. While the compliance policy does not necessarily threaten our financial success as a company, it absolutely impacts the patients who are benefiting from care, and that is a problem that we will continue to lobby for in the name of our patients. More broadly, the regulatory environment outside the NCD is also moving in a direction that we support. On competitive bidding, as a reminder, the categories identified by CMS for the upcoming round do not include any of our current product offerings. As a result, we do not expect a material impact to the business and continue to view the reimbursement foundation of our core services as stable. On the enrollment moratorium announced by CMS earlier this year, I want to be clear that this has no impact on Viemed Healthcare, Inc.’s operations whatsoever. We are fully enrolled, fully operational, and continuing to grow in every market we serve. What the moratorium does do is restrict new entrants from attaining Medicare enrollment during this period, and for an established provider with our national infrastructure and existing payer relationships, it makes the competitive landscape more rational over time. Across these regulatory developments, the direction is clear. The shift toward more objective criteria under the NCD, the absence of competitive bidding pressure on our core products, and the barriers to entry that favor established providers all reinforce the position we have built over time. These are the kinds of conditions that support long-term sustainable growth. None of that happens without the team behind it. Managing the NCD transition, expanding maternal health into new markets, and continuing to scale sleep requires a high level of operational discipline and clinical focus. Our team of 1,387 employees delivered on each of those priorities this quarter, and the results reflect that work. Those results are built on capabilities we have developed over time. A clinical model, a technology platform, a compliance infrastructure, and a national network of payer relationships all work together to support how we operate and scale. That combination allows us to expand sleep into new markets, extend maternal health through the existing infrastructure, and manage the regulatory transition of ventilation with consistency. It is a foundation that supports continued growth. With that, I will now turn the call over to William Todd Zehnder to walk through our financial results and capital allocation in more detail. I would draw your attention in particular to the free cash flow results and the capital return activity we executed during the quarter. Those numbers reflect the execution we have been describing, and I think they tell an important story about the financial trajectory of this business. William Todd Zehnder: Alright. Thank you, Casey, and good morning, everyone. In reviewing the financial results, all figures are in U.S. dollars, and our full results have been filed with the SEC. I will be referencing information available in our quarterly financial supplement, which can also be found on our investor relations website. Starting with the top line, first quarter revenue totaled $75.4 million, representing growth of 28% over the prior year. On a sequential basis, revenue was essentially flat compared with the $76.2 million we delivered in the fourth quarter of 2025, which is right in line with the seasonal pattern we outlined on our last call. As we discussed in March, Q1 typically runs flat to slightly down sequentially, and that is exactly how it played out. The quarter reflects strong execution against the plan. Looking at the components of that revenue, ventilator rentals totaled $35.4 million for the quarter, up approximately 10% over the prior-year period. Our other home medical equipment rentals contributed $16.2 million, up 25% year over year. Equipment and supply sales came in at $17.5 million, more than doubling from $7.5 million in the prior-year period, driven by growth across both sleep resupply and our maternal health offerings. On the sleep side, our PAP therapy patient count reached 35,938 at quarter end, up 57% year over year and 4% sequentially. As that PAP base grows, more patients move into long-term resupply relationships, which creates a recurring and predictable revenue stream that compounds over time. The maternal health contribution reflects both the continued performance of the Lehan business and the early expansion beyond its original footprint that Casey discussed. From a mix standpoint, ventilator rentals represented approximately 47% of total revenue in 2026 compared to 54% in 2025. That shift matters for a few reasons. Sleep resupply and maternal health carry different capital requirements, payer profiles, and growth characteristics than ventilation, and as those categories scale, they reduce our concentration risk, broaden our reimbursement base, and improve the capital efficiency of the business. The Viemed Healthcare, Inc. business itself continues to perform well, but the overall revenue base is becoming more balanced, which is by design. The continuation of this diversification should help bolster our financial performance in the future. On the payer side, Medicare represented 35% of revenue in the quarter, down from 41% a year ago. As our sleep and maternal health businesses scale, a larger share of our revenue is coming from commercial payers, which reduces our concentration to any single payer and provides a more diversified reimbursement base. Gross profit for the quarter was $42.8 million, representing a margin of 56.8%. That is a modest improvement compared to 56.3% in 2025 and roughly in line with what we delivered for the full year of 2025. Sequentially, margins were down modestly from the 57.9% we reported in the fourth quarter, which is consistent with normal Q1 patterns. The sequential moderation from Q4 is largely a function of revenue volume. Q1 is our lowest revenue quarter of the year, and our labor costs in COGS carry some relatively fixed components, so lower sequential revenue naturally produces some margin compression at the gross profit line. In evaluating year-over-year performance, it is important to consider that 2025 included a $2.7 million recurring gain on disposals related to the ventilator buyback program with Philips, which has since concluded. That gain impacted both operating income and adjusted EBITDA in the prior period and creates a distortion in the year-over-year comparison. Adjusted EBITDA for 2026 was $14.3 million, or 19% of revenue, compared to $12.8 million, or 21.6% of revenue, in 2025. Excluding the prior-year gain, adjusted EBITDA margin in 2025 would have been approximately 17%. On a comparable basis, adjusted EBITDA margin expanded by approximately 200 basis points year over year, which we believe better reflects the underlying operational progress of the business. As expected, the reported 19% margin is lower than our full-year 2025 margin of approximately 22.7% given the seasonal nature of Q1. That quarterly cadence is consistent with prior years and does not change our full-year view on margin. We continue to expect adjusted EBITDA margin to be in the range of approximately 21% to 22% for the full year 2026, supported by operating leverage in SG&A as the revenue base grows. SG&A as a percentage of revenue improved to 46.1% in 2026 from 48.1% in 2025, a 200 basis point improvement year over year. That improvement reflects the operating leverage we continue to realize as we scale. In absolute dollars, SG&A increased by $6.4 million, driven primarily by employee-related costs to support our growth, including headcount added from the Lehan acquisition. We ended the quarter with 1,387 employees, up 14% from 1,222 a year ago. Net income attributable to Viemed Healthcare, Inc. for the quarter was $2.6 million, or $0.06 per diluted share, essentially flat with the $2.6 million reported in 2025. As noted, the prior-year period benefited from the Philips disposal gain that did not recur. On a normalized basis, the underlying earnings trajectory of the business continues to improve. Free cash flow is an area I want to spend some time on because we think it is one of the most important indicators of where the business is headed. Free cash flow for the quarter was $2.6 million compared to negative $5.7 million in 2025. That is an $8.3 million improvement year over year, and it reflects progress on both sides of the equation. We are generating more cash from operations, and we are deploying less capital to do it. On the operating side, cash flow from operations was $8.1 million in the quarter, up from $2.9 million a year ago. That is nearly a threefold improvement in a single year and is the most direct reflection of the earnings growth we are generating across the platform. On the spend side, net CapEx was $5.5 million compared to $8.5 million in 2025. As sleep resupply, maternal health, and staffing represent a growing share of our revenue, more of our growth is coming from service lines that require less capital per dollar of revenue than our ventilator business. This is an intentional and favorable structural shift in the capital intensity of the business, and we expect it to continue as the mix evolves. The result is a business that is growing revenue at 28% year over year while simultaneously becoming more capital efficient. That combination is what produces durable free cash flow at scale, and it is what we are seeing in the numbers. To put that in perspective, trailing twelve-month free cash flow was $11.6 million at the end of 2024, it was $23.3 million through 2025, and it was $36.3 million as of today. We believe that as the market better understands the free cash flow profile of this business, it will be an increasingly important driver of how Viemed Healthcare, Inc. is valued. We continue to fund our CapEx entirely from operating cash flow. Net CapEx as a percentage of revenue was approximately 7.3% in the first quarter. Based on that result and the continued evolution of our revenue mix toward less capital-intensive categories, we are updating our full-year net CapEx outlook to a range of 9% to 10.5% of net revenue, from our prior expectation of 10% to 11.5%. That update reflects the structural improvement in capital efficiency we are seeing as the business mix evolves, and we expect that trend to continue through the remainder of the year. Turning to capital allocation and the balance sheet, during the first quarter, we repurchased and canceled 150,000 shares of common stock under our 2026 share repurchase program at an average price of $9.29 per share for a total cost of $1.4 million. We authorized this program in March and began executing immediately. Our share repurchases are accretive to per-share value for continuing shareholders, and we believe that consistent execution on our buyback programs has been a contributing factor in the positive share performance we have seen over time. We also made $3.2 million in principal payments on our long-term debt during the quarter, reducing long-term debt to $8.3 million at 03/31/2026. We ended the quarter with $9.8 million in cash and $46 million available under our credit facilities. Our balance sheet remains in excellent shape. We are effectively at net zero debt, and we have significant capacity available under our credit facilities should an attractive acquisition opportunity arise. We remain disciplined on that front. Any acquisition would need to meet our return thresholds and fit within the strategic framework we have outlined, but the financial position to act is there. The ability to simultaneously repurchase shares and pay down debt while continuing to invest in the business is a direct reflection of the free cash flow generation we just discussed. That is exactly what we said we would do when we laid out our capital allocation framework, and the financial results this quarter reflect that execution. Our capital allocation priorities remain the same: invest in organic growth first, evaluate disciplined acquisitions second, and return capital to shareholders when appropriate. The share repurchase program reflects our confidence in the long-term value of the business at current levels, and we will continue to execute on it opportunistically. Turning to our outlook, we are updating our full-year 2026 guidance on two metrics. On net revenue, we are narrowing and raising the low end of our range to $312 million to $320 million from the prior range of $310 million to $320 million. We are reaffirming adjusted EBITDA in the range of $65 million to $69 million. On net CapEx, as I mentioned a moment ago, we are updating our full-year outlook to a range of 9% to 10.5% of net revenue from the prior expectation of 10% to 11.5%. The first quarter came in strong as expected. Revenue was consistent with the seasonal pattern we described on our last call, and the underlying business performed well in line with our internal plan. As we move into the second quarter, we continue to expect sequential revenue growth in the range of 3% to 5% per quarter through the remainder of the year. The operational signals Casey described, including improving new patient starts momentum in ventilation and the continued acceleration in maternal health, give us good visibility into that ramp as we move through the year. We feel good about where we sit relative to the full-year plan. Before we open up the line for questions, I want to end with a few key takeaways from the quarter. Revenue grew 28% year over year. Free cash flow improved by $8.3 million compared to 2025, driven by stronger operating cash generation and a more capital-efficient business. We ended the quarter with effectively no net debt and $46 million of available credit capacity, and we returned capital to shareholders through active execution of our share repurchase program. Each of those outcomes reflects deliberate execution against the plan we have laid out, and we enter the second quarter with good momentum across the platform. We will now open the call for questions. Operator: Thank you. At this time, we will conduct the question and answer session. A confirmation tone will indicate that your line is in the question queue. To ask a question, please press star 1 on your phone. Your first question comes from Dave Storms with Stonegate. Please state your question. Dave Storms: Good morning, and thank you for taking my questions. Great to see that you are increasing the low end of the range. You mentioned new patient starts, continued acceleration in maternal, and the like as drivers. Where could leverage push you to the higher side of that revenue guidance range? Is it more ventilator patients, is it the maternal integration, or something else? William Todd Zehnder: I would say that all of the product lines have the opportunity to push us toward the upside, Dave, and that is the great situation we are in. Vent new patient starts are exceeding what we originally thought, and the metrics that Casey talked about regarding compliance are extremely important for keeping patients on and getting that length of stay to where we want it to be. So ventilation has upside. The maternal health business is growing dramatically, and as we continue to operationalize it and scale, it probably has a very high likelihood of being a contributor to outperformance. And then the sleep side continues to outperform what we thought it would do a few years ago. So those three really have the ability to push us up toward that top end and, if everything works well, who knows—we may be able to increase it later on. But right now, we are very comfortable with where we sit. Dave Storms: That is great. Maybe circling in on maternal a little bit, you are seeing a lot of growth there. What are the potential limiters—headcount, education, new products, geographies? What could be limiting factors that you will focus on most? Casey Hoyt: Yes. I will start with complex respiratory, which is foundational for us. The NCD rules and really becoming the thought leader in them—having our clinical protocols laid out by the NCD already in place at Viemed Healthcare, Inc. gave us a leg up to be the first one inside of our referral sources’ offices to explain how the new world is going to work. We have been leveraging that and educating our referral sources so they understand what they are up against. Naturally, we are seeing our referrals spike as a result of being the educator of the new landscape inside of those offices. Beyond that, it is all of the above on what you laid out. We are expanding into new geographies. We have new sales reps who are clicking on all cylinders, and we have a new profile of reps we have been hiring that have been taking off as well. Lots of positive momentum with training, coaching, mentoring, and getting folks producing sooner rather than later. It becomes a land grab—getting into new markets with our program. William Todd Zehnder: And I will add—specific to maternal—people on the sales front are not the governor. It is really back office and fulfillment that we are staffing up. We have contracts in place, and we have marketing abilities around the country. It is about getting the mid and back office scaled up, and we have already increased that business dramatically. We are hiring as fast as we can and fulfilling as fast as we can. Finding salespeople is not a problem—although we have some we are layering in—it is really more digital marketing than anything. Dave Storms: Understood. Thank you. One more on margins: you mentioned operational efficiencies in vent and touched on SG&A. Over the next three to six months, is there low-hanging fruit left, or is it largely where you want it? William Todd Zehnder: There are always things to continue to do. We have been transparent that growth is going to come with some expenses, and we will continue to incur those. But we are extremely excited about the efficiency we are seeing. If you want to talk about AI or machine-based learning to help on the intake side or the logistics side, we have a lot of things we are implementing that should help with efficiencies. They should help with the cadence of setups and with the labor per order that we are processing. And as we continue to build these other business lines, corporate G&A is not having to go up in lockstep, so we will see efficiencies there as well. The most telling thing is the 200 basis point improvement in SG&A in one year. Our goal is to continue to drive that number down and improve margins over time. And as we have said on the call, this free cash flow enhancement is real, and we are very excited about it. Dave Storms: That is great commentary. I will take the rest offline. Thank you. Operator: Thank you. We have reached the end of the question and answer session. I will now turn the call over to management for closing remarks. Casey Hoyt: We appreciate everyone’s trust in our team. We are going to continue to double down on this growth and positive momentum and look forward to updating you in the coming quarters. Thank you, and have a good day. Operator: This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Palmer Square Capital BDC Inc.'s First Quarter 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn the conference over to Jeremy Goff. Please go ahead. Jeremy Goff: Welcome to Palmer Square Capital BDC Inc.'s First Quarter 2026 Earnings Call. Joining me this afternoon are Christopher Long, Angie Long, Matthew Bloomfield, and Jeffrey Fox. Palmer Square Capital BDC Inc.'s first quarter 2026 financial results were released earlier today and can also be accessed on our Investor Relations website at palmersquarebdc.com. We have also arranged for a replay of today's event that can be accessed on our website. During this call, I want to remind you that the forward-looking statements we make are based on current expectations. The statements on this call that are not purely historical are forward-looking statements. These forward-looking statements are not a guarantee of future performance and are subject to uncertainties and other factors that could cause actual results to differ materially from those expressed in the forward-looking statements, including, without limitation, market conditions caused by uncertainty surrounding interest rates, changing economic conditions, and other factors we identified in our filings with the SEC. Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions can prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions can be incorrect. You should not place undue reliance on these forward-looking statements. The forward-looking statements made during this call are made as of the date hereof, and Palmer Square Capital BDC Inc. assumes no obligation to update the forward-looking statements unless required by law. To obtain copies of SEC-related filings, please visit our website at palmersquarebdc.com. With that, I will now turn the call over to Christopher Long. Christopher Long: Good afternoon, everyone. Thank you for joining us today for Palmer Square Capital BDC Inc.'s first quarter 2026 conference call. On today's call, I will provide an overview of our first quarter results, touch on our market outlook and competitive positioning, and then turn the call to the team to discuss the current industry dynamics at play, our portfolio activity, and financial results. During the first quarter, our team deployed $109.4 million of capital and generated total and net investment income of $26.2 million and $11 million, respectively. We delivered net investment income of $0.35 per share and paid a $0.37 per share total dividend, which includes a $0.01 supplemental distribution above our base dividend and included approximately $0.02 of spillover income. Consistent with the sector, our earnings profile is reflective of monetary policy tightening over the last several quarters, in addition to experiencing a slowdown in new deal and refinancing activity given the macro backdrop. With this in mind, our dividend payout still represents an 11.1% yield on NAV and a 13.5% yield on the stock price as of April 30, which we believe is a compelling value proposition for investors. We also believe we are beginning to experience a pickup in activity in April, which we are hopeful continues for the remainder of the second quarter. As such, our Board has confirmed our second quarter base dividend of $0.36, with the supplemental to follow in normal course. We will continue to prioritize, to the extent possible, a distribution strategy that maximizes cash returns to investors. Our March NAV per share was $13.30. This mark is based on real actionable prices in the market and underscores our intentional commitments to transparency and accountability regardless of the day's market condition. This level of transparency is especially relevant in today's environment. With heightened scrutiny around BDC portfolio company valuation, we believe our monthly NAV disclosure delivers an added layer of confidence in the underlying value of Palmer Square Capital BDC Inc.'s portfolio while highlighting the uniqueness of our portfolio's positioning in liquid senior secured debt. We are pleased with the increased amount of positive feedback we have been receiving in this regard. 2026 presented another episode of volatility, induced by the software sell-off and credit cycle concerns in general, factors we discussed on our fourth quarter earnings call in February. These issues have continued to drive headlines in the months since, in addition to concerns and economic impacts resulting from the Iran war. As I did last quarter, I would like to spend a moment reiterating our philosophy around software and technology investments as it remains very topical. We continue to prefer deeply embedded mission critical software in areas such as cybersecurity, IT infrastructure, and ERP systems, which we believe will ultimately be net beneficiaries of AI advancements. Within these subsectors, we lend to large, highly scaled providers that have meaningful profitability and cash flow. We have found that these large enterprise platforms tend to be backed by sophisticated private equity sponsors and believe their capital structures provide meaningful equity cushion below our senior secured loans. In our experience, these providers also frequently benefit from significant incumbency advantages. We believe another advantage is the breadth and depth of their data collected across industries. This data positions incumbents to develop more effective AI and infrastructure than their more nascent peers, as data quality remains a foundational element of model performance and inference. To that end, we believe our portfolio companies are already realizing the benefits of AI advancements. Examples include one data analytics business that has over 60% of its top 50 customers using at least one AI-native product, while one of our large ERP software companies' AI application has seen adoption by 40% of its over 7 thousand customers. In the latter example, management expects that adoption to be over 75% by year-end 2026. Beginning in April, we started to observe a stabilization and, in some cases, a reversal of the mark-to-market prices on software and other AI-impacted loans, which we believe reflects the market's growing realization of the advantages incumbent providers hold amid the AI-driven disruption. To echo recent commentary from a large private equity sponsor, these incumbents are well positioned to win, but that position is not guaranteed. We believe that advantage is predicated on their long-term customer relationships, their ownership of critical data that underpins the day-to-day functions of their clients, and their ability to incorporate AI into existing software systems to improve services. With that, I will hand the call over to Angie. Angie Long: Thank you, Chris. Through the first quarter, Palmer Square Capital BDC Inc.'s portfolio faced many macro headwinds, but we believe it performed respectably given the degree of volatility across asset classes. Importantly, given this backdrop, we continue to see stability in our underlying credits, continued earnings growth in our software exposure, and minimal fundamental impacts from the Iran war. As the broader market begins to regain its footing, we believe Palmer Square Capital BDC Inc.'s portfolio will perform steadily as we look to capitalize on an improving opportunity set in what we believe should be better risk-adjusted spreads going forward. Stepping back, the first quarter was defined by significant macro volatility driven by the sell-off in software and technology credit, persistent headlines around redemptions in evergreen vehicles, and geopolitical uncertainty, most notably the situation in Iran. Within that context, our views on software remain unchanged. As Chris alluded to earlier, we continue to believe that deeply embedded mission critical platforms are well positioned to be net beneficiaries of AI advancements. As we are already seeing across parts of the market, these businesses are beginning to incorporate AI into their existing systems, leveraging long-standing customer relationships and differentiated data sets to enhance their offerings. Across the broader market, the dislocation has started to create more attractive entry points. In the secondary loan market in particular, we are seeing pricing that, in certain cases, reflects macro concerns more than company-specific performance. That shift is beginning to create a much better risk-reward dynamic than we have seen over the past several quarters. From an activity standpoint, M&A volumes slowed during the quarter as sponsors paused in response to the macro backdrop. However, with improving visibility, we are beginning to see activity return, including increased refinancing activity and select new opportunities across both the broadly syndicated and private credit markets. Importantly, spreads are now beginning to move wider across both markets. We are cautiously optimistic and believe the extended period of spread tightening is likely behind us. Finally, we must acknowledge that geopolitical developments remain a key variable. A timely resolution in Iran would likely be supportive of market conditions, particularly given the potential for elevated oil prices to have broader inflationary impacts across the economy. While the environment remains fluid, we believe the combination of more attractive pricing and a disciplined approach positions us well for the periods ahead. At the portfolio level, underlying credit performance continues to remain solid, and capital markets remain open for high-quality borrowers. We have experienced increased volatility in NAV, which is not unexpected given the market dynamics we have discussed thus far and the overall liquid nature of our underlying loans. We view this as a function of an efficient market attempting to price in perceived risks, rather than a reflection of any meaningful deterioration in underlying credit quality. To reiterate Chris' earlier comments, our monthly NAV is based on real, actionable market prices, providing more frequent transparency into how the portfolio is valued and eliminating perceived questions around the true NAV of the BDC. In terms of our balance sheet, we continue to believe the flexibility of our financing facilities is a core benefit of the BDC. The CLO that we issued in 2024 will exit its noncall period in July 2026, and we will likely be looking at potential refinancing options for that during the second quarter. During the first quarter, we remained active and disciplined with our share repurchase program. We bought back 140 thousand 149 shares for approximately $1.6 million and have remaining availability of approximately $4.2 million. In addition, Palmer Square Capital Management, our manager, purchased an additional 67 thousand 875 shares for approximately $800 thousand via its program. The Board will continue to evaluate share repurchases in the second quarter and beyond, given the attractive trading levels of our stock relative to NAV, and will consider future upsizes to the program if deemed appropriate. For added context, Palmer Square Capital BDC Inc. shares were yielding 13.5% as of 04/30/2026, a significant premium to the 11.1% yield on NAV. We believe this presents a compelling value proposition in the current environment, especially when taking into account the quality and conservative position of Palmer Square Capital BDC Inc.'s portfolio. As we look ahead to the remainder of 2026, we are constructive on the emerging opportunity set and believe the depth of our platform combined with Palmer Square Capital BDC Inc.'s flexibility to nimbly allocate across both public and private markets will continue to serve as a strong advantage in positioning the portfolio to capitalize on attractive risk-adjusted opportunities as they emerge. I will now turn the call over to Matthew to discuss our portfolio and investment activity in more detail. Matthew Bloomfield: Thank you, Angie. As Angie mentioned, Palmer Square Capital BDC Inc. navigated 2026 well despite heightened volatility facing the sector and broader markets. Relative to the fourth quarter, our net investment income per share decreased to $0.35 per share in the first quarter 2026, predominantly due to a combination of lower base rates as well as slower prepayment activity and the shortest quarter of the year. I would like to note that the full impact of lower base rates was felt more in 2026 than in 2025, due to how our borrower contracts are structured, and we believe the second quarter should represent a more normalized environment assuming no additional rate cuts in the near term. In recent weeks, we are beginning to observe increased new-issue activity and refinancings. While prepayment activity is difficult to predict, we believe it could reaccelerate as we move through the year. In addition, to reiterate Chris and Angie's comments, we also believe we are in a more reasonable spread environment today versus the past several quarters and are optimistic about the opportunity to reinvest paydowns into a higher-spread environment in the near term. Our total investment portfolio as of 03/31/2026 had a fair value of approximately $1.15 billion, diversified across 44 industries that demonstrate strong credit quality, industry and company-specific tailwinds, and a variety of end markets. This compares to a fair value of $1.2 billion at the end of 2025, reflecting a decrease of approximately 4.1%. In the first quarter, we invested $1.094 billion of capital, which included 42 new investment commitments at an average value of approximately $2.1 million. During the same period, we realized approximately $79.9 million through repayments and sales. Importantly, we remain focused on diversification as we allocate new capital across the portfolio, as we believe the recent market turbulence has refocused investors on the importance of risk management through diversification. To recap key portfolio highlights, at the end of the first quarter, our weighted average total yield to maturity of debt and income-producing securities at fair value was 11.73%, and our weighted average total yield to maturity of debt and income-producing securities at amortized cost was 8.26%. We believe our focus on first lien loans combined with diversification across industries and company size contributes to a strong credit profile, with exposure to 44 different industries. Further, our 10 largest investments account for just 10.64% of the overall portfolio, and our portfolio is 96% senior secured, with an average hold size of approximately $4.4 million. We view this as a key risk management tool for Palmer Square Capital BDC Inc. On a fair value-weighted basis, our first lien borrowers have a weighted average EBITDA of $452 million, senior secured leverage of 5.5 times, and interest coverage of 2.4 times. Additionally, new private credit loans comprised 22.3% of overall new investments at a weighted average spread of 486 basis points over the reference rate. While credit quality remains an industry-wide concern, nonaccruals continue to be low at Palmer Square Capital BDC Inc. On a fair value basis, nonaccruals represent less than one basis point, and on an at-cost basis, only 90 basis points. Our PIK income represents approximately 1.64% of total investment income, well below our peers and the industry average. We have maintained an average internal rating of 3.6 on a fair value-weighted basis for all loan investments. Our rating is derived from a unique relative value-based scoring system. We believe credit performance across the portfolio remains strong, continue to experience stable leverage levels and loan-to-value ratios, and our diversification positions us attractively within the dynamic markets we participate in. As we have discussed in the past, we believe larger borrowers are better positioned to deliver favorable credit outcomes over the long term, a dynamic we expect to continue as AI is advantageous to companies with the scale to invest in and leverage these technologies. As Angie described, in conjunction with the Board, we continue to evaluate share repurchases as a means of driving shareholder value given the discounts in the market. We will continue to evaluate share repurchases on a go-forward basis and will look to balance attractive investment opportunities in conjunction with those potential repurchases. Earlier in the call, we mentioned dislocations in the secondary market creating a better risk-reward dynamic than we have seen over the past several quarters. While we are actively evaluating new investments, we plan to approach these opportunities with balance. We are managing leverage carefully given movements in NAV, which Jeffrey will discuss in more detail, and we will be discerning in weighing the return profile of any new investments against that available through share repurchases to ensure we are making the most accretive capital allocation decisions on behalf of our shareholders. Now I would like to turn the call over to Jeffrey, who will review our first quarter 2026 financial results. Jeffrey Fox: Thank you, Matthew. Total investment income was $26.2 million for 2026, down 16% from $31.2 million for the comparable period last year. Income generation during the quarter reflected a mix of contractual interest income, paydown-related income, and select fee income from new deal activity. Total net expenses for the first quarter were $15.2 million compared to $18.3 million in the prior-year period. Net investment income for 2026 was $11 million, or $0.35 per share, compared to $12.9 million, or $0.40 per share, for the comparable period last year. During 2026, the company had total net realized and unrealized losses of $48.3 million compared to total net realized and unrealized losses of $21.3 million in 2025. This consisted of net unrealized depreciation of $52.8 million related to existing portfolio investments and net unrealized appreciation of $15.2 million related to exited portfolio investments. At the end of the first quarter, NAV per share was $13.30 compared to $14.85 at the end of 2025. Moving to our balance sheet, total assets were $1.2 billion and total net assets were $413.8 million as of 03/31/2026. At the end of the first quarter, our debt-to-equity ratio was 1.7 times compared to 1.54 times at the end of 2025. This difference is predominantly due to the change in NAV as well as the modest impact from share repurchases. Available liquidity, consisting of cash and undrawn capacity on our credit facilities, was approximately $325.3 million. This compares to approximately $311.3 million at the end of 2025. Finally, on May 6, the Board of Directors declared a second quarter 2026 base dividend of $0.36 per share in line with our dividend policy. Furthermore, our policy continues to be distributing excess earnings in the form of a quarterly supplemental distribution. And with that, I would now like to open up the call for questions. Operator: We will now open the call for questions. To ask a question, press star then the number one on your telephone keypad. Please pick up your handset and ensure that your phone is not on mute when asking your question. Our first question will come from the line of Kenneth Lee with RBC Capital Markets. Please go ahead. Kenneth Lee: Hey, good afternoon, and thanks for taking my question. Just one on the NAV. It sounds like a lot of the marks are driven by market and actionable pricing there. Could you remind us again how much input does Palmer Square have in terms of the loan valuations within the book? Or is it completely driven by what you are seeing on the secondary markets there? Thanks. Matthew Bloomfield: Ken, it is Matthew. Thanks for the question. It is completely driven by third-party marks. On the broadly syndicated side, those are real quotes, real levels, tradable in the secondary market. Those come from a third-party service provider that aggregates all those daily marks on the syndicated loans. On the private credit side, those are marked from a third-party valuation provider. Kenneth Lee: Okay. Great. Very helpful there. And one follow-up, if I may. I just want to get your thoughts around dividend coverage just given where NII is leveling out right now. Thanks. Matthew Bloomfield: It is obviously something we and the Board spend a lot of time on. The first quarter of the year is always the slowest from a prepayment activity standpoint and the shortest day count of the year, and the volatility that transpired predominantly in February and March slowed activity down pretty dramatically. As we moved into April, we do feel incrementally better about what we are seeing from new origination activity and conversations. We have had a couple of recent items that have already hit. So we feel very good about the $0.36 base dividend and the ability to pay a supplemental this quarter. That is the consideration. Base rates certainly play a big impact in that—obviously out of our control—but we are incrementally feeling better about where those are settling out, at least in the near term. We are not interest rate prognosticators per se, but as we look through things, look through the portfolio, and look through activity in April, we felt increasingly comfortable with where we are at here for the near to intermediate term. Kenneth Lee: Right. Very helpful there. Thanks again. Operator: Again, for questions, press star then one on your telephone keypad. Our next question will come from the line of Richard Shane with JPMorgan. Please go ahead. Richard Shane: Hey, guys. I need to queue in a little faster. Kenneth kind of asked my question, but I am curious as well about cadence of deal flow, both repayments and investments, and you largely addressed that. But any other color you want to add, I would be appreciative. Matthew Bloomfield: Similar to past years, coming into the end of last year, conversations and activity level felt pretty robust, and it was likely that would continue into the first half of 2026. With what transpired in the software space and then followed by the Iran war, as has been the case for the past several years, M&A conversations can grind to a halt pretty quickly. That being said, specifically outside of software, it feels like conversations have reengaged through April and into early May. That always takes a little bit of time to translate to actual deal activity. From what we are seeing, early looks on the broadly syndicated side have increased the past couple of weeks. Conversations and term sheets on the private credit side have marginally increased as well. We expect spreads to be wider. There is always a bit of digesting that from the borrower standpoint and from the sponsor community. I do not expect a huge acceleration, but I definitely expect it to pick back up from the very depressed levels we saw in February and March of the first quarter. Richard Shane: Got it. And then just one follow-up question, and thank you for that. One of the things we are hearing more generally is improved documentation, better covenants associated with deals, and more thoughtful opportunity for due diligence. Is that something, particularly in the BSL market, it is fair to extrapolate as well? Matthew Bloomfield: Yes, I think it is. Given the bandwidth we have across the firm from a capital deployment standpoint in the broadly syndicated market—outside of the BDC with our global CLO platform and private funds business—we tend to have meaningful relationships with those sponsors, so we get a lot of early access with management teams. The amount of time we are getting to spend has certainly increased. As that flows through to the credit documentation, in times of volatility and wider spreads it becomes a more lender-friendly environment, which we certainly welcome. It has been quite some time since we have been able to say that. We will use that to get as good documentation and as favorable levels as we can from a lender standpoint, and that has certainly come to our favor recently. Richard Shane: Got it. And then last question, and I apologize for so many, but we have asked most of the management teams in the space. When you think about where we are in the continuum in terms of structure and pricing, is it fair to say we are back to the middle? We have gone from tight, but we are not at distressed-type markets. It is more in the normal range right now. Matthew Bloomfield: The way we look at it—and we have been pretty vocal over the past year plus—is that spreads had been very tight relative to risk across corporate credit, structured credit, investment grade, and high yield. In a lot of ways, I would have expected spreads to be considerably wider given everything going on from a macro sentiment standpoint. We did see spread widening. I think spreads will stay a little bit wider. The markets we participate in feel more like fair value—certainly not cheap and not super wide to stress or distress levels. You are being better compensated than we have been in quite some time, but we view it as fair compensation relative to what we have seen over the past twenty-plus years. Richard Shane: Sounds good. I appreciate it very much, guys. Thank you. Operator: Our next question will come from the line of Derek Hewitt with Bank of America. Please go ahead. Derek Hewitt: Good afternoon. Could you provide some color on pro forma leverage as of April, since we have seen some recovery in the BSL market? And then secondly, are there certain sectors that have been significantly dislocated earlier this year, maybe even software, that you might lean into from a new investment perspective? Matthew Bloomfield: Hi, Derek. Appreciate the question. From April’s standpoint, we should be posting the updated NAV later next week. To your point, we have seen a modest rebound in prices in April, so we expect leverage to come back down, but we will disclose the updated NAV for April by the end of next week, which gives good directionality to where things are headed. Given the underlying collateral and credit facilities we have, we are able to manage leverage quickly. We even paid down about $14 million in total on the credit facilities in the first quarter to maintain appropriate leverage levels that we were comfortable with. There were a lot of moving pieces in the quarter, but that is something we have good control over and can manage effectively on a daily basis. To the second part of your question, undoubtedly software was the most disrupted sector in the first quarter, and that is predominantly responsible for the unrealized mark-to-market move in NAV as the whole sector traded off considerably. Our opinion is we want to be prudent in how we think about overall exposure there, but there are some really great companies trading at real discounts to par. When we have conviction, we will certainly look to take advantage where it makes sense. Outside of that, with the Iran situation, there have been interesting opportunities in the chemical space. That has been a very tough sector for the past two-plus years given supply-demand dynamics and the effective dumping by Chinese producers in some pan-European markets. With the closure of the Strait for the past couple of months, that has led to meaningful earnings tailwinds for some petrochemical producers. We have been able to see some benefit from a couple of tactical positions there. Over the last several quarters, there has not been as much interesting to do from a total return standpoint given how tight spreads had gotten. That dynamic has certainly changed with the moves across software and the geopolitical tensions. That said, we want to be prudent and make sure we have dry powder to the extent there are further dislocations, but we are certainly seeing more that is interesting to us now than we have in quite some time. Thank you. Operator: And this concludes our question and answer session. I will turn the call back over to Jeremy for any closing comments. Jeremy Goff: Thank you, operator, and thank you, everyone, for your time and all the thoughtful questions. We look forward to updating everyone on second quarter 2026 financial results in August. Thank you again. Operator: That concludes our call today. Thank you all for joining. You may now disconnect.
Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Saratoga Investment Corp.'s fiscal year end and fourth quarter 2026 Financial Results Conference Call. Please note that today's call is being recorded. During today's presentation, all parties will be in listen-only mode. Following management's prepared remarks, we will open the line for questions. At this time, I would like to turn the call over to Saratoga Investment Corp.'s Chief Financial and Chief Compliance Officer, Henri Steenkamp. Please go ahead. Henri Steenkamp: Thank you. I would like to welcome everyone to Saratoga Investment Corp.'s fiscal year end and fourth quarter 2026 Earnings Conference Call. Today's conference call includes forward-looking statements and projections. We ask you to refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these forward-looking statements and projections. We do not undertake to update our forward-looking statements unless required to do so by law. Today, we will be referencing a presentation during our call. You can find our fiscal year end and fourth quarter 2026 shareholder presentation in the Events and Presentations section of our Investor Relations website. A link to our IR page is in the earnings press release distributed last night. For everyone new to our story, please note that our fiscal year end is February 28. So any reference to Q4 results reflects our February and year end period. A replay of this conference call will also be available. Please refer to our earnings press release for details. I would now like to turn the call over to our Chairman and Chief Executive Officer, Christian Oberbeck, who will be making a few introductory remarks. Christian Oberbeck: Thank you, Henri, and welcome, everyone. Saratoga Investment Corp. highlights this quarter include net positive originations generated from our strong pipeline, including five new portfolio companies originated in the quarter, sustained long-term AUM growth, a strong 9.1% latest twelve months return on equity, beating our prior year and more than double the industry, and importantly, continued solid performance from the core BDC portfolio in a challenging and volatile macro environment. Continuing our historical strong dividend distribution history, we announced a monthly base dividend of $0.25 per share, or $0.75 per share in aggregate for 2027, which when annualized represents a 12.6% yield based on the stock price of $23.89 as of 05/04/2026, offering strong current income from an investment value standpoint. Originations and AUM growth were strong during the quarter, contributing to adjusted NII of $0.53 per share, including the impact of a $1.7 million excise tax expense. Adjusted for this excise tax, NII was $0.61 per share, consistent with the prior quarter. Overall, our adjusted NII continues to reflect the impact of declining short-term interest rates and tightening spreads on our largely floating rate asset base. During the quarter, we saw a meaningful increase in deal activity reflecting our own business development activities despite persistent sector headwinds and the cautious sentiment that has taken hold across the broader private credit sector. Market dynamics continue to be very competitive. While our portfolio saw multiple debt repayments in Q4, our strong origination activity more than offset those exits, resulting in net originations of $101.1 million for the quarter from $135.1 million in new originations across five new investments and 15 follow-ons. Our strong reputation, differentiated market positioning, and the ongoing development of sponsor relationships continue to create attractive investment opportunities from high quality sponsors. Investment activity continues post quarter end with one new portfolio company investment and multiple follow-ons already closed. We remain prudent and discerning in our underwriting approach, particularly in light of the current volatile and uncertain environment. We believe Saratoga Investment Corp. continues to be favorably situated for potential future economic opportunities as well as challenges. Our total $1.109 billion portfolio was marked down 1% or $9.6 million during the quarter, including net depreciation of $3.1 million in the non-CLO core portfolio and unrealized depreciation of $5.5 million in the CLO and JV. Our investment in ZOLEDGE that previously had been restructured and written off continues to perform strongly with $3.3 million of unrealized appreciation recognized in this quarter. As of quarter end, our core non-CLO portfolio remains 1.6% above cost with our total portfolio valuation 2.4% below cost. These results reflect the quality of our direct lending underwriting, the strength of our portfolio companies and their sponsors, and our focus on well-selected industry segments with favorable risk-adjusted returns. During the fourth quarter, our core BDC net interest margin decreased by 4% from $13.5 million last quarter to $13 million. This was driven primarily by the average SOFR rate used in the portfolio decreasing by 12 basis points from last quarter, accelerated OID of $0.9 million on the sale of the assets that was 200 basis points lower than on the repayments they replaced, and the timing of originations and repayments in Q4, partially offset by the 5.6% increase in average core assets. Our overall credit quality for this quarter decreased slightly to 96.8% of credits rated in our highest category. We have just two investments on nonaccrual status, Pepper Palace, which has been restructured, and our CLO’s F note, that has been put on nonaccrual for the first time this quarter, representing 0.2% of fair value and 1.2% of cost, well below the industry average of 3.3%. With 82.1% of our investments at quarter end in first lien debt, and generally supported by strong enterprise values and balance sheets in industries that have historically performed well in stress situations, we believe our portfolio composition and leverage profile are well structured for future economic conditions and uncertainty. As always, and particularly in the current uncertain environment, balance sheet strength, liquidity, and NAV preservation remain paramount for us. At quarter end, we maintained a substantial $211 million investment capacity to support our portfolio companies with $99 million available to our existing SBIC III license, $90 million from our two revolving credit facilities, and $21.8 million in cash. Our quarter end cash position decreased meaningfully from $169.6 million last quarter due in large part to strong origination activity and the refinancing of the $175 million institutional note. The refinancing of this debt included the issuance of $150 million of new bonds, and our regulatory leverage remained unchanged at 168.4% quarter over quarter. As we kick off our fiscal year 2027, the macro environment remains complex, shaped by geopolitical tensions, evolving U.S. tariff policies, and concerns about AI and software. All of these aspects combined with an uncertain interest rate environment create elevated volatility and continued uncertainty on credit spreads across the private credit sector. While negative press and sentiment weigh on the public BDC market, at this time, it appears that these very negative perceptions are not commensurate with the current market performance in the broader private credit market. As we continue to focus on underwriting strong credit and long-term growth, we continue to grow our team, having added three new associates and two new managing director hires this year, including most recently David DeSantis, who joined Saratoga Investment Corp. as Chief Operating Officer and Senior Managing Director. David brings a wealth of private credit experience and organizational leadership, significantly expanding our C-suite resources to further enhance Saratoga Investment Corp.'s performance and growth opportunities. David will be making his debut presentation today addressing the market and Saratoga Investment Corp.'s portfolio. Moving on to Saratoga Investment Corp.'s fiscal 2026 fourth quarter key performance indicators as compared to the quarters ended 02/28/2025 and 11/30/2025, our quarter end NAV was $396.2 million, up 0.9% from $392.7 million last year and down 4.1% from $413.2 million last quarter. Our NAV per share was $24.42, down from $25.86 last year and $25.59 last quarter. Year over year, NAV per share is down $1.44 with total NII of $2.32 versus total dividend distributions of $3.74. The $1.42 of distributions in excess of NII approximates the entire $1.44 twelve-month reduction in NAV per share. This excess distribution represents previously undistributed NII profits from prior years. Our adjusted NII was $8.5 million this quarter, up 6.2% from last year and down 12.8% from last quarter. Our adjusted NII per share was $0.53 this quarter, down 5.4% from last year and 13.1% from last quarter. Excluding the excise tax, adjusted NII for Q4 was $0.61, unchanged from last quarter. Adjusted NII yield was 8.4% this quarter, unchanged from 8.4% last year and down from 9.5% last quarter. And latest twelve months return on equity was 9.1%, up from 7.5% last year, down from 9.7% last quarter, and above the industry average of 4.3%. This past year saw a $5 million overall net realized and unrealized gain for the year, and Slide 3 illustrates how these combined portfolio and financial results have delivered a return on equity of 9.1% for the last twelve months, above the industry average of 4.3%. Additionally, our long-term average return on equity over the past twelve years of 10.1% is well above the BDC industry average of 6.7%. Our long-term return on equity has remained strong over the past decade plus, beating the industry nine of the past twelve years and consistently positive every year. As you can see on Slide 4, our assets under management have steadily and consistently risen since we took over the BDC years ago despite a slight pullback in fiscal 2025 reflecting significant repayments. This quarter saw significant originations again outpacing repayments, resulting in a meaningful increase in AUM as compared to the previous quarter. The quality of our credits remains solid, with just two investments on nonaccrual, Pepper Palace, which has been restructured, and our CLO’s F note, that has been put on nonaccrual for the first time this quarter. Our management team is working diligently to continue this positive long-term trend as we deploy our significant levels of available capital into our pipeline while at the same time being appropriately cautious in this evolving, volatile credit and economic environment. With that, I would like to turn the call over to Henri to review our financial results as well as the composition and performance of our portfolio. Henri Steenkamp: Thank you, Chris. Slide 5 highlights our key performance metrics for Q4 and Slide 6 highlights our key performance metrics for the year, most of which Chris already highlighted. Of note, the weighted average common shares outstanding in Q4 was 16.2 million, increasing from 16.1 million and 14.5 million shares for last quarter and last year's fourth quarter, respectively. Adjusted NII was $8.5 million this quarter, up 6.2% from last year and down 12.8% from last quarter. For the year, adjusted NII was $37.5 million, down 20.2% from full year 2025. This quarter's decrease in adjusted NII as compared to the prior quarter was largely due to the impact of the $1.7 million excise tax paid during this quarter, while the increase from last year primarily relates to higher other income such as structuring and advisory fees reflecting the increased origination activity this year. The weighted average interest rate on the core BDC portfolio of 10.4% this quarter compares to 11.5% as of last year, and 10.6% as of last quarter. The yield reduction from last year primarily reflects the SOFR base rate decreases over the past year, but is also indicative of recent tighter spreads experienced on new originations versus historically higher spreads on repaid assets. Total expenses for the year, excluding interest and debt financing expenses, base management fees and incentive fees, and income and excise taxes, increased by $1.7 million to $11 million as compared to $9.3 million in fiscal year 2025. These same expenses for Q4 increased by $1 million to $2.4 million as compared to $1.4 million last year, and decreased by $0.9 million from $3.3 million last quarter. These all represented 0.8% of average total assets on an annualized basis, unchanged from both last quarter and last year. Also, for investors interested in digging deeper into the income statement and balance sheet metrics for the past two years, we have again added the KPI slides 28 through 51 in the appendix at the end of the presentation. And Slide 32 compares our nonaccruals to the BDC industry. You will see that our nonaccrual rate of 1.2% of cost, updated for the CLO F note that is now on nonaccrual, is still almost three times lower than the industry average of 3.3%. This highlights the current strength in credit quality of our core BDC portfolio. Moving on to Slide 7, NAV was $396.2 million as of fiscal quarter end, an increase of $3.5 million from last year and a decrease of $17 million from last quarter. During this year, $19.3 million of new equity was raised at or above net asset value through our ATM program. This chart also includes our historical NAV per share which highlights how this important metric has increased 23 of the past 34 quarters. Over the long term, this metric has increased since 2011, and grown by $2.45 per share or 11.1% over the past nine years, when not many BDCs have grown NAV per share long term. We will cover the changes since last quarter on the next slide. On Slide 8, you will see a simple reconciliation of the major changes in adjusted NII and NAV per share on a sequential quarterly basis. Starting at the top, adjusted NII per share was down $0.08 in Q4, primarily due to the impact of annual excise tax expense of $0.09. Excluding this, adjusted NII per share would be $0.61 per share, consistent with last quarter. On the lower half of the slide, NAV per share decreased by $1.17, primarily due to the $0.75 monthly and $0.25 special dividend exceeding the $0.48 GAAP NII plus the $0.60 unrealized appreciation recognized in Q4, with almost two-thirds of that being from the JV equity position. Now Slide 9 shows the same reconciliations for the year, and starting at the top again, adjusted NII per share was down $1.44 per share for the year, largely due to a decrease of $1.15 in non-CLO net interest income reflecting lower base rates and tighter spreads, and $0.46 per share due to dilution from the DRIP and ATM programs' additional shares. On the lower half of the slide, NAV per share is down $1.44 per share with total NII of $2.32 and a total dividend distribution of $3.74. The $1.42 of distributions in excess of NII equals the entire twelve-month reduction in NAV per share. This excess distribution represents previously undistributed NII profits from prior years. Slide 10 outlines the dry powder available to us as of quarter end, which totaled $210.8 million. This was spread between our available cash, undrawn SBA debentures, and undrawn secured credit facilities. This quarter end level of available liquidity allows us to grow our assets by an additional 19% without the need for external financing, with $21.8 million of quarter end cash available and thus fully accretive to NII when deployed, and $99 million of available SBA debentures at low-cost pricing, also very accretive. In addition, $169 million of our baby bonds, with two-thirds being 8% plus, are callable now, providing us the option to refinance them and creating a natural protection against potential continuing future decreasing interest rates, which should allow us to protect our net interest margin if needed. These calls are also available to be used prospectively to reduce current debt. You will also see that this quarter, we repaid our $175 million 4.375% 2026 notes that matured at the February year end and issued $150 million of new notes at around 7.5%, with maturities between four and five years. Additionally, subsequent to quarter end, we also issued a $25 million 7.25% private note. We remain pleased with our available liquidity and leverage position, including our access to diverse sources of both public and private liquidity, and especially taking into account the overall conservative nature of our balance sheet and that most of our debt is long term in nature. Also, our debt is structured in such a way that we have no BDC covenants that can be stressed during volatile times, especially important in the current economic environment. Now I would like to move on to Slides 11 through 14 and review the composition and yield of our investment portfolio. Slide 11 highlights that we have $1.109 billion of AUM at fair value that is invested in 49 portfolio companies, one CLO fund, one joint venture, and numerous new BB and BBB CLO debt investments. Our first lien percentage is 82.1% of our total investments, of which 53.1% of that is in first lien last out positions. On Slide 12, you can see how the yield on our core BDC assets, excluding our CLO investments, has changed over time, including this past year, reflecting the recent decreases to base interest rates and tightening spreads. This quarter, our core BDC yield decreased to 10.4% from last quarter's 10.6%, with most of the decrease reflecting further core base rate reductions and the rest due to recent tight spreads experienced on new originations versus historically higher spreads on repaid assets. The CLO yield increased to 11.6% from 10% last quarter due to a lower fair value. Slide 13 shows how our investments are diversified primarily through the U.S., and on Slide 14, you can see the industry breadth and diversity that our portfolio represents, spread over 43 distinct industries, in addition to our investments in the CLO, JV, and BB and BBB CLO debt securities, which are all included as structured finance securities. We do have software as a service assets that Dave will touch on shortly. Moving on to Slide 15, 7.6% of our investment portfolio consists of equity interests, which remain an important part of our overall investment strategy. This slide shows that for the past fourteen fiscal years, we had a combined $45.4 million of net realized gains from the sale of equity interests or sale or early redemption of other investments. This year alone, we have generated $5.7 million in net realized gains. This long-term realized gain performance highlights our portfolio credit quality, has helped grow our NAV, and is reflected in our healthy long-term ROE. That concludes my financial and portfolio review. Our Chief Operating Officer and Senior Managing Director, David DeSantis, will now provide an overview of the investment market. David DeSantis: Thank you, Henri, and good to meet all of you for the first time. So today, I will give an update on the markets since Saratoga Investment Corp.'s last call in January, and then comment on our current portfolio performance and investment strategy. Generally, we are not seeing a pickup in M&A activity in the specific market we participate in, but our deal flow has increased due to the success we are having with our own business development efforts, as seen by the fact that six of the ten new platform companies closed this past year with new relationships. The combination of historically low M&A volume in the lower middle market for an extended period of time and an abundant supply of capital as spreads tighten and leverage is full, and lenders compete to win new deals, especially on high-quality transactions. Market dynamics remain at their most competitive level since the pandemic, although we are seeing some signs of spread widening. We have also experienced repayment activity for some of our lower loan-to-value loans being refinanced on more favorable terms. The Saratoga Investment Corp. management team has successfully navigated through numerous credit cycles and capital markets dislocations. Through it all, we have learned to stay laser focused on the things that we can control. In summary, these are: number one, stay disciplined on asset selection; two, invest in and greatly expand our business development efforts, especially given that we feel the market is still largely underpenetrated by us; and third, continue to support our existing healthy portfolio companies as they pursue growth. The relationships and overall presence we have built in the marketplace combined with our ramped up business development initiatives give us confidence in our ability to achieve healthy and disciplined portfolio growth in a manner that we expect to be accretive for our shareholders. Excuse me. Now I would like to switch to a discussion of software as a service, or SaaS. Companies have been getting a lot of press lately. Specific to SaaS companies in our SaaS portfolio, Saratoga Investment Corp. does not view software generally as being a single industry. The companies in Saratoga Investment Corp.'s portfolio that deliver their solutions through software platforms are highly diversified across a wide variety of industries and end markets and thus do not follow a common pattern of industry or sector concentration. Based on Saratoga Investment Corp.'s more than thirteen years of investing in software-related businesses, we have found that the performance of each of these businesses is more affected by position in the industry and specific end market within which it operates—key considerations for any business—rather than by the fact that it is a service offering delivered through a software solution. While the SaaS market has been in the headlines this past quarter, it is important to avoid generalizations and to look through to individual investments and their specific attributes. Much of the market turmoil—not just related to software companies—has been driven by the accelerating emergence of AI as a potential disruptive force. To add some perspective on the software underwriting approach we have taken over the years, as with all deals in all industries, we have always taken into account potential disruptive forces, whether they be stronger players within a market, an entrant from an adjacent market, or a material change in product or future expectations. Because our underwriting bar is so high, especially for software, we have turned down far more software deals than we have done over the years. The advent of AI has increased the chances for disruption, a fact we are accustomed to underwriting; therefore, our underwriting bar has become higher still in recent times. We always evaluate not only how we believe AI may impact our existing and prospective portfolio companies, but more importantly, how these companies are actually integrating AI into their products and their offerings. The software businesses that Saratoga Investment Corp. chooses to provide capital to must have several of the following positive attributes: enterprise software companies deeply ingrained in mission-critical aspects of company workflows and therefore exceedingly valuable and difficult to replace; vertical software with a highly specialized and complex solution set that incorporates deep knowledge of a specific industry end market; systems of record that help administer highly proprietary, confidential, compliance-driven data that should not be exposed to broad AI applications where its confidentiality could be at risk; predominantly recurring revenue with strong gross and net dollar retention as a marker of stability; healthy historical revenue growth in expanding and durable end markets; high gross margins, often 70% plus, that bolster profit potential and signify high value add; leading competitive position in an industry vertical; and the ability to be run for cash versus growth; regular and frequent human user and/or decision-making required in the workflow. Because we are not tourists in the space and have been disciplined in the application of these underwriting guidelines, we have achieved successful realizations on 35 software-related businesses, producing a gross unlevered IRR of 14.4% with zero economic losses over the last thirteen years. This past fiscal year produced consistent outcomes, with seven software company realizations producing a gross unlevered IRR of 14.2%. Our existing SaaS portfolio has strong credit metrics, with loan-to-value, or LTV, of 31%; 93% of the software portfolio is first lien, with an additional 6% in equity positions which provides meaningful upside to our shareholders. Overall, portfolio fair value exceeds cost by 2.5% within our software portfolio. As to future investments, we do believe that there will remain select opportunities for Saratoga Investment Corp. to invest in exceptional software businesses where we have confidence that our capital is well protected due to sustainable enterprise values and unique value propositions of the underlying businesses. However, I would like to emphasize that Saratoga Investment Corp. is seeing significantly fewer software-related investments that meet our strict underwriting requirements than in previous years. As such, we do expect to see a substantial shift away from software in our deal flow and, ultimately, within our portfolio. By way of example, we have closed one new platform since the quarter end and have two more in closing, none of which are software-related businesses. Now I would like to shift to highlight key elements of the lower middle market where we operate. We continue to believe that the lower middle market is the best place to be in terms of capital deployment. As compared to the larger end of the middle market, the due diligence we are able to perform evaluating investments is much more robust, the capital structures are generally more conservative with less leverage and more equity, the legal protections and covenant features in our documents are considerably stronger, and our ability to actively manage our portfolio through ongoing interaction with management and ownership is greater. As a result, we continue to believe that the lower middle market offers the best risk-adjusted returns, and our track record of realized returns reflects just that. Our underwriting bar remains high, as usual, in a very tough market, yet we continue to find opportunities to deploy capital thoughtfully. As seen on Slide 16, although providing additional capital to existing portfolio companies continues to be an asset deployment means for us, with 13 follow-ons in the first calendar quarter of 2026 alone, we have also invested in five new platforms over the same period, reversing the decline we experienced in the prior calendar year. Overall, our deal flow is increasing as our business development efforts continue to ramp up. Our consistent ability to generate new investments over the long term despite ever-changing and increasingly competitive market dynamics is a strength of ours. Portfolio management is critically important, and we remain actively engaged with our portfolio companies and in close contact with our management teams. We ended the quarter with just one core BDC investment on nonaccrual status, Pepper Palace, as Chris mentioned previously, and added our CLO’s F note which has been put on nonaccrual for the first time. Together, these two investments only represent 0.2% of the portfolio at fair value and 1.2% at cost. In general, our portfolio companies are healthy, and the fair value of our core BDC portfolio is 1.6% above its cost. Two core BDC investments that had notable write-downs this quarter are Exigo and Madison Logic. We recognized unrealized depreciation of $2.8 million on our debt and equity investments at Exigo as it is experiencing headwinds due to a challenging end market. The company's customers are direct selling businesses relying on consumer purchasing, which is softening due to competitive and economic pressures. The lending group is actively working with management and sponsor to explore options to stabilize and improve performance. Our Madison Logic debt investment was written down by $1.2 million reflecting continued performance decline in difficult macroeconomic conditions. We are working with the lending group and sponsor to allow the company to execute on growth initiatives while increasing visibility into day-to-day performance. Both of these investments remain on accrual with healthy cash balances to service debt. Offsetting these markdowns, our ZOLEDGE investment continues to perform exceptionally well post restructuring, and we marked this up another $3.3 million this quarter. Finally, the remaining markdowns in Q4 primarily include the $5.4 million write-down of our JV investments reflecting both the individual CLO asset performance as well as general market conditions. As a reminder, 82.1% of our portfolio is in first lien debt and generally supported by strong enterprise values in industries that have historically performed well in stress situations. We have no direct energy or commodities exposure. Additionally, the majority of our portfolio is comprised of businesses that produce a high degree of recurring revenue and have historically demonstrated strong revenue retention. Looking at leverage on the same slide, you can see that industry debt multiples were around 5.4 times; total leverage for our overall portfolio was at 5.3 times, excluding Pepper Palace. Moving on to Slide 17, this provides more data on our deal flow. As you can see, the top of our deal pipeline is significantly up from the end of calendar year 2024 and in line with last year. This recent increase of deals sourced is a result of our recent business development initiatives, with 22 of the 108 term sheets issued over the last twelve months being for deals that came from new relationships formed this year. Overall, the significant progress we have made in building broader and deeper relationships in the marketplace is noteworthy because it strengthens the dependability of our deal flow and reinforces our ability to remain highly selective as we rigorously screen opportunities to execute upon the best investments available to us. Our originations this fiscal quarter totaled $135.1 million, consisting of five new investments totaling $78.4 million, 15 follow-ons totaling $55.2 million, and BBB CLO debt investments of $1.5 million. For the fiscal year, originations totaled $309.5 million, consisting of nine new investments totaling $137.3 million, 32 follow-ons totaling $125.5 million, and BB and BBB CLO debt investments of $46.7 million. As you can see on Slide 18, our overall portfolio credit quality and returns remain solid. As demonstrated by the actions taken and outcomes achieved on the nonaccrual and watch-list credits we had over the past year, our team remains focused on deploying capital in strong business models where we are confident that under all reasonable scenarios, the enterprise value of the business will sustainably exceed the last dollar of our investment. Our approach and underwriting strategy have always been focused on being thorough and cautious. Since our management team began working together almost sixteen years ago, we have invested $2.53 billion in 130 portfolio companies and have had just three realized economic losses on these investments. Over that same time frame, we have successfully exited 87 of those investments, achieving gross unlevered realized returns of 14.9% on $1.37 billion of realizations. The weighted average return on our exits this quarter was 15.8%, higher than our overall track record. Even taking into account last year's write-downs of a few discrete credits, our combined unlevered realized and unrealized returns on all capital invested equal 13.4%. Total realized gains for fiscal year 2026 are $5.8 million. We think this performance profile is particularly attractive for a portfolio predominantly constructed with first lien senior debt. Our overall investment approach has yielded exceptional realized returns, recovery of our invested capital, and our long-term performance remains strong as seen by our track record on this slide. Moving on to Slide 19, you can see our second SBIC license is fully deployed and funded, and we are currently ramping up our new SBIC III license with $99 million of lower-cost undrawn debentures available, allowing us to continue to support U.S. small businesses, both new and existing. This concludes my review of the market, and I would like to turn the call back over to our CEO. Christian Oberbeck: Thank you, Dave. As outlined on Slide 20, our latest dividend of $0.75 per share in aggregate for the quarter ended 02/28/2026 was paid in three monthly increments of $0.25. Recently, we declared that same level of $0.75 for the quarter ended 05/31/2026, marking the fifth quarter of our new dividend payment structure. The Board of Directors will continue to evaluate the dividend level on at least a quarterly basis, considering both company and general economic factors including the current interest rate and macro environment's impact on our earnings. Moving to Slide 21, our total return for the last twelve months, which includes both capital appreciation and dividends, has generated total returns of 14%, vastly beating out the BDC index's negative 1%. This places us in the top seven of all BDCs for the latest twelve months, April 2026. Our longer-term performance is outlined on the next slide, Slide 22, which shows that our one-year, three-year, and five-year total returns all place us well above the BDC index. Additionally, since Saratoga Investment Corp. took over management of the BDC in 2010, our total return of 838% has been more than three times the industry's 247%. On Slide 23, you can further see our last twelve months' performance placed in the context of the broader industry and specific to certain key performance metrics. We continue to focus on our long-term metrics such as return on equity, NAV per share, NII yield, and dividend growth and coverage, all of which reflect the value our shareholders are receiving. As mentioned earlier, the reduction in our per share NAV this year is almost completely accounted for by the payment of previously undistributed profits. The NII yield and dividend coverage metrics reflect the long-term impact of reduced rates and undeployed levels of cash. In this volatile macro environment, we will continue to deploy our available capital into strong credit opportunities that meet our high underwriting standards. Our focus remains long term. We also continue to be one of the few BDCs to have grown NAV accretively over the long term and have a consistent healthy return on equity, significantly beating the industry with our long-term return on equity at roughly 1.5 times the industry average, and latest twelve months return on equity more than double the average. Moving on to Slide 24, all of our initiatives discussed on this call are designed to make Saratoga Investment Corp. a leading BDC that is attractive to the capital markets community. We believe that our differentiated performance characteristics outlined on this slide will help drive the size and quality of our investor base, including adding more institutions. These differentiating characteristics, many previously discussed, include maintaining one of the highest levels of management ownership in the industry at 11%, ensuring we are strongly aligned with our shareholders. Looking ahead on Slide 25, while geopolitical tensions and macroeconomic uncertainty remain ongoing factors, we began seeing renewed momentum in M&A activity across the market, which resulted in a meaningful increase in deal activity, and we continue to focus on expanding deal sourcing relationships. At the same time, our portfolio continues to perform, and we remain encouraged by the resilience and strength of our pipeline. While broader sentiment towards the private credit market has become increasingly cautious due to headwinds in the software sector and increasing caution across the market, we believe these issues are not indicative of broader credit market fundamentals. Supported by our experienced management team, disciplined underwriting, and strong balance sheet, we believe we are well positioned to responsibly grow the size and quality of our portfolio, generate consistent investment performance, and deliver compelling risk-adjusted returns for our shareholders over the long term. In closing, I would again like to thank all of our shareholders for their ongoing support. We will now open the call for questions. Operator: Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Erik Zwick with Lucid Capital Markets. Please go ahead. Erik Zwick: Thanks. Good afternoon, everyone. I wanted to start with a question maybe for Henri. As I think about the outlook for the portfolio yield and NII going forward, if I look at the Fed funds future curve, it seems like there are no rate cuts priced into the market anymore, so hopefully SOFR and base rates stay level so that pressure is gone. But just looking at what was added for new investments in the quarter coming on 200 basis points lower than the repayments, it seems like there is still potentially some pressure there. So is that right as we look at the next quarter or so—likely still some pressure on yields? And then, if your number one objective is expanding the asset base in a prudent manner, is that a way to potentially offset some of that pressure as I think about NII going forward? Henri Steenkamp: Hey, Erik. Nice to hear from you. Absolutely. I think, firstly, it is nice to see from an earnings perspective that the SOFR rate has definitely stabilized and that if anything, we might see a drop or spread widening taking place. As we look ahead and look at our Q1 projections and Q2, we are definitely seeing a stabilization of base rates. And then the other variable, as you mentioned, is the recycling of assets, and it is obviously always hard to predict repayments. I would say that the assets that were repaid this past quarter that resulted in the 200 basis points were some of our higher-yielding assets, so I do not think one would expect that large a difference between the assets being repaid and new assets coming on. But I think there definitely is still potential when you have repayments to have a little bit of a squeeze happening there. To offset that, though, as the prepared remarks said, we are seeing some of the highest levels of business development pipeline-type activities happening, reflecting everything that has been done over the last year or so, and so that is helping us grow our asset base, which obviously does help offset some of that squeeze that we are seeing as assets repay. Erik Zwick: Great. That is helpful. And maybe just a bit of a follow-up with the success of the business development efforts—has that gradually changed the mix of the pipeline in terms of new versus follow-on activity? Christian Oberbeck: Generally, that is not something we can control, as you know. We obviously cover our portfolio companies, and our portfolio has been a good source of repayments. But we have a very active and very productive calling effort, and I think, as Dave mentioned earlier, we are looking at relatively fewer software and relatively more other types of secular growing businesses—education, healthcare, those types of things. Erik Zwick: Got it. And then last one. Apologies if I missed it in the prepared comments. What transpired during the quarter that led to the CLO F note being placed on nonaccrual? Henri Steenkamp: Yes. As you know, we have different tranches in our CLO, and so we obviously have the equity that leads to distributions to the equity. Following the equity distribution, the F note is the next tranche up, and out of the cash that comes from distributions, the F note interest has to be paid. There was just insufficient cash at the last CLO distribution to pay the F note interest for half of the quarter. This is a test that gets done every quarter, so it will be reassessed next quarter. But based on what we know now, and seeing as half the interest could not be paid, we put that on nonaccrual. Obviously, if next quarter distributions are sufficient to cover that, we might reassess that. But as of this past quarter, half of it was unpaid and, therefore, put on nonaccrual. Erik Zwick: Okay. Then maybe one quick follow-up there. Is it a grouping of assets that have been underperforming, or what led to that shortfall? Henri Steenkamp: It is really a function of the remaining assets in the CLO. There is a group of assets that has been underperforming, and they continue to underperform. As you had seen over the last couple of quarters, the F notes had continuously been written down over the past couple of quarters. There was a big write-down in Q3—it was still about $1.20 on the books—and then we fully wrote it down now in Q4. It is just a function of those underperforming assets not generating sufficient cash flows anymore to cover the interest. Erik Zwick: Understood. Thanks for taking my questions. Operator: One moment for our next question. The next question comes from the line of Robert Dodd with Raymond James. Robert Dodd: Hi, guys. I have several, but I will start with the F notes since that was on that point. It has been written down and is now carried at zero. If we looked at a normal portfolio company for you guys, if something was on nonaccrual and marked down, you would be talking about the lender getting together and the sponsor, etc. Obviously, that is not the situation here because you control the F note effectively. Is there a path to recovery in value of the F note? Is it cost recovery or anything? It has been written down to zero, but is there a perspective where that can appreciate again? It has not been a one-off this quarter to write it down, it has gradually depreciated. Is that just the consequence of the structure, or is there a way you could get value back out of that note to accrete to NAV? Henri Steenkamp: That is a great question, Robert. Obviously, it is a much larger assessment because it is a tranche of debt within a structured finance product. If you look at our existing CLO, it is an asset that the BDC has had for eighteen years since the start, has done exceptionally well, and has generated around $120 million of distributions, plus all the fees that it receives because the BDC is the manager of the CLO as well. It is something that has done really well, but it is no longer in its reinvestment period at the moment. So the way you would get that value back is if you take a step back and you potentially refinance the CLO, which is something we are continuously assessing. The assets of the CLO were $650 million and, when you are out of the reinvestment period, you use all the proceeds from repayments to start repaying the debt, so it is down to about $350 million of assets. It is a much smaller size, which also makes it easier to refinance. We are continuously looking at the performance of the assets that remain in the CLO and also where market conditions are, where refinancing rates are, etc., to determine whether we want to refinance the CLO. If you refinance the CLO, that will be the first step to then recovering the value of the F note because you then start reinvesting cash into new assets that will be generating new cash flow that will help the value of the F note. So it is a larger process and a larger consideration than, as you said, individual portfolio companies, but it is tied to the refinancing of the CLO that we are assessing on a continuous basis. Robert Dodd: Got it. Thank you. Different topic. On the outreach—you have outperformed over the last couple of quarters, onboarding new portfolio companies and doing follow-ons despite a muted environment for a lot of your competitors. Your outreach in establishing new relationships on the sponsor side has been paying off. How much further can you push that—originations, pipeline, adding more sponsors? I know you are underpenetrated relative to where you would like to be, but by how much? How much could the pipeline increase? Christian Oberbeck: That is a very interesting question. The nature of what we do in the lower middle market—if there is a pyramid structure, the biggest deals, the multibillion dollar deals, are at the top of the pyramid, and the much smaller deals are at the bottom. It is a much wider base. We do not even talk about what our market share is because it is really infinitesimal compared to the opportunity set out there. A lot of the transactions we do are sometimes the first institutional capital in a deal, and sometimes it is a founder either selling or looking for a partnership to do something. It is not really driven by the exact same factors that drive the larger middle market that are determined by M&A volumes and things like that. There is a much broader mix of sourcing, including non-sponsor sourcing, and obviously there are a lot of sponsors going into those transactions. Really, there is no ceiling on how much more business we could generate. It is time and relationship building. That is really our constraint. We do not think the opportunity set is the constraint, but how many people we have applied to it, how efficient we are in addressing these, and how fortunate we are in winning the auctions. We are noticing a fair amount of competition and sometimes we may be backing several in a given process, and some of those are harder to win. So the final sourcing and the closing of the deal is not necessarily something we can control so much. But generating new relationships—there is really no limit. The limit is really ourselves: how much time and effort can we apply? Henri Steenkamp: In addition to our quarterly presentation on the website, we also have an investor presentation, which is a separate presentation. I will point you to Slide 27 and Slide 31 that give a bit more color on our business development process and relationships and how we find deals, etc. We talk there about how there are probably about 450 companies or firms or sponsors that we have on what is called a focus list of ours. Then we tier them, and there are probably a couple of hundred that we would view as our more top-tier relationships that we are more actively pursuing. But when you think of the deals we do, it is probably a handful of sponsor relationships that we have most of our deals in. The population of sponsors out there is extremely broad. Obviously, you get more quality deals from a small handful of sponsors, but the opportunity is really large as you spend more time on business development, which we really have been doing with the team over the last six months and year or so. David DeSantis: I would also add that we have spent a lot of time cultivating these different relationships over time. This is oftentimes a multiyear effort, and the sponsor universe is quite broad. Depending on the metric, I have read a lot of different sources, but it is somewhere between 1,500 and 4,000 sponsors. As we cultivate relationships with these firms and engender ourselves to them through the work that we do on deals—particularly those that do not close—this is a multiyear effort to become more successful, more ingrained, more credible, and trusted by these sponsors. We are starting to reap the fruits of that labor today. Operator: One moment as we bring up the next question. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. Our next question comes from Christopher Nolan with Ladenburg Thalmann. Go ahead. Your line is open. Christopher Nolan: Hi. Thanks for the detail on the F notes. Were there any particular industries that drove the nonaccrual? Henri Steenkamp: I do not know exactly off the top of my head, but it is really a handful of assets. I do not think they are in one industry, but probably about five assets or so that drove most of the decline. Christian Oberbeck: I think it is fair to say that it is less about a given asset group and more about the structure, because in the structure we are in now, a lot of the cash flows are going to pay down the more senior debt. The cost structure of the liabilities is a factor, which is why we are very focused on finding a refinancing point for it. In essence, we are paying down a lot more of the senior debt. Some of it is also the cost structure of our liabilities, which, again, in a refinancing, as Henri mentioned earlier, is the opportunity to reset. We have dialogues ongoing at all times here, and hopefully we will find an opportunity to reset it. At that point in time, we can reprice our liabilities, which are not perfectly priced to what we could get in the market if we refinanced right now. Henri Steenkamp: Chris, we also have significant disclosure on the CLO in our 10-K that we just filed. In the MD&A, you will be able to see the split by industries and the weighting by our credit risk categories as well. Christopher Nolan: Should we expect CLOs to decrease as a percentage of the investment portfolio? Christian Oberbeck: I think they have decreased a fair amount at this point in time. The whole business, as Henri mentioned earlier—we had tremendous success with CLOs for a long time. Over the last four to five years, the CLO industry has had a lot of negative developments. There has been some weakening of the covenants, LMEs—the liability management exercises—you have had a change in interest rate structure, and all that. There is a big digestion cycle for a lot of the way the market operated several years ago that is causing the problems today. As we move forward, there are fewer LMEs, the documentation is getting a little better, and companies are getting financed more appropriately for the current interest rate environment, which is more stable than it was over the last several years. The underlying dynamic is stabilizing. The whole industry does suffer from the slowdown in M&A, so a lot of what is going on in private equity and private credit is refinancings of existing companies, and those generally come at much tighter spreads and are much more shopped. As the M&A environment comes back, those types of deals generally have wider spreads to them for a whole host of reasons. We think there has been a cyclical, maybe slightly secular, degradation in the quality of the market in CLOs, but we think there are a number of initiatives going on that are at a minimum stabilizing that, and we think it is possible to even improve from here. Christopher Nolan: Okay. Thank you. Henri Steenkamp: Thanks, Chris. Operator: I am showing no further questions at this time. I would now like to turn it back to Christian Oberbeck for closing remarks. Christian Oberbeck: We thank all of our shareholders and analysts for following us and participating on this call, and we look forward to speaking with you next quarter. Thank you. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Ladies and gentlemen, greetings, and welcome to the Rand Capital Corporation First Quarter FY 2026 Financial Results Conference Call. At this time, all participants are in the listen-only mode. If anyone requires operator assistance during the conference call, please signal the operator by pressing star and 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host for today, Craig Mychajluk. Please go ahead. Thank you, and good afternoon, everyone. Craig Mychajluk: We appreciate your interest in Rand Capital Corporation for joining us today for our first quarter 2026 financial results conference call. On the line with me are Daniel Penberthy, our President and Chief Executive Officer, and Margaret Whalen Brechtel, our Executive Vice President and Chief Financial Officer. A copy of the release and slides that accompany our conversation is available at randcapital.com. If you are following along on the slide deck, please turn to Slide two. I would like to point out some important information. As you are likely aware, we may make forward-looking statements during this presentation. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ from where we are today. You can find a summary of these risks and uncertainties and other factors in the earnings release and other documents filed by the company with the Securities and Exchange Commission. These documents can be found on our website or at sec.gov. During today's call, we will also discuss some non-GAAP financial measures. We believe these will be useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results in accordance with generally accepted accounting principles. We have provided reconciliations of non-GAAP measures with comparable GAAP measures in the tables that accompany today's earnings release. With that, please turn to Slide three, and I will hand the discussion over to Daniel Penberthy. Daniel? Daniel Penberthy: Thank you, Craig Mychajluk, and good afternoon, everyone. We view Q1 as a transition quarter for Rand Capital Corporation. Our results reflected the impact of nonaccruals and a smaller income-producing portfolio due to the repayment of several debt investments during 2025. But we have also made progress on several fronts that we believe are important as we move through 2026. Investment income for the quarter was $1.2 million and net investment income was $0.18 per share. Those figures were below the prior-year period primarily due to a reduced amount of interest income from our current portfolio companies as compared with 2025. At the same time, we generated a realized gain of approximately $1.1 million from the exit of Cybertz, or The Rack Group as it is commonly known, and we also deployed $5.1 million into new and follow-on investments during the quarter. This includes our new investment in AME HoldCo. From a capital position standpoint, we ended the quarter with net asset value of $17.16 per share with approximately 80% of the portfolio invested in debt investments, and more than $20 million of available liquidity, with only $0.5 million drawn on our line of credit at quarter end. So while the quarter's earnings reflect the lag from 2025 debt repayments and current portfolio nonaccruals, we believe the quarter also showed continued execution through capital recycling, new investment activity, and balance sheet flexibility. With that overview, let us turn to Slide four. Delivering consistent cash dividends remains central to Rand Capital Corporation’s strategy. During the first quarter, we paid our regular quarterly cash dividend of $0.29 per share, and in April, we declared another regular dividend of $0.29 per share for 2026. That consistency is important. Even in periods where repayments have reduced the size of the earning portfolio and nonaccruals have weighed on our current income, we have remained focused on supporting the regular dividend while rebuilding the portfolio. The nature of the GAAP versus tax or RIC-based accounting for our dividends has benefited us in 2026 as we work hard to rebuild the portfolio base supporting future dividends. Our dividend strategy remains disciplined and earnings driven. We want to preserve balance sheet flexibility, continue to support the portfolio where appropriate, and deploy capital selectively into investments that can contribute to income and create long-term shareholder value. Please turn to Slide five for a review of the portfolio. At March 31, our portfolio had a fair value of $51.5 million across 20 portfolio companies. This compares with $48.5 million at year-end 2025. The portfolio remained positioned toward income generation with approximately 80% in debt investments, as I previously highlighted, and 20% in equity investments. That debt-orientated mix continues to reflect our emphasis on structures designed to generate current income while preserving some potential upside through equity participation. The annualized weighted-average yield on debt investments, including PIK interest, was 9.43% at quarter end, down from 11.3% at 12/31/2025. That decline primarily reflects the impact of nonaccruals including such companies as FSS and MRES, both of which were placed on nonaccrual status beginning in 2025. These nonaccruals dragged down the total yield on an aggregated basis. However, keep in mind our individual transactions are more typically currently being priced with interest in the 13% to 14% range. More broadly, our strategy remains focused on expanding income-producing investments over time while preserving credit quality with a disciplined approach to underwriting and valuation. Please turn to Slide six. This slide summarizes our key portfolio actions in the quarter—both new deployment and follow-on capital, as well as the actions we took in a workout situation and, importantly, a strong full-cycle realization or exit for Rand Capital Corporation. We closed a $4 million investment in AME HoldCo during the quarter consisting of a $3 million term loan at 13% and a $1 million equity investment alongside it. AME provides auto center design and installation, and we believe it fits well within our lower middle market investment strategy. We also remained active with existing portfolio companies. During the quarter, we participated with a co-investor in the buyout of MRES' senior credit position, with Rand Capital Corporation’s pro rata investment totaling approximately $0.678 million. This positioned the investor group as a senior creditor in the situation. MRES is currently being restructured through a technical bankruptcy through the courts. We are optimistic that given our strong position in both the senior and subordinated debt tranches, we will play a key role in partnering with the company to execute a successful workout plan. We also funded a $0.4 million follow-on debt investment in FSS, bringing our total investment there to a fair value of $4.3 million at quarter end. And lastly, we completed a smaller follow-on equity investment of $0.05 million into KITECH. In addition to those investments, the quarter included the final monetization of Cybertz, doing business as The Rack Group, which we view as a strong investment outcome for Rand Capital Corporation. We had previously received full repayment of our original $7.7 million debt investment, and during the first quarter, we sold our remaining equity holdings for approximately $1.3 million in proceeds, generating a realized gain of approximately $1.1 million. The Rack Group is a good example of the way our model is intended to work: earning income through the life of the investment, providing follow-on capital to support growth, and participating in upside through equity components. More broadly, it also reflects the capital recycling dynamic that is core to our strategy and all BDCs, where repayments and realizations create capital for future deployment into new income-producing opportunities. Please turn to Slide seven, which shows our balanced industry exposure across the portfolio. Professional and business services remains the largest area of exposure, followed by manufacturing, and then distribution and consumer products. While individual weighting shifted during the quarter due to new investment, follow-on funding, and repayments and valuation changes, the broader portfolio continues to reflect a balanced mix across multiple industries aligned with our lower middle market focus. We believe maintaining this balanced industry exposure supports the portfolio resilience while preserving flexibility to pursue attractive sector-specific opportunities as they do emerge. Please turn to Slide eight. Our top five portfolio investments represented approximately $22.9 million in fair value, or 44% of the total portfolio, at 03/31/2026. These holdings include International Electronic Alloys, or INEA, KITECH, Highland All About People, BMP Foodservice Supply, and AME HoldCo. These investments form an important part of the portfolio and we are focused on working with the companies to preserve creditworthiness and the value in the Rand Capital Corporation portfolio as well as to preserve and maintain their income-producing base. Some also include equity participation or PIK interest income features that can contribute to additional return potential over time. Compared with prior periods, the top five also reflect the portfolio transition we have discussed. Cybertz is no longer in the top five, following the full monetization of that investment, and AME has now entered the group following our new investment in the quarter. With that, I will turn it over to Margaret Whalen Brechtel to walk through the financial results in more detail. Margaret Whalen Brechtel: Thanks, Daniel Penberthy, and good afternoon, everyone. I will start on Slide 10, which provides an overview of our financial summary and operational highlights for 2026. Total investment income was $1.2 million, down 38% compared with the prior-year period. The decrease primarily reflects lower interest income from portfolio companies following the repayment of five debt instruments over the past year along with lower fee income. Noncash PIK interest totaled $0.244 million in this first quarter, representing 20% of total investment income compared with 31% in the prior-year period. We continue to monitor PIK exposure closely. Total expenses were $0.642 million for the quarter, down 19% compared with $0.791 million in 2025. The decrease primarily reflects lower base management fees and no income-based incentive fee accrual in 2026. Net investment income for the quarter was $0.545 million, or $0.18 per share. Adjusted net investment income per share is also $0.18 per share. Please turn to Slide 11. The waterfall chart on this slide illustrates the drivers of net asset value change during 2026. We began the period with net assets of $52.2 million. During the quarter, we generated $0.545 million of net investment income and $1.1 million of net realized gain on the sale of our remaining equity position in Cybertz. These positive contributions were offset by $2 million of unrealized depreciation and $0.861 million of dividends declared during the quarter, resulting in ending net assets of approximately $51 million and a net asset value per share of $17.16. Now turning to the balance sheet on Slide 12. At 03/31/2026, total assets were $52.5 million and net asset value per share was $17.16, as I just mentioned. Our investment portfolio accounted for $51.5 million of total assets, or $17.30 per share, while consolidated cash was [inaudible] per share. Other assets and liabilities, net, reduced net asset value by approximately $0.919 million, or $0.31 per share. We ended the quarter with $0.5 million outstanding on our senior secured revolving credit facility and approximately $20.1 million remaining availability. This facility permits up to $25 million in borrowings, subject to borrowing conditions and portfolio eligibility requirements, and it does not mature until 2027. The Board of Directors also renewed our share repurchase program, authorizing the repurchase of up to $1.5 million of additional Rand Capital Corporation common stock. The combination of modest leverage, meaningful availability under the facility, and the renewed authorization provides flexibility as we evaluate opportunities to deploy and, where appropriate, return capital to shareholders. With that, I will turn it back to Daniel Penberthy for closing remarks. Daniel Penberthy: Thanks, Margaret Whalen Brechtel. If you would please turn to Slide 13. As we step back and look at where Rand Capital Corporation stands today, we believe the first quarter continued the transition we began in 2025. We are moving from a period where repayments and portfolio events dominated the narrative into a period where we are again deploying capital selectively into new income-producing assets while managing through a handful of challenged portfolio positions. What continues to differentiate Rand Capital Corporation is our flexibility. Across the BDC landscape, investors are focused on dividend sustainability, credit quality, and balance sheet strength. We believe our actions from a capital recycling and new investment deployment perspective while maintaining conservative leverage demonstrate that we are managing with that same focus. Looking ahead, our 2026 objectives are straightforward and aligned with the slides. First, we are executing a long-term strategy anchored in a resilient, income-focused investment model. We are seeing early signs of improved sponsor activity and deal flow in our segment of the market, and we believe we are well positioned to scale the portfolio prudently as attractive opportunities emerge. Second, we intend to use our liquidity and available credit capacity to support both new investments and follow-on capital where we see compelling risk-adjusted returns. We are maintaining underwriting standards and active portfolio oversight. Including in situations like FSS and MRES, we are working to protect and, where possible, enhance future value. Third, our goal is to support a consistent earnings-driven dividend while reinforcing NAV through disciplined capital allocation. We believe our current balance sheet, portfolio mix, and pipeline give us the flexibility to pursue growth from a position of strength rather than a need to chase volume. We believe the work completed in 2025 and the actions taken in 2026 have positioned Rand Capital Corporation to rebuild the portfolio thoughtfully from a position of balance sheet strength. We remain focused on the things we can control—prudent underwriting, disciplined capital allocation, and long-term shareholder value creation. As you all know, the broader BDC market is experiencing significant volatility and private credit has become more challenging for many of the newer public and private funds. Rand Capital Corporation is not immune to these dynamics. However, we are confident that our decades of experience and the strength of our management team will guide us through what we expect to be a relatively short-lived and intermittent period of market disruption. Thank you for your time today and your continued interest in Rand Capital Corporation. We appreciate your support and look forward to updating you on our progress next quarter. Have a great day. And go Savers. Operator: Ladies and gentlemen, the conference call of Rand Capital Corporation has now concluded. Thank you for your participation. You may now disconnect your lines.
Operator: Good afternoon, and welcome to Savers Value Village, Inc.'s conference call to discuss financial results for the first quarter ending 04/04/2026. At this time, participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. Please note that this call is being recorded, and a replay of this call and related materials will be available on the company's investor relations website. The comments made during this call and the Q&A that follows are copyrighted by the company and cannot be reproduced without written authorization from the company. Certain comments made during this call may constitute forward-looking statements which are subject to significant risks and uncertainties that could cause the company's actual results to differ materially from expectations or historical performance. Please review the disclosure on forward-looking statements included in the company's earnings release and filings with the SEC for a discussion of these risks and uncertainties. Please be advised that statements are current only as of the date of this call, and while the company may choose to update these statements, it is under no obligation to do so unless required by law or regulation. The company may also discuss certain non-GAAP financial measures. A reconciliation of each of the historical non-GAAP measures to the most directly comparable GAAP financial measure can be found in today's earnings release and SEC filings. Joining from management on today's call are Mark Walsh, chief executive officer; Jubran Tanious, president and chief operating officer; Michael Maher, chief financial officer; and Ed Ruma, vice president of investor relations and treasury. Mark Walsh, you may go ahead, sir. Mark Walsh: Thank you, and good afternoon, everyone. We appreciate you joining us today. We are pleased with our first quarter results as we once again delivered strong sales performance and continued our earnings inflection for the second consecutive quarter of year-over-year adjusted EBITDA growth. We increased segment profit in both of our major markets through a combination of continued strength in our U.S. comp store fleet, the ongoing maturation of our new stores, profit improvement initiatives, and tremendous operational discipline. We also made continued progress on our innovation agenda, which is already delivering benefits to our business. Let me start with a few highlights from the quarter. Sales in our U.S. business grew 11.2% with comps up 6.4% driven by both average basket and transactions. The secular trend towards thrift remains a powerful tailwind, and our maturing new store fleet is in the early stages of contributing to comp sales growth. In Canada, our sales trends were largely as expected with a 0.6% comp decrease during the quarter, reflecting a roughly 70 basis point headwind due to an early Easter. I am especially proud of our Canadian team's execution this quarter. Despite flat comps, we grew Canadian segment profit almost 24% as we tightly managed production levels and benefited from some significant and sustainable profit improvement initiatives. We opened three new stores during the quarter, all of which were in the U.S., and we continue to expect around 25 total new store openings this year. Our new store portfolio continues to perform in line with expectations, giving us confidence in our ability to drive profitable sales growth as these stores mature. Financially, we generated $44 million of adjusted EBITDA in the quarter, or 11% of sales. Finally, we are reaffirming our outlook for 2026, which Michael will address in more detail. Turning to our results by geography, in the U.S. we believe that we are still in the early innings of consumer thrift adoption. Our 6.4% comp, despite some unusually disruptive weather, was broad-based with strong growth across regions, categories, and income cohorts. We continue to see the strongest growth in our younger and more affluent consumer cohorts, which speaks to the power of our model and its ability to resonate with shoppers across demographics. We feel very good about our competitive positioning and value gaps as new clothing and footwear prices continue to face upward pressure. Additionally, on-site donation growth continues to be robust, which helps power our flywheel, enabling our compelling assortment. In short, the U.S. business is firing on all cylinders, and we are excited about our continued expansion in this market. In Canada, our 0.6% comp decrease was largely in line with our flattish comp expectation, with the Easter shift negatively impacting our comp by roughly 70 basis points. Macro conditions remain stable but sluggish, particularly in our key Southern Ontario market, including the Greater Toronto Area and Windsor, where we have roughly 35% of our Canadian store fleet. We do not expect a material change in the economic conditions in Canada in the near term, and we continue to plan our business around a roughly flat comp. Having said this, our first quarter results demonstrated our ability to drive meaningful profit improvement in Canada despite limited top-line growth. Canadian segment profit increased $6 million over last year, and profit margin expanded 310 basis points, which we attribute to our continued focus on productivity and tight management matching demand and production. We also have a number of tests and initiatives underway to drive meaningful improvements in sales yields and cost per unit in our off-site facilities. We are quickly sharing learnings and best practices across our central processing centers and expect incremental benefits in the coming quarters. Moving on to new stores, we opened three new store locations in the U.S. during the quarter and continue to be pleased with the results as they are performing in line with our expectations. As I indicated earlier, we are excited to continue growing our store fleet in the U.S. and believe we can expand at current rates for years to come. For 2026, we are planning to open around 25 new stores, over 20 of which will be in the United States across 11 states, with a nice mix of infill and new markets. An upcoming highlight this quarter is our first North Carolina store, as our Burlington location opens later this month. Repeating our theme, our new store growth remains the highest return and most important use of our capital, and we are excited to bring our value offering to more consumers. Shifting now to innovation, where our key priority areas are strengthening our price-value equation, driving efficiency and cost reduction, and expanding our data science and business insights. Last quarter, we announced the launch of ABP Lite, an asset-light extension of our automated book processing, or ABP, system. I am pleased to report that we have completed our rollout plans ahead of schedule, with the vast majority of the fleet now leveraging our ABP capability. We expect these stores will now reap the proven benefits of ABP. I think this is a great example of how we can deploy technology in a cost-effective and high-return way across our store portfolio. We also continue to significantly strengthen the foundation of our data science and business insights. The team has been working hard to transition to a more robust data state, structuring operating data that allows us to translate and communicate insights to drive field action, thus improving our ability to, one, react to changes in sales trends, two, improve productivity, three, support margin discipline, and finally, help us continually refine our value proposition for consumers. I would like to highlight the progress we are making through a strategic partnership with Microsoft. For several months Microsoft has had a team of forward-deployed engineers working closely with Savers Value Village, Inc. to embed AI agents directly into our operating model. Our first agentic AI capability monitors our loyalty program, empowering our field organization with insights to boost consumer engagement and drive productivity. Our loyalty program is a strategically important part of our business as it represents roughly 73% of our sales and is a key focus as we continue to grow our store fleet. This deployment also provides us an agentic template for an agile future rollout of AI capabilities and insights across our enterprise. We have already identified several other use cases for AI agents across our business and are either deploying or finalizing for implementation as part of our broader innovation road map. We look forward to sharing more updates on future calls. I would like to thank our nearly 24,000 team members for their efforts in driving a strong start to 2026 and helping us deliver our commitments to our customers, nonprofit partners, and shareholders. Our mission is to make secondhand second nature, and that continues to gain momentum. We are well positioned to build on this momentum and deliver continued success. I will now hand the call over to Michael to discuss our first quarter financial performance and the outlook for the remainder of 2026. Michael Maher: Thank you, Mark, and good afternoon, everyone. As Mark indicated, we had a solid first quarter. Total net sales increased 8.9% to $403 million. On a constant currency basis, net sales increased 6.9% and comparable store sales increased 3.5%. We are especially pleased with our sales results in the U.S., where net sales increased 11.2% to $234 million. Comparable store sales increased 6.4%, fueled by both average basket and transactions, with broad-based gains across categories, regions, and income cohorts. Given the breadth of our sales performance, and the fact that we have yet to see a material lift from our new store openings, we remain very confident in our ability to grow the U.S. business. We also saw continued stability in Canada, where net sales increased 6.7%. On a constant currency basis, Canadian net sales increased 2% to $131 million, and comparable store sales decreased 0.6%, reflecting an earlier Easter that negatively impacted comp by 70 basis points due to store closures on Good Friday. In the near term, we do not assume any material improvement in the Canadian economy and, as such, we will be planning our Canadian business conservatively. However, as Mark mentioned, we did successfully expand segment margins and grow profit contribution even without comp sales growth through strong execution, efficiency gains, and the continued maturation of our new stores. All things considered, we believe this quarter is a good model for how we will continue to grow segment profit contribution even with limited sales growth going forward. Cost of merchandise sold as a percentage of net sales decreased 10 basis points to 45.4% due to comp leverage, efficiency initiatives, as well as growth in on-site donations, partially offset by the impact of new store openings. Salaries, wages, and benefits expense was $86 million. Excluding IPO-related stock-based compensation, salaries, wages, and benefits as a percentage of net sales was roughly flat at 20.5%. Selling, general, and administrative expenses increased 13% to $98 million and, as a percentage of net sales, increased 80 basis points to 24.4%, primarily due to growth in our store base, increased routine maintenance costs—namely higher snow removal expenses—and increased occupancy costs. Depreciation and amortization increased 18% to $23 million, reflecting investments in new stores. Net interest expense decreased 15% to $13 million, primarily due to the impact of our debt refinancing last fall. GAAP net loss for the quarter was $5 million, or $0.03 per diluted share. Adjusted net income was $2 million, or $0.02 per diluted share. First quarter adjusted EBITDA was $44 million and adjusted EBITDA margin was 11%. U.S. segment profit was $43 million, an increase of $4 million, primarily due to increased profit from our comparable stores. Canada segment profit was $31 million, up $6 million due to disciplined management of production and expenses and the CPC productivity and efficiency initiatives Mark mentioned earlier. Our new stores continue to perform in line with our expectations and mature on schedule as their contribution ramps. However, as we mentioned last quarter, a more balanced store opening schedule this year means more front-loaded preopening expenses. While we expect preopening expenses for the year to be roughly flat with last year at approximately $14 million to $16 million, first quarter preopening expenses were approximately $1 million higher than last year. Our balance sheet remains strong with $62 million in cash and cash equivalents and a net leverage ratio of 2.5 times at the end of the quarter. We also repurchased 1.2 million shares at a weighted average price of $8.51. Our capital allocation strategy remains unchanged, as we continue to prioritize organically funding new store growth, repaying debt as we target a net leverage ratio under 2 times by the end of next year, and opportunistically repurchasing shares. I would like to now turn to our guidance and discuss our outlook for fiscal 2026, which remains unchanged from the previous full-year guidance we gave back in February. We continue to expect net sales of $1.76 billion to $1.79 billion, comparable store sales growth of 2.5% to 4%, net income of $66 million to $78 million, or $0.41 to $0.48 per diluted share, adjusted net income of $73 million to $85 million, or $0.45 to $0.53 per diluted share, adjusted EBITDA of $260 million to $275 million, capital expenditures of $125 million to $145 million, and approximately 25 new store openings. Our outlook for net income assumes net interest expense of approximately $50 million and an effective tax rate of approximately 28%. For adjusted net income, we are assuming an effective tax rate of approximately 27%. We are projecting weighted average diluted shares outstanding to be approximately 163 million for the full year. This does not contemplate any potential future share repurchases. Finally, I would like to briefly touch on our expectations for the second quarter. We expect total revenue growth to be 100 to 200 basis points lower than the first quarter due to the impact of foreign exchange rates. We expect constant currency total revenue and comp sales growth similar to the first quarter. We also expect Q2 adjusted EBITDA growth to be similar to Q1, with the cadence of earnings through the balance of the year to resemble 2025. We plan to open six new stores during the quarter in line with our goal of more ratably opening stores throughout the year. This concludes our prepared remarks. We will now open the call for questions. Operator? Operator: Thank you. We will now begin the question-and-answer session. If you would like to withdraw your question, simply press 1 again. We will go to our first question from Matthew Boss at JPMorgan. Matthew Boss: Great. Thanks, and congrats on a nice quarter. So Mark, can you elaborate on the step-up in comp trends that you are seeing in the U.S. business in particular? Two straight quarters of double-digit same-store sales on a two-year stack. Maybe if you can touch on new customer acquisition, secular thrift tailwinds, and just any puts and takes to consider with the second quarter comp trend maybe relative to the mid-single-digit full-year guide? Mark Walsh: Yes. Thanks, Matt. Look, I think it starts with what we have seen is widespread growth across geographies and merchandise categories, and that obviously plays into a great experience—value and selection winning. On top of that, we are seeing accretive adoption trends amongst our younger and higher income households. We have seen that continue. So we are seeing trade down and trade in. I would also say that demand is really healthy across a broad base of all income demographics, and I think that is a key difference versus Canada. The secular trend certainly remains a tailwind, and what is really great is basket and transactions have driven comp. As we mentioned around the agentic initiative, the loyalty program is an important element in how we consider and drive growth, and we have continued to see really nice growth in our loyalty program in the U.S. And then, Matt, to your question about how we think about Q2, so far what we have seen in April in the U.S. is actually a little bit of acceleration in U.S. comps, but we do expect those comps to get a little tougher to lap as we progress through the year. So still thinking about a mid-single digit. In Canada, we really have not seen much change. It remains roughly flattish. Michael Maher: Sure. So new stores continue to perform in line with our expectations and consistent with the waterfall, as you described it, that we have laid out here over the last year or so. Just as a reminder for everyone, typically in year one we see about $3 million in top-line sales. We do lose money both from the preopening expenses that we incur as well as in the first year of operations as we are still ramping volume and developing and building that on-site donation foundation. Profitability typically passes breakeven in the second year and then continues to ramp as the sales improve. Ultimately, we target a year five top line of about $5 million and something close to a 20% margin. So far, our new store classes continue to perform in line with that waterfall. Thus far, Matt, we are still too early in that pipeline for those stores to be meaningfully contributing to our comp. So the comps that we are posting in the U.S. really are mature store comps. Recall that we only started opening new stores at this pace in the last couple of years, and really only the 2024 classes at this point have entered the comp base. So it is less than 50 basis points in total benefit to the comp, but we expect that is going to continue to build as more of those stores enter the comp base going forward. Mark Walsh: Let me supplement Michael's answer, Matt. It remains the highest and best use of our capital to open up these stores. Matthew Boss: Helpful color. Best of luck. Mark Walsh: Thank you. Operator: We will move next to Brooke Roach at Goldman Sachs. Brooke Roach: Good afternoon, and thank you for taking our question. I was hoping you could unpack the improvement in profitability that you are seeing in the Canadian business. How should we expect that to continue for the rest of the year? And then more broadly, can you help us understand what the quantitative impact that you see from your AI capability monitors and your agents is on profitability as you look on a multiyear basis? Jubran Tanious: Hi, Brooke. I can take the Canadian profitability question. The first thing I would say is it is driven by a few factors. It is not one thing. The first is some of our initiatives in CPC. Mark talked about those in his opening comments. Those continue to get better, more efficient, more effective through a variety of process improvements, and we have been very pleased with that and proud of the team. We are in the midst of expanding that to all of our off-site locations. The second thing, and we talked about this on past calls, is striking the right balance in total pounds processed—the amount of production level—and maintaining a good equilibrium so that we are feeding customers fresh product but also doing it in a very healthy gross margin way. We think the team did an excellent job at striking that equilibrium this past quarter. The third thing I would cite is ongoing refinement and improvement of our data and analytical tools. That is important because if you think about converting pounds into items, those improvements have helped us better align items that we supply to the customer at the category level, so it improves our ability to put the right thing at the right time in front of the customer, and that obviously benefits our sales yield. Lastly, I would cite the ongoing on-site donation growth, which we are seeing improve in a broad-based way. This past quarter, over three quarters of our supply came from on-site donation and GreenDrop mix—nice year-on-year improvement, and one that we expect to continue. So you put all that together, and yes, we absolutely expect those trends to continue through the balance of the year, and that is all contemplated in our guidance for Canada. On your question around AI and the agentic deployment, let me say that it is just one element of a much broader innovation approach that includes ABP Lite. It includes a number of process and efficiency improvements that we are driving in our off-site production centers and then applying data science and business insights to what is a data-rich business. From an AI-specific perspective, these efforts are primarily efficiency- and productivity-driven, and we will develop a better sense for how big of an impact it will be over time. Michael Maher: Brooke, just one closing thought on that. First, as Jubran stated, we are really pleased with what we are seeing in Canada. While we do not guide segment profit specifically, we do expect directionally that to continue, and we have contemplated that in the guidance for this year. Longer term, to your question about innovation, it gives us added confidence in that longer-term algorithm of getting back to that high-teens EBITDA margin as we continue to see the new stores mature, but also see the innovation initiatives really take root. Operator: Great. Thanks so much. I will pass it on. Next, we will move to Randy Konik at Jefferies. Randy Konik: Thanks a lot. Michael, I just want to jump off of the last thing you said there in terms of segment profit, or geographic profit margins as we move higher. Can you give us some perspective on where we sit with those Canadian margins versus history in the U.S.? Are there things you are doing in Canada that you intend to apply to the U.S. business to kind of further those margins higher? Just give us some thoughts on some of these profit initiatives you are working on and where they are in that life cycle. How much higher can we go from here? And then, it looks like you managed payroll well in the quarter. You have had some deleverage in that item in the last four to six quarters. Is that something where now we are kind of turning the corner on that payroll side of things? Will we start to get some leverage going forward out into the balance of the year and into 2027 and beyond? How do you think about it? Michael Maher: Sure, Randy. Why do I not start, and then I will let Jubran jump in and provide a little color too. First of all, we have long seen that we have structurally higher contribution margins in Canada than the U.S. I actually think that gap probably widens in the short term in 2026 because we continue to invest in growth in the U.S., which, as we have said now for a while, does create a short-term headwind. Long term it is absolutely value accretive, but we know that there is some short-term margin pressure as a result of opening new stores. We are generating nice comp growth and seeing healthy gains from on-site donations and yield improvements in the U.S. as well, but you do have that headwind. Whereas in Canada, the focus really is on profit improvement and process optimization. We are not investing meaningfully in new store growth in Canada at this point. We are a mature business there—much more highly penetrated, obviously, than we are in the U.S.—and so that gives us a chance to really focus on the productivity and efficiency initiatives that Jubran described earlier and really see those flow through into the bottom line as you saw here in the first quarter and the improvement in our Canadian segment profitability. I do expect directionally that trend to continue this year. On the OpEx line—salaries, wages, and benefits—I think you are referring to that. We are continuing to step down the IPO-related stock comp in that line. We have one quarter left of that here in the second quarter. That is roughly $4 million in each of Q1 and Q2. That falls away completely in Q3 and beyond, so you will see that. Excluding those nonrecurring items, I think you will see normalization as we go forward. We do still have some pressure from new stores and those maturing and getting to scale, so that normalizes as we get past the one-time items. I would expect actually more of the improvement this year to come from gross margin rather than the operating expense lines, as we continue to see the new stores mature and the benefit of that and their related on-site donation ramp flowing through to the margin line. Jubran Tanious: It absolutely cuts across borders. When we think about production, productivity, and efficiency improvements, the team does a very good job of working collaboratively on discovery, leveraging best practices, and scaling that across all of our operations. Two examples we talked about earlier: off-sites—the improvements that we have made in off-sites are going to benefit all locations, not just in Canada. Data and analytics—the refinement I mentioned, where we have tools that are better than they have been in terms of putting the right thing at the right time in front of the customer—cuts across all segments. So the short answer is yes, we expect broad-based benefits from that. Randy Konik: Super helpful. Thanks, guys. Operator: We will go to our next question from Michael Lasser at UBS. Michael Lasser: How long can you continue to grow the profitability in Canada on a flat comp? At some point, do you start to experience deleverage if the same-store sales do not grow, and do you need to take action to reinvigorate the same-store sales growth in that market? My follow-up question is on the delta between your sales yield and what you are paying for donations. What are you seeing with respect to the sales yield? How much of the improvement in sales yield is being driven by like-for-like pricing? And on the payment for donation, are you experiencing any inflation as a result of the overall environment and some of the scrutiny that charities are under around the country? Jubran Tanious: Hey, Michael. I will grab the profitability question. I understand your question. Long term, I think there is merit to what you are saying, but we think there is still a tremendous amount of opportunity—certainly for the remainder of this year—on all the initiatives that we have to improve efficiency and effectiveness. The trends that we saw in Q1 we expect to continue for the remainder of this year. On your supply cost question, a reminder that our supply cost is governed by a set of contracts that we have with all of our great nonprofit partners across our three countries that are typically anywhere between one and three years. They are deliberately relatively short to medium term because we are always evaluating the market so that we can stay very competitive in terms of what we pay for delivered product or on-site donation, which we have reliably continued to grow across all segments. So the short answer is no, we are not experiencing any unexpected upward pressure on supply costs. That is all very predictable. It is contract-based, we can see it clearly, and we plan for it many months in advance. In terms of availability of supply, both for our comp stores and to feed new store growth, we have no concerns at all. The team continues to execute well. We see no ceiling on how high on-site donations can go—that is what we are seeing in the business. Michael Maher: And then, Michael, on the sales yield, we were really pleased with the roughly 6.5% increase in sales yield that we delivered in the first quarter. There is an element of higher ASP in that. We strive to keep that at or below inflation over time, and that is a normal recurring thing. What really drove that outsized growth this quarter were the things Jubran talked about earlier—being very careful about how we are managing production and lining that up to demand, especially in Canada, and the productivity initiatives in our off-site processing facilities, which are helping us to get the right item to the right location at the right time and, therefore, drive greater sales yields on those items as well. Michael Lasser: Thank you very much, and good luck. Operator: We will take our next question from Robert Drbul at BTIG. Robert Drbul: Good afternoon. A couple of questions for you. On the first one, when you look at energy cost impact, can you talk about how you are being impacted throughout the business from that perspective? And then the second question I have is, can you expand a bit more on new store productivity? Are you seeing any variations? And as you take a more measured approach to this year—five in the first quarter, six in the second—the benefits to a more measured rollout from an execution perspective, what are you seeing there? Thanks. Michael Maher: Yeah, Bob. Let me take the energy cost question, and then I will let Jubran take the new store one. The run-up in fuel costs came fairly late in the quarter for us, so not really a material impact to our first quarter. At these levels, we think there is some modest pressure for the balance of the year—nothing that we think we cannot mitigate—but it is obviously a fast-evolving situation that we will continue to monitor. Jubran Tanious: New stores have been very pleasing, as Mark talked about in his opening comments. They are in line with our expectations. I think our ability to pick winners and refine our modeling of new stores has just gotten better and better over the years, and we are seeing that in performance. To your question of whether we are seeing any outliers, it has been pretty consistent. We feel very good about our ability to predict and execute all the things that have to go into making a new store open on time and be successful. In terms of our ability to prospect and find attractive new locations and fill up that pipeline, that has only gotten stronger. As we think about the remainder of this year and what we have committed to in 2027, we are right on track with where we hoped we would be. Robert Drbul: Great. Thank you very much. Operator: We will move next to Mark Altschwager at Baird. Mark Altschwager: Thank you. Good afternoon. I wanted to follow up on the price-value framework you have been building on here in the last few calls. With the U.S. comp now nicely in the mid-single digits and your competitive set continuing to take price, has anything in your testing changed your view on the AUR opportunity? Are you taking any incremental price tactically by category or by geography? And how are you thinking about further opportunity if that value gap widens? Is it more about loyalty growth with new customer acquisition on that trade down, or is there maybe some incremental AUR contribution to comp as we move forward? Thank you. Mark Walsh: Great question. We are very focused on maintaining a super deliberate and very attractive price-value for our customer base in both the U.S. and Canada. We have a great dataset that informs our approach on where we are putting category pricing in a given geography—critical element. As we think about watching the item ratio or flow-through, that really informs us as to where there are certain opportunities in certain geographies and certain categories. So again, a very analytically, data-science-driven approach to how we are deploying pricing across our fleet in both countries. The differences are obviously the geographies and the sensitivities to price relative to how quickly those garments or those goods sell. We are monitoring our approach carefully, and in this environment we seem to be winning. We are really pleased with the throughput that we have gotten in both countries when it comes to our price-value relationship. Mark Altschwager: Thank you. And just a follow-up on the loyalty program, the loyalty file. Can you size up where that is today and how much it grew in Q1? Trying to get a better understanding of how much the U.S. strength is growth in that file versus deeper engagement with your existing base. Mark Walsh: The file is growing quite nicely. We are a little north of 6 million total loyalty members across North America. We continue to see nice growth. I think the thing we are most pleased about is that the top loyalty cohort behavior really continues to outperform in both countries, and it represents roughly 73% to 74% of our sales. It is a great ability for us to connect with our consumers very cost efficiently at any given time. Operator: Our next question comes from Peter Keith at Piper Sandler. Peter Keith: Nice quarter, guys. I know you sound like Q2 has continued the trend, but with the backdrop of higher gas prices, in the past you have spoken to a lower income element as a portion of your customer base. With the loyalty program, are you seeing anything of note as it relates to trade in versus trade down in this evolving economic backdrop? And to follow up on the prepared remarks about using AI and applying it to your loyalty program, can you unpack exactly what you are doing? It sounds like something that would enhance sales, but I would like to get a better understanding of what is happening. Mark Walsh: I will take that. In both countries, we continue to see a really nice adoption trend amongst younger and higher income consumers. When you think about higher income consumers, trade in and trade down are certainly part of our growth mix in our loyalty platform. There are some differences between the countries. In the U.S., consistently, demand has remained healthy and broad-based across all income demographics. In Canada, where there is a little more economic sluggishness, we see our lower household income cohort disproportionately impacted. That is really the only difference we are seeing between the two countries and how they are engaging with us and through the loyalty program. On AI, our goal is to pick very important and critical strategic elements of our business model and what the stores do. The loyalty program is an important element of our consumer engagement platform. Having our store managers and store leadership continually focus on this very critical element was a great starting point for us to kick off our agentic strategy. What this agent is doing is communicating to our store managers where they are relative to their peer set from a loyalty perspective. It provides things to consider and actions to take relative to how you are engaging with the consumer at that moment when they could either sign up or be given the opportunity to get signed up. We see this as the unlock for several more agents to come right behind that, to allow us to keep our team and our store managers focused on critical issues throughout the week, period, and month, and then provide the information upward so that district managers, regional managers, Jubran, and the country leads can roll down appropriately to ensure that those key disciplines are being met and focused on throughout the year. Operator: We will move to our next question from Jeremy Hamblin at Craig Hallum. Analyst: This is Will on for Jeremy. Thanks for taking my questions. First, I was just wondering if you are able to size the weather impact you saw in Q1, and then you noted the 70 basis point headwind from Easter. Should we be considering a similar magnitude of benefit to your Q2 from the late Easter last year? And then on the ABP Lite rollout, it sounds like it is ahead of pace. It may be too early, but is there any quantifiable benefit you have been able to realize thus far from the rollout? Michael Maher: It is Michael. I do not know if I would quantify a weather impact other than to say it really was more about how the quarter played out—very lumpy in terms of the comps, given the weather patterns this year versus last. February was our softest comp because we had some really extreme storms in both the U.S. and Canada this year. Some degree of extreme weather is just par for the course in Canada in particular. It was probably more extreme than normal in the U.S. and therefore arguably a little bit more disruptive to our U.S. comp, which nevertheless continued to be strong. We are focused on what we can control, and as we exit the quarter and see that normalize, we are pleased with the reacceleration in the U.S. comp. As far as the Easter impact, yes, that headwind of roughly 70 basis points to Q1 will flip and benefit us in Q2 by a similar amount. Jubran Tanious: On ABP Lite, it is a little early to cite the results, but we are very pleased with the rollout. Between our traditional automated book processing, ABP, and now its derivative ABP Lite, we have rolled it to roughly 85% of the fleet. Rollout has gone well. Reminder, books are only about 5% of our business, but ABP Lite is a great example of our innovative process—data intensive, stress tested—and a smart rollout plan that we feel good about. We will continue to monitor it in the coming months. Operator: We will go next to Owen Rickert at Northland Capital Markets. Analyst: Hi. This is Keaton Chokey on for Owen. You have called out the strength in the younger and more affluent cohorts. I was curious to hear how their basket size, purchase frequency, and category mix have been trending versus legacy customers, and how you expect that to trend going forward. Any early read on Tennessee and North Carolina stores? Are those markets ramping faster or slower than prior cohorts, and what are you expecting out of those? Mark Walsh: Thanks for the question. Pretty consistent—nothing out of the ordinary in terms of the trend lines we are seeing from that particular customer cohort. On Tennessee and North Carolina, we are excited about those markets. We have not yet opened those stores. Our first store in North Carolina will open later this month, and our first store in Tennessee will be several months beyond that—maybe end of this year or early next year. Nothing to report yet, but suffice to say, we are very energized by the white space opportunity and the quality of the sites that we have secured. Operator: And we will go next to Dylan Carden at William Blair. Dylan Carden: Thanks a lot. I am curious, is there any incremental or change in the competitive dynamic in Canada? I know that market tends to lag from an online migration standpoint, if that is a piece of it. To the extent that there is not, what is the line of sight you have on some of the improvement in that market? Or if it is more that if you are managing the business to a flat comp, that becomes more of a manifest destiny that you feel more comfortable with. And then on the AI/technology side of things, any incremental thinking on how you might use that from an inventory management standpoint—pricing, decisions on what to keep versus donate? Jubran Tanious: In terms of a longer-term expectation of growing the top line, we are not satisfied with a flat comp. We think there are a number of things that we can test and trial. What we know is that we can control what we can control now, which is efficient and effective use of our material and labor to put the right thing at the right time and in the right amount in front of the customer. Doing that well in a more sophisticated way allowed us to have the gross margin improvement that we saw in Q1. In terms of competitive landscape directly for us in Canada, nothing specific that we could point to that has materially changed. Not-for-profit is really our number one competitive set in the Canadian market. Being within 12 miles of 90% of the population, we are fairly saturated. We are highly competitive in every market in Canada, and we are not satisfied with our comp trend. We are doing a lot to try to improve those trends. Michael Maher: To put a bow on that, we continue to work to drive the business in all facets, including top line. In the near term, we are mindful of the macro environment, and we believe it is prudent to plan for a flattish comp for the balance of this year. We continue to believe that even with that backdrop, we can drive profit improvement on the order of what we saw in the first quarter. Mark Walsh: On AI, we have a robust innovation pipeline for sure, and we have a lot of promising initiatives in test. We are pretty conservative about bringing them public. Once we get to a place where we are ready to deploy, we will be sharing those opportunities. Operator: That concludes our Q&A session. I will now turn the conference back over to Mark Walsh for closing remarks. Mark Walsh: I just want to thank everyone again for their interest in Savers Value Village, Inc. We look forward to talking to you in roughly three months. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good afternoon, and welcome to Tarsus Pharmaceuticals, Inc. First Quarter 2026 Financial Results Conference Call. As a reminder, this call is being recorded and all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. At this time, I would like to turn the call over to David Nakasone, head of misalation, to lead the call. David, you may begin. David Nakasone: Thank you. Before we begin, I encourage everyone to visit the Investors section of the Tarsus Pharmaceuticals, Inc. website to view the earnings release and related materials we will be discussing today. Joining me on the call this afternoon are Bobak R. Azamian, our Chief Executive and Chairman, Aziz Mottiwala, our Chief Commercial Officer, and Jeffrey S. Farrow, our Chief Financial Officer and Chief Strategy Officer. I would like to draw your attention to slide three, which contains our forward-looking statements. During this call, we will be making forward-looking statements that are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to consult the risk factors contained in our SEC filings for additional detail. With that, I will turn the call over to Bobak R. Azamian. Bobak R. Azamian: Good afternoon, and thank you for joining us. We are off to a strong start in 2026 with a quarter that reflects the continued momentum of XTENVI’s launch and the strength of our key growth drivers. We have always believed XTENVI would be revolutionary and our strong first quarter results reflect that. Every key metric we track, including the number of prescribers, depth of prescribing, awareness, and evidence generation, continues to grow substantially quarter over quarter. These are the same drivers we have committed to delivering on, and we are on track to achieve our full-year guidance, reach blockbuster status over the next couple of years, and realize $2 billion in peak sales potential. In the first quarter of 2026, XTENVI delivered more than $145 million in net product sales, an increase of more than 85% year over year, reflecting consistent patient outcomes and expanding eye care physician, or ECP, utilization across their practices. Having spent time in the field and at several medical conferences over the past few months, I can tell you what we are hearing directly from ECPs: they describe XTENVI as one of the most impactful medicines they have ever used, with consistent outcomes, clear utility across their practices, and broad access that is nearly universal. It works, it is easy to use, and access is outstanding. When those elements come together, behavior changes. ECPs are no longer looking only for the most symptomatic cases; they are beginning to screen every patient for collarette. That is what ultimately drives a larger addressable market over time—more patients identified, and more patients treated. What we are building at Tarsus Pharmaceuticals, Inc., however, is not a one-product story. We have developed a disciplined, repeatable playbook for identifying diseases with clear root causes and significant unmet need, and transforming how they are treated. That playbook is driving the future of our pipeline. In the first quarter of 2026, we initiated CALLIOPE, an approximately 700-participant Phase II trial of TPO5 for the potential prevention of Lyme disease. Enrollment is progressing well, with the first wave of participants already dosed, and we expect top-line data during 2027, which would support readiness for a Phase III trial. Lyme disease represents one of the largest and fastest-growing unmet needs in infectious disease prevention, affecting millions of Americans each year, yet there are no FDA-approved prophylactic options available today. It seems like I cannot go a week without reading something in the news about the impact of the disease and the increasing burden on the U.S. healthcare system. TPO5 is the first-of-its-kind investigational oral on-demand prophylactic designed to target and kill ticks before they transmit disease, and we believe it has the potential to fundamentally shift the current paradigm from management to disease prevention. We have seen tremendous interest in this program from patients, potential partners, federal agencies, and the broader medical community, reflecting both the scale of the opportunity and the need for a new approach. Another program I hear increasing excitement about is TPO4, particularly with the initiation of our Phase II CORE study in ocular rosacea. Ocular rosacea is another significant and underdiagnosed disease, affecting an estimated 15 to 18 million Americans, with no FDA-approved treatments today. Similar to Demodex blepharitis, or DB, it is a mite-driven disease that impacts the area around the eye, including the eyelids and surrounding skin, and can meaningfully affect how patients look, feel, and see. We hear it all the time from ECPs: a treatment like TPO4 could be game-changing, and they cannot wait to offer their patients an option like this. TPO4 is a novel sterile investigational ophthalmic gel designed to treat Demodex mites, the root cause of disease, and we believe it has the potential to become another first and only FDA-approved medicine for an underdiagnosed and underappreciated eye disease. The CORE study is progressing as planned, and we continue to expect top-line data in 2027. Turning back to XTENVI, the drivers are clear: broader physician adoption, a DTC campaign bringing more patients through the door, and an expanding evidence base—all pointing to a larger treatable population over time. XTENVI is only one piece of a larger story. We are deliberately building Tarsus Pharmaceuticals, Inc. to create and lead new categories in eye care and beyond, with the pipeline and playbook to do it repeatedly. And with that, I will pass it to Aziz. Aziz Mottiwala: Thanks, Bobak. As just highlighted, in Q1 we delivered more than $145 million in XTENVI net product sales, an increase of more than 85% year over year, and we meaningfully outperformed the market. Additionally, every key metric we track has grown, and as we have moved into the second quarter, prescriptions continue to grow, with some of the highest weekly numbers since launch. Our outstanding performance continues to be driven by three key factors: increasing depth of prescribing, expansion of the patient funnel, and ongoing evidence generation. In terms of depth of prescribing, we continue to see growth not just in the number of ECPs prescribing XTENVI, but in how often they prescribe. In the first quarter, nearly half of our 15 thousand target ECPs prescribed XTENVI at least once a week, up approximately 10% from Q4 2025. As Bobak noted, ECPs continue to see incredible outcomes with XTENVI and are looking for more patients they can serve across their practices. At the American Society of Cataract and Refractive Surgery, or ASCRS, conference, we met with countless physicians and heard in several podium discussions that they are broadly incorporating DB screening and treatment as part of their routine preoperative procedures, where every cataract patient is assessed prior to surgery. To further accelerate the growth we are seeing within our existing base of ECPs, we are preparing to deploy our key account leaders, or KALs. This is a highly targeted investment focused on our largest and highest-potential practices where ECPs are actively prescribing and there remains significant opportunity to expand utilization. This role attracted exceptional talent from across the industry, and we expect this team to be a meaningful driver of incremental growth starting in 2026. Additionally, retreatment rates are increasing to the mid-teens range as ECPs formalize long-term DB management protocols. As a reminder, we expect steady-state retreatment rates of approximately 20%. Turning to direct to consumer, or DTC, our DTC campaign is delivering strong and improving return on investment, or ROI, that is exceeding our expectations and is at the higher end of benchmarks. This is also reinforced by what we consistently hear from ECPs: more and more patients are coming into the office proactively asking about DB and XTENVI. Further, we continue to see millions of visitors to the xtenvi.com website, and high-value engagement—including quiz completion and use of the Find a Doctor tool—is up nearly 40% quarter over quarter, continuing to exceed even our own lofty expectations. With over a year of experience, we now have a much clearer understanding of what specifically maximizes DTC performance, and we are applying those learnings to continuously improve how and where we deploy our investment, focusing on the channels and messages that generate the highest-value engagement. In short, we are amplifying what is already working. Additionally, we have several exciting new things planned in the coming weeks, including a creative refresh and expanded disease state messaging designed to help even more patients recognize their symptoms, normalize DB, and ultimately drive more patients into the office. We are also continuing to make investments in evidence generation that reinforce the broad utility of XTENVI and expand how ECPs think about DB. One key example is the data we presented at ASCRS on the association between DB with chalazion and hordeolum—conditions that are estimated to impact several million patients in the U.S. These conditions can cause patients significant discomfort, impact their vision, and lead to invasive procedures in ECP offices. This data showed that a large portion of patients assessed also had underlying DB—more than 70% overall and even higher in recurrent cases—and we are hearing directly from doctors that they are excited about this data and are proactively screening and treating these patients. The takeaway is simple: our ongoing evidence generation is doing exactly what we intended—expanding our market opportunity by giving ECPs more compelling reasons to look for and treat DB across a broader and larger set of patients. As we look ahead, there is great momentum across the key drivers of the business, and we expect to build on that momentum with the deployment of our KAL team, the scaling ROI of our DTC campaign, new patient-focused initiatives, and additional evidence that further supports the broad utility of XTENVI. And as Jeffrey will discuss, these drivers give us confidence in achieving full-year guidance while continuing to expand the long-term opportunity for XTENVI. Over to you, Jeffrey. Jeffrey S. Farrow: Thanks, Aziz. Building on what Bobak and Aziz outlined, we delivered net product sales of $145.4 million, reflecting strong year-over-year growth from growing demand for XTENVI and exceptional execution by our team. As expected and highlighted on our year-end earnings call, the first quarter included typical seasonal dynamics such as deductible resets and higher out-of-pocket costs, as well as some impact from severe winter weather, particularly in the Northeast part of the country. Despite these factors, our underlying demand remains significantly stronger than our peers. According to third-party data, peers experienced double-digit prescription declines versus our low single digits, and as we entered the second quarter, XTENVI prescription trends rebounded to all-time highs. Turning to other revenue items, license fees and collaboration revenues were $16.7 million in the quarter. This includes a one-time $15 million regulatory milestone payable by our partner, Grand Pharma, following the approval of TPO3 for DB in Greater China, as well as approximately $1.7 million related to the required China withholding tax. This approval represents an important step toward helping the more than 40 million people in the region affected by DB and underscores our commitment to serving patients. Over time, we do expect to generate additional royalties from this partnership, although they are not expected to be meaningful in 2026 or 2027 as Grand Pharma seeks to secure payer coverage. We look forward to supporting Grand Pharma as they prepare for commercial launch later this year. For additional details on our Q1 financial performance, please refer to the earnings release issued earlier today. Looking ahead, we reiterate our full-year 2026 guidance of net product sales of $670 million to $700 million, SG&A expenses of $545 million to $565 million including approximately $40 million in stock-based compensation, R&D expenses of $115 million to $135 million including stock-based compensation of approximately $20 million, and gross margins of approximately 93%. Our guidance reflects continued strength in the underlying fundamentals of the business, including increased depth of prescribing, expansion of the patient funnel, continued execution by our exceptional sales force including the deployment of our new key account leaders, and ongoing evidence generation expanding the addressable patient population. From a quarterly perspective, growth in 2026 is expected to follow patterns consistent with our prior experience and broader sector dynamics—that is, strong growth in the second quarter, more modest growth in the third quarter, and robust growth in the fourth quarter. Finally, turning to the pipeline, as Bobak mentioned, we initiated our Phase II CALLIOPE trial evaluating TPO5 for the potential prevention of Lyme disease during the first quarter. Lyme disease is the most common vector-borne disease in the United States, with more than 35 million people considered to be at high or moderate risk of contracting the disease and hundreds of thousands of new cases diagnosed annually, yet there are still no FDA-approved prophylactic options. What makes TPO5 compelling is not just the size of the market, but the strength of the science and the differentiated nature of our approach. This oral, on-demand investigational therapeutic is designed to directly target the root cause of Lyme disease by potentially killing ticks before disease transmission occurs—an approach that is simple, fast, and practical for patients. In fact, it is already approved for Lyme disease prevention in dogs and cats, and they have benefited from prophylactic Lyme therapies just like TPO5. From a financial and operational standpoint, we are advancing this program with a clear development path and defined milestones, including expected top-line data in 2027. Similarly, our ocular rosacea program continues to progress as planned, with top-line data also anticipated in the first half of next year. Outside of the U.S., we continue to advance our global expansion efforts for TPO3 and are on track to complete the key technical work required to support potential future filings. At the same time, we are taking a thoughtful approach to timing and evaluating next steps in the context of the broader geopolitical, regulatory, and macro access environment. Before I hand the call off to Bobak, I want to restate that we firmly believe that we are well-positioned for the remainder of 2026 with strong and growing underlying demand for XTENVI and a robust and advancing pipeline with top-line results in 2027. With that, I will turn it back to Bobak for closing remarks. Bobak R. Azamian: Thanks, Jeff. Tarsus Pharmaceuticals, Inc. continues to execute on one of the most successful launches in eye care, and we have delivered so much that the addressable market continues to expand beyond our initial estimates. More patients are being identified, more patients are being treated, and more physicians are continuing to embed XTENVI into routine care. This is a direct result of how we deepened utilization in ECP practices, meaningfully grew awareness about DB, and generated compelling clinical evidence showing just how important it is to treat the condition. We are now applying that same category-creating model across our pipeline, including in Lyme disease prevention and ocular rosacea, as we work to replicate the success of XTENVI and establish Tarsus Pharmaceuticals, Inc. as a leader in creating new standards of care. Operator, please open the line for questions. Operator: Thank you. To ask a question at this time, you will need to press 1-1 on your touch-tone telephone and wait for your name to be announced. To withdraw your question, simply press 1-1 again. Please stand by while we compile the Q&A roster. Operator: Our first question comes from the line of Yuchen Ding with Jefferies. Your line is now open. Yuchen Ding: Hi, thanks for taking our questions. We have two. On the second quarter, I was surprised that you did not give bottle guidance, but when I look at consensus, which is $168 million, it should imply around 145 thousand to 150 thousand dispensed bottles. That is about 13% or 14% quarter-over-quarter growth and similar to the Q2 bounce that we saw in 2025. How do you feel about those numbers, and does our math make sense? And then second, Glaukos has a Phase II readout later this year for DB. They are delivering physostigmine, which is approved for glaucoma. You have mentioned before that you have looked at all these different assets, so I am curious what you think about the potential tolerability issues there since the drug actually constricts pupils. From your own due diligence, are vision changes or blurry vision a liability with that asset? Thanks so much. Jeffrey S. Farrow: Hi, Dennis—this is Jeff, and I will take the first part of the question and then turn it over to Bobak for the second part. As we have moved into full-year guidance, we have stepped away from the quarterly updates in terms of bottles dispensed and gross-to-net, absent some material change where we do not believe we are going to be able to meet that guidance. Our expectation is to continue to provide updates on the guidance that we provided earlier. We still believe in the full-year guidance, both on the revenue side and the SG&A side. To your question on growth between Q1 and Q2, just a reminder that 2025 was the second full year of launch and we were starting from a smaller base at that point in terms of total bottles, so we should not expect 30% growth similar to what we saw between Q1 and Q2 last year. Take into account the fact that we are starting on a bigger base now and make your adjustments accordingly. Bobak R. Azamian: Thank you, Dennis. With respect to how we see the landscape, we are really focused on XTENVI. We have been creating a really important market category for patients, and we see that growing. I think the evidence we are generating around XTENVI is robust, with more to come, so we believe that XTENVI’s profile is going to be the standard of care for the foreseeable future. We certainly track everything we see in terms of pipeline, and we are not surprised that people are also looking at this market, but in terms of XTENVI’s effectiveness, its safety, and the product profile, it is just such a great standard of care. I hear time and again, like I did in the field this quarter, how this is the best medicine a lot of doctors have seen, so we are really focused on building on that success and creating a lasting standard of care. Operator: Thank you. Our next question comes from the line of an Analyst with Mizuho. Your line is now open. Analyst: Hi, this is Emma for Greg. Thanks for taking our questions and congrats on the quarter. Maybe two from us. First, how much of the current growth is coming from the extension use cases under the Demodex blepharitis umbrella? Specifically, we are interested in the cataract surgery patient population. And then second, given the reaffirmed guidance of $670 million to $700 million, can you walk us through some of the assumptions and drivers required to achieve that guidance, including prescription growth, gross-to-net normalization, and overall run rate through the balance of the year? Aziz Mottiwala: When we think about the market and how the product is performing, one of the great things we highlighted in the prepared comments and what we are hearing clearly from physicians is the continued expansion of use throughout the patient population. We started early on with some of the most obvious cases—dry eye, cataract surgery, contact lens intolerance. We are definitely seeing a lot of utilization across all of those segments, and we have really shifted our strategy now to not only go after those segments but to go more broadly. There are 25 million Americans out there and they are coming into the funnel. We think about not just cataract and dry eye; we think about, as we mentioned, patients that have hordeolum or chalazia, for example, and even other cases. The way to think about this is physicians are using this across every segment we have highlighted, and they continue to expand to new segments—that is where our evidence generation strategy will fuel growth. In terms of some key drivers, I would highlight that coming off of this quarter, we saw progression in every metric we track commercially—depth, and all of our consumer metrics—which sets us up nicely for the rest of the year. We have our key account leaders deploying; they will start to make an impact in the third quarter and in the back half of the year, and we have some exciting things on our direct-to-consumer initiatives as well. A lot more drivers to come, and I will let Jeff speak to the mechanics in terms of the guidance. Bobak R. Azamian: Aziz, one other thing I would add—based on what I hear, these drivers are really playing out. I am hearing doctors that are treating regardless of symptoms, treating with any comorbidity, and in the setting of cataract surgery. I am excited about the evidence that we generated and evidence to come. I think chalazion is one of those examples where there are lots of reasons to treat, and that is really leading to the expansion of the patient population and the addressable market here. Jeff, I will pass to you. Jeffrey S. Farrow: Thanks, Emma, for your question. In addition to the broad strokes Aziz mentioned—growing depth of prescribing, DTC impact, and evidence generation that Bobak highlighted—and the impact of the KAL team, those will impact growth over the quarters, particularly in the back half of the year. We continue to see the seasonality that we saw last year and the year prior. Much like last year, Q1 was tempered, but we saw some nice robust growth in the second quarter as the deductibles got blown through by individual patients. We also see growth in the summertime, but much more tempered than between Q1 and Q2, and then Q4 tends to be one of our highest growth quarters as patients come into the end of the year, have run through their deductibles, and are trying to use up their FSA. We anticipate that type of seasonal impact as well. Operator: Thank you. Our next question comes from the line of an Analyst with LifeSci Capital. Your line is now open. Analyst: Congrats on the quarter. Just a couple of questions. I am getting some questions on ocular rosacea. You mentioned it is the root cause of the disease. I think with blepharitis, in the trials you were plucking eyelashes and you can legitimately see the mites, and it is a pathognomonic sign when you see the collarettes now. How comfortable do we feel that ocular rosacea is—Demodex mites are causing the ocular rosacea? Bobak R. Azamian: Thank you, Frank, and I appreciate that question. You have tracked our story for a long time, and you have seen the playbook that we applied in the development of XTENVI and are applying in OR. To your point, it starts with a disease that has a clear root cause and clearly identifiable patients, and we see that in OR. To your question, we see that the majority of patients with OR have Demodex. It is harder to measure—you do not have the benefit of a collarette that you can pull from around the eye—but you do have clear signs. Those are signs of inflammation, redness, erythema, and telangiectasia. We know that when patients have those signs, they are very likely to have Demodex as an underlying root cause. That is the basis of our approach here. I will also add we are hearing a lot of great interest in OR as well. When I am out in clinics or talking to doctors about XTENVI, they raise OR. They say, “I am looking at these patients; I have something great for the added margin, but I do not have anything for the inflammation around their eyes.” They are seeing how important this disease is now that they are taking a close look around the eyes. We see an opportunity to create a category with a very similar playbook. Analyst: Great. And then just on the endpoint side, to compare it to what you have done in the past, the collarette cure rate was very interesting for blepharitis. In this case, can you remind us what the endpoints are and the comfort on the regulatory side of those endpoints? Bobak R. Azamian: Absolutely. We are enrolling patients by OR, and we are looking at OR endpoints—those same telangiectasias and erythema. We have aligned with the FDA that we need to look at those endpoints and we need to see an improvement in one of them. That is how we are structuring the trial, and that is the bar we expect for success in the Phase II trial that we are conducting. Analyst: If I could sneak in a last one. In terms of the second quarter, Jeff, thanks for breaking out first-quarter seasonality and the cadence. In the second quarter, can you give any granularity as to what is to be expected in the months of the second quarter? Jeffrey S. Farrow: In terms of revenue, Frank? Analyst: Yes, or scripts. Sometimes there are weeks that are harder, or there are summer months with holidays and conference time. Any granularity on what goes on in the second quarter that we should pay close attention to? Jeffrey S. Farrow: Part of that was the impact of the spring break timeframe, which we have already passed through in large part in April, so that is behind us. There are some conferences that could pull some doctors out of the office, but we do not anticipate that to be much greater than what we have seen historically. You can think about this as on a growth trajectory upwards for the rest of the quarter. Analyst: Great. And do you break out how your patients are broken down between age groups? Is it the older crowd or the younger crowd you are treating? Jeffrey S. Farrow: We see utilization across a wide array of patients. Cataract patients are typically an aging population, so we see a lot of utilization there. But patients with contact lenses or dry eye span the entire patient population. While there is a higher propensity in elderly patients—you are right about that—we see more and more younger patients, professionals working and looking at the screen all day, noticing their eyes are bothering them. They see the ad, they are motivated to talk to their doctor. We are seeing utilization across the board—cataract is obviously an elderly population, and elsewhere it is a diverse population of patients getting treated. Operator: Thank you. Our next question comes from the line of Jenna Davidner with Barclays. Your line is now open. Jenna Davidner: Hi, thank you for taking my question. I had one on Lyme disease. As Bobak mentioned, there is a lot of elevated concern right now around ticks, so I was curious if you could remind us what your strategic priorities for this program are and whether or not this might make sense to partner out. Given the elevated concern and that there is no FDA-approved prophylactic treatment, do you think there is any pathway toward an accelerated approval timeline? Thank you. Bobak R. Azamian: Thank you so much, Jenna. Thanks for highlighting the Lyme program. We hear a lot of interest in this program. There is not really a week that goes by that I do not see something in the press or media about Lyme disease, and tick season has now started. We are very excited about the program. We have advanced it into this Phase II trial that is groundbreaking in many ways—700 patients across a broad array of participants and geographies. We are using a very novel investigational medicine, TPO5, which is an oral on-demand option—patients can take it where they sit and on demand—and that is a very unique potential medicine. In this trial, we expect to get good data on safety and dosing and be Phase III ready, as I mentioned. That will allow us to assess where this fits. Our base case is this is better in someone else’s hands as it goes to Phase III, but delivering a robust Phase II data set with FDA clarity on the path forward will be important. In terms of the FDA’s guidance, they have been very collaborative. There have been other vaccines developed in this space, so we are largely following that guidance. The Phase III is TBD based on our Phase II, but our base case is that we would have to conduct a large vaccine-like Phase III, and that is something we would have clarity around as we get ready for that and talk to potential partners. Operator: Our next question comes from the line of Jason Matthew Gerberry with Bank of America. Your line is now open. Analyst: Hi, this is Melanie on for Jason. Thanks for taking our question. You mentioned that with the addition of the key account leaders, most of that impact is likely to be seen in the back half of the year. How should we think about that incremental impact on top of the seasonality you flagged, with a stronger second half? Thank you. Jeffrey S. Farrow: Melanie, adding these key account leaders is going to be a great catalyst for us in a lot of ways. We have shown when we added people, we can get a response right away—we did this when we expanded our sales force prior, and we are using a very similar approach. The key account leader is a unique position targeted toward the increasing depth of prescribing we are seeing. Two things I will tell you: no one in our called-on audience, no physicians we are talking to, have capped out yet—even our top doctors have room to grow—and we are seeing a broader opportunity with doctors being able to prescribe more in general. These key account leaders are some of the most experienced and sophisticated sales individuals, and again, this is against a very high bar because we have a great sales team. They will be targeted against the highest-opportunity practices that are having good success but could be doing more. We are finalizing training, and they will be out there in the third quarter. I think you are going to start to see that. It is about 17 to 20 people; this is not a massive expansion of the sales force, but this will catalyze even more depth of prescribing and is a key element to drive to the targets we have this year. I would expect you to see that right away, and you will see that bear through the seasonality, but it does not alleviate the impact of seasonality—that is a patient-flow issue, not so much an execution issue. Think of this as depth of prescribing, change of behavior over time, and allowing us to continue a great growth trajectory. You will still see seasonality in the quarters, as mentioned. Operator: And our next question comes from the line of an Analyst with Oppenheimer. Your line is now open. Analyst: Hi, thanks for taking our questions. A couple from us. First, can you give any additional color on what percentage of prescriptions dispensed in the quarter represent retreatment patients versus new starts? Second, thinking about the $2 billion peak sales number, how much of that is predicated on retreatment becoming recurring annual behavior versus purely new patient identification? Aziz Mottiwala: Retreatment is something we get a lot of questions on and something we are tracking closely. It is also something we have seen progress nicely over the last several quarters. As a reminder, we have said we would expect retreatment to be at steady state around 20%, meaning at any given week of prescriptions, about 20% of the composition would be retreatments. What we are seeing so far is retreatment averaging in the mid-to-high teens, and that is up quarter over quarter—one of those key metrics—so we are seeing that steadily progress. We would expect that to even out at around 20%. To your question on long-term potential, at steady state you can assume about 20%, so in a peak-year revenue, approximately 20% would be due to retreatment. Operator: Thank you. Our next question comes from the line of Lachlan Hanbury-Brown with William Blair. Your line is now open. Lachlan Hanbury-Brown: Hey, thanks for the question. First for Jeff: you had stronger-than-expected gross-to-net in the first quarter. Can you elaborate on what drove that? Is that the mix shift, changes in Medicare, or some one-off items? How should we think about that flowing through? We typically have a cadence of gross-to-net stepping down throughout the year—should we still expect that, or is it going to be relatively flat from here? Jeffrey S. Farrow: Lachlan, good to hear you. We are not providing gross-to-nets on a quarterly basis now that we have moved to full-year revenue guidance. I would say we did see the typical seasonality in the first quarter in terms of copays resetting and driving some additional support. That said, we are very comfortable that we will be exiting Q4 in the 43% to 45% range. I would guide you to expect it to be somewhere within that range for the year. Lachlan Hanbury-Brown: Great, thanks. And maybe one for Aziz. The continued strong growth in web visits and especially the high-value activities on the website seems encouraging. Has the conversion rate—from website visits to e-scripts—to the extent you can track it, maintained constant so it tracks in line with the increase in visits? Aziz Mottiwala: On DTC, this is an area that is really compelling and one we are excited about. You highlighted the increased high-value activities. We are pleased because the ROI overall continues to improve and is already ahead of benchmarks and our expectations. We do not get into specific conversion metrics, but if the ROI is improving, it implies more patients are getting on therapy. Q1 is a patient-flow thing—there were lost days due to weather—so I would not think about Q1 versus those engagement metrics as the comparator. Patients are ready to go, and we are seeing the impact even early in Q2 with prescriptions near all-time high levels. I think you will continue to see that stack over time. The great thing about DTC is once you get to a great ROI—and I have seen this in my career—you can start to see a stacking effect where patients are primed and ready to go. This also validates the strategy of continuing to drive depth of prescribing. The more doctors looking for more patients, the better our conversion is going to be. This is the one-two punch we are working on, and you are seeing positive trajectory on both fronts. Operator: Thank you. Our next question comes from the line of Francis Edward Hickman with Guggenheim. Your line is now open. Francis Edward Hickman: Thanks for taking the question. Congrats on the progress. Another one on the gross-to-net. As this retreatment cohort expands toward that 20% that you have guided for, does the gross-to-net profile change between a refill prescription and a new start? Do you get better net price realization if a patient is coming back and does not need to go through the whole copay assistance program? Curious how that dynamic may shift beyond the typical seasonal gross-to-net changes you have already talked about. Jeffrey S. Farrow: Great question, Eddie. It is not likely to change on a refill patient. They still have to go through the prior authorization process as well as potentially provide some copay for that product as well, so it is not likely to change much. Francis Edward Hickman: Got it. And did you talk specifically about which federal agencies have interest in TPO5 and what that means for acceleration of the program? Jeffrey S. Farrow: Sure, Eddie. We have a strong government affairs team that has been engaged. As you and Jenna highlighted, there is a lot of interest here. There is a Lyme-focused group looking at opportunities to speed up approvals, particularly in the Phase III realm, and stepping away from the disease-prevention approach that vaccines typically do. They are invested in looking at diagnostics and other areas that can speed up the development pathway. And then RFK, who is part of the HHS program, has made this a high priority. As has McCarray. The FDA has taken an aggressive approach here and is looking to speed therapeutics to market as quickly as we can. Operator: Thank you. There are no further questions in the queue at this time. Ladies and gentlemen, this concludes today’s conference call. Thank you for participating, and you may now disconnect.
Operator: Good day, ladies and gentlemen. Welcome to today's conference call to discuss LifeVantage Corporation's 2026 results. At this time, all participants are in a listen-only mode. Following the formal remarks, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up. Hosting today's conference will be Reed Anderson with ICR. As a reminder, today's conference is being recorded. And now I would like to turn the conference over to Mr. Anderson. Please go ahead, sir. Reed Anderson: Thank you. Good afternoon, and welcome to LifeVantage Corporation's conference call to discuss results for 2026. On the call today from LifeVantage Corporation are Michael Beindorff, Interim Chief Executive Officer; Carl Aure, Chief Financial Officer; and Kristen Cunningham, Chief Sales Officer. By now, everyone should have access to the earnings release, which went out this afternoon at approximately 4:05 p.m. Eastern Time. If you have not received the release, it is available on the Investor Relations portion of LifeVantage Corporation's website at lifevantage.com. This call is being webcast, and a replay will be available on the company's website as well. Before we begin, we would like to remind everyone that our prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance, and therefore, undue reliance should not be placed upon them. These statements are based on current expectations of the company's management and involve inherent risks and uncertainties, including those identified in the Risk Factors section of LifeVantage Corporation's most recently filed Forms 10-K and 10-Q. Please note that during today's call, we will discuss non-GAAP financial measures, including results on an adjusted basis. Management believes these financial measures can facilitate a more complete analysis and greater transparency into LifeVantage Corporation's ongoing results of operations, particularly when comparing underlying operating results from period to period. We have included a reconciliation of these non-GAAP measures with today's release. This call also contains time-sensitive information that is accurate only as of the date of the live broadcast, 05/06/2026. LifeVantage Corporation assumes no obligation to update any forward-looking projections that may be made in today's release or call. Now I will turn the call over to Michael Beindorff, Interim CEO of LifeVantage Corporation. Michael Beindorff: Thank you, Reed. Good afternoon, and thank you all for joining us today. For those of you I have not had the opportunity to meet, let me briefly introduce myself. I have had the privilege of serving on the LifeVantage Corporation board of directors since 2012, which gives me over fourteen years of insight into this company's evolution, challenges, and the tremendous opportunities that we have in front of us. I have spent my career building consumer brands across a variety of business environments including The Coca-Cola Company, Visa, and Planned OutRx, among some others. Before we dive into our quarterly results today, I want to take just a moment to recognize Steve Fife, who retired as our president and CEO on April 30. Steve's tenure at LifeVantage Corporation has been absolutely transformational. His strategic vision and his relentless focus on operational excellence have been instrumental in modernizing our business model, strengthening our financial position, and laying the foundation for the future. So on behalf of the entire board and the organization, I want to thank him for his leadership and I want to wish him the very best in his retirement. Now, you might ask why a long-serving board member would step into an interim operating role, and the answer to that is pretty simple. I believe deeply in LifeVantage Corporation's products, its people, and its potential. My fourteen years of board service give me a unique perspective on what makes this company special. I am excited about our product portfolio. From our flagship Protandim family to innovation like TruScience Liquid Collagen, the MINDBODY GLP-1 system, and our comprehensive gut activator P84, these products represent genuine innovation in cellular health activation and are all backed by rigorous scientific validation. But what truly gets me excited is our passionate consultant community. Having spent almost my entire career building consumer brands, I deeply appreciate the power of authentic advocacy. Our consultants understand the uniqueness of our products and the deep scientific validation behind them, and they deliver this information and these products to people every day. They share their personal health journeys, and they create genuine entrepreneurial opportunities. That is a combination that is both powerful and sustainable. Our most recent Momentum Academy in Las Vegas was a great example of this. It perfectly captured the energy and the potential of our consultant community. It was centered around the theme of breakthrough, and this three-day immersive experience brought together our independent consultants from across the country for powerful leadership training, business-building strategies, and meaningful connection with each other. Among other things during the conference, the company announced the VIP bonus, our first-ever twelve-month volume growth incentive program for consultants. This program will handsomely reward consultants who meet their growth goals, and we believe the program can be a game changer not only as a catalyst for growth, but also in terms of leadership development. In addition to incentivizing growth, the program is designed to identify and elevate consultants who demonstrate the leadership behaviors associated with long-term success. We think that by rewarding these behaviors, we will build a stronger leadership pipeline and align our field organization around what is required to improve the company's long-term growth trajectory. The passion, the clarity, and the commitment that I witnessed in Las Vegas reinforced my confidence in our community's strength and our company's future. Now before Carl details our Q3 results, I want to provide a brief high-level perspective on where we stand today and where this enterprise is headed in the future. The direct selling business continues to evolve, and LifeVantage Corporation has been proactive in adapting our business model to meet changing consumer preferences and market dynamics. We have invested in digital capabilities, upgraded our consultant compensation plan, enhanced our consultant tools and support systems, and continued to innovate our product offerings to address emerging health and wellness trends. And these investments in our future are continuing. As we told you in February, we are making a significant investment in upgrading our e-commerce platform. The launch of Shopify along with a totally revamped and upgraded back-office system will dramatically improve both our customers' and our consultants' e-commerce experience with LifeVantage Corporation from end to end. We plan to start launching Shopify later this year, and we are excited about the prospects as we roll the Shopify launch through our markets. In addition, our business fundamentals are solid. We have a clean balance sheet, no debt, and cash reserves that give us flexibility. Looking ahead, we see significant opportunities. The health and wellness market continues to expand, and our unique positioning in nutrigenomics gives us credibility and we think differentiates us in a crowded marketplace. We remain committed to operational excellence, strategic execution, and delivering value for all stakeholders. With that, let me turn it over to Carl to take you through our financial results. Carl Aure: Thank you, Michael, and good afternoon, everyone. Let me walk you through our third quarter financial results. Please note that I will be discussing our non-GAAP adjusted results where applicable. You can refer to the GAAP to non-GAAP reconciliations in today's press release for additional details. For 2026, we delivered net revenue of $43.7 million, which was down 25.2% compared to $58.4 million in 2025. The decrease was primarily driven by a decline in sales of our MINDBODY GLP-1 system, partially offset by sales of LoveBiome, which we acquired in October 2025. Revenue in the Americas region decreased 28.9% to $34.3 million, reflecting decreased sales of our MINDBODY GLP-1 system and a decrease in total active accounts. Revenue in the Asia Pacific and Europe region decreased 7.7% to $9.4 million, primarily driven by a decrease in total active accounts. Foreign currency had a negligible impact on Asia Pacific and Europe during the quarter, positively impacting results by $100 thousand. Our gross profit percentage for the third quarter was 79%, down from 81% in the prior-year period, reflecting increases in shipping and warehouse expenses along with higher inventory obsolescence-related expenses. Excluding a $183 thousand allowance related to MINDBODY inventory, our non-GAAP adjusted gross profit percentage was 79.4%. Commissions and incentive expense as a percentage of revenue was 43.5% in the third quarter compared to 44.8% in the prior-year period. The decrease as a percentage of revenue was primarily due to the timing and magnitude of our promotional incentive programs and changes to the mix of customers and independent consultants. We anticipate full-year fiscal 2026 commissions and incentive expense to be approximately 42.5% of revenue. Selling, general, and administrative expenses were $13.9 million, or 31.7% of revenue, compared to $17.1 million, or 29.2% of revenue, in the prior-year period. The increase as a percentage of revenue was primarily due to the overall decrease in sales volume. GAAP operating income was $1.7 million compared to $4.1 million in the prior-year period. Adjusted non-GAAP operating income was $1.8 million compared to $4.1 million in the prior-year period. GAAP net income was $1.4 million, or $0.11 per diluted share, compared to $3.5 million, or $0.26 per diluted share, in the prior-year period. Adjusted non-GAAP net income was $1.5 million, or $0.12 per diluted share, compared to $3.5 million, or $0.26 per diluted share, in the prior-year period. We recorded income tax expense of $300 thousand in the third quarter compared to $700 thousand in the prior-year period. We expect our full-year effective tax rate for fiscal 2026 to be approximately 18% to 20%. Adjusted EBITDA for the third quarter was $3.2 million, or 7.3% of revenues, compared to $6.4 million and 11% in the same period a year ago. Our financial position remains solid with $12.5 million of cash and no debt at the end of the third quarter. We generated $5.5 million of cash from operations during the first nine months of fiscal 2026 compared to $10.8 million in the same period in fiscal 2025, primarily due to the payment of accrued employee-related incentive compensation and consultant incentive trip expenses. Capital expenditures totaled $2.5 million for the first nine months of fiscal 2026 compared to $1.2 million in the prior-year period, reflecting our continued investment in technology infrastructure, including the Shopify integration. We also utilized $3.7 million in cash during the first nine months of fiscal 2026 relating to the closing of the LoveBiome transaction. Turning to capital allocation, we repurchased 206 thousand shares for an aggregate purchase price of $1.0 million during the quarter. During the first nine months of fiscal 2026, we have repurchased approximately 250 thousand shares for an aggregate purchase price of $1.6 million. As of March 31, there was $59 million remaining under the new $60 million share repurchase authorization approved by our Board of Directors in January. Today, we also announced a quarterly cash dividend of $0.05 per share of common stock, which represents an 11% increase to the previous dividend amount. This dividend will be paid on 06/15/2026 to shareholders of record as of 06/01/2026. We remain committed to our balanced capital allocation strategy in order to maximize shareholder value. Turning to our outlook for fiscal 2026, we now expect to end fiscal 2026 with revenue, adjusted EBITDA, and adjusted earnings per share close to the lower end of our previously issued guidance range. This updated guidance reflects the current trends in the business, including the competitive dynamics in the GLP-1 market and our commitment to managing costs while investing in strategic growth initiatives. We remain focused on improving our profitability metrics and driving long-term value for our stockholders. And with that, let me turn the call back over to Michael. Michael Beindorff: Thanks, Carl. Before we get into the Q&A, I have just a couple more comments. We recently made a couple of very important announcements. First, we have been granted a U.S. patent for our Healthy Glow Essentials Stack, which features Protandim NRF2 Synergizer and TruScience Liquid Collagen, further validation of our leadership in scientific innovation. Second, and perhaps more importantly, on April 16, the Board of Directors announced the appointment of Terrence Moorhead as our next Chief Executive Officer. Terrence will join us in August, bringing over thirty years of leadership experience, revitalizing brands, and accelerating growth, particularly in direct selling. During our extensive search, we talked to nearly every CEO, president, and general manager in the direct selling space, and interestingly enough, almost every one of those candidates that we spoke with wanted the job. I think they all saw the potential and the opportunity that LifeVantage Corporation presents. But when we met Terrence, we recognized instantly that he was different. He is a deeply experienced, transformative leader with an outstanding track record that speaks for itself. I am excited about the expertise and the vision that he will bring to LifeVantage Corporation. During the transition period, I am working closely with our executive team, including Kristen Cunningham, our Chief Sales Officer, and Carl, our Chief Financial Officer. This team knows the business inside and out, and I have complete confidence in their ability to execute. Looking forward, our dedication to optimizing health remains absolutely unwavering, as does our commitment to equipping our independent consultants with the resources and the products necessary to build thriving businesses so they can deliver exceptional value to our customers. I want to express my gratitude to our employees, our independent consultants, our shareholders, and most of all, our loyal customers. Finally, to be very clear, we recognize that our performance over the last few quarters has not been up to our standards. On my desk, I keep a plaque that simply reads, “The world belongs to the discontented.” Well, let me assure you that we are not content, and I pledge to work tirelessly with this team on behalf of all of our stakeholders to improve the results. There is much to do. I am certain that the solid groundwork we have laid and the talented team we have will pay dividends in the quarters and the years ahead. Thank you for your confidence and your support of our mission. We will now open the call for questions. Operator: We will now be conducting a question-and-answer session. If you would like to ask a question, please press the appropriate key. Our first question is from Doug Lane from Water Tower Research. Please go ahead. Doug Lane: Yes. Thanks. Good afternoon, everybody. Carl, looking at the cash flow, you mentioned $5.5 million cash from operations generated this year, but the $5 million came in the March quarter despite the shortfall versus what we were looking for. I do not know. You do not really talk to this in your guidance, but there is nothing going on in the fourth quarter that would not make you think you could be positive in cash from operations, is there? Carl Aure: No, that is right, Doug. In the recent quarter, we generated about $5 million of cash from operations, and we anticipate doing a similar amount in Q4 as well. We anticipate continuing to build cash. I think we talked at the last call about some unusual timing differences in the first quarter that led to some of those declines or unusual quarter comparisons we saw earlier in the year. So going forward, we anticipate continuing to generate cash based off of the current model. Doug Lane: Okay. That is helpful. And then, looking at your CapEx, about $1 million in the March quarter. I know you talked about investments, Shopify, what have you. But is that $1 million-per-quarter run rate kind of steady state here? Is there something coming down the pipe that might divert that up or down? Carl Aure: I think that will be consistent for the next quarter or two. We are getting closer on the implementation of Shopify. We are targeting to get things in place probably not by the end of Q4, but rolling into Q1, and there will be a staggered approach as we roll it out internationally. We will continue to see some of those development costs, particularly in Q4, and probably start to reduce once we get into Q1 of next fiscal year, and after that, they should really start to eliminate. Unknown Speaker: Pardon me? Doug Lane: With the December quarter release, you announced the $60 million share buyback, and I just wanted to see if you could update us on what your thought is there. It looks like you did not buy back much in March, but what should we look for for share buybacks for the next few quarters? Carl Aure: We are still very committed to the share buyback. I think that was evidenced by the board's approval of the new $60 million authorization. During the quarter, we repurchased about $1 million worth—just a little over 200 thousand shares that we repurchased in the quarter. And I still think, where current valuations are at, we are still committed to this and will be looking to opportunistically buy over the next few quarters as market conditions permit. Doug Lane: Okay. And getting back to the lower sales, the consultant count was a little bit below what I was looking for. In the Americas in particular, it dropped a couple thousand sequentially from 32,000 to 30,000. So what do you think is driving the shortfall in consultants in the Americas, which is your biggest market? And what are you doing to try to get that number going the other way? Kristen Cunningham: Hi, Doug. It is Kristen. Definitely not a number we are excited about, but what has us all really excited, myself included, is the engagement that we are starting to see and the activity that we are starting to see. For us, it is how do we reinforce that consultant group with a foundational approach versus creating just a pop-and-drop to drive sales. We are seeing a lot of simplification around the business, which, as you know, is harder to do than anything. But we are seeing consultants going back to the foundation of their own business. They are excited about Protandim, about Collagen, about Healthy Glow, about our recent announcement that we made about it. Those are our stickiest products, so we are feeling good about that. Our incentive programs—oftentimes when you launch an incentive program, it can be complicated—but we have really tried to create a program that is simplified and complements what we are doing strategically. The message, as you heard us talk about, is about how do we get more storytellers—more consultants talking about LifeVantage Corporation—and our intent is to complement that. Plus, when we layer that with our VIP program, which is about identifying the right leaders, you can have the right everything in a business, but with the wrong leadership and the wrong sentiment in the field, it is really challenging to turn that. We are confident in our leadership right now, and we are addressing that through this VIP program where we are incentivizing growth, but we also asked it to be an opt-in. We did not just say this is available to everybody in the U.S.; they had to raise their hand and say, “We are part of the leadership team committed to growth.” We are seeing so much activity because of those three things combined. We are really encouraged about what we saw coming out of Vegas and staying consistent with that over the past couple weeks, and we will continue to drive it day in and day out. Doug Lane: Those are helpful. The VIP bonus sounds very exciting. I guess the last thing is really new product. You have had the P84 that you acquired from LoveBiome, and you had the HealthyEdge stack. What do you have on tap for new product news for the remainder of the calendar year? Carl Aure: I can speak to that a little bit, Doug. We have our next big event—our annual convention—slated for October of this year. In some of the previous calls and investor-related discussions we have had, we talked about a product launch at that event. Our typical cadence for launching a hero product is every eighteen months to two years, and as you know, the last major launch we had was MINDBODY, which was about two years ago. We did add the LoveBiome line that you mentioned. We do have something in the works. We have not talked a lot about exactly what category that falls into, but it will be in line with the typical LifeVantage Corporation science-backed product, and it is something we are really excited about going forward. Doug Lane: Most of your recent news has really been around gut health between MINDBODY and P84. Are we going deeper in gut health, or is there something new on the horizon? Carl Aure: I think this category is not necessarily in gut health itself. We still believe in that P84 product and the LoveBiome business that we acquired in October, so gut health is still an important part of our product portfolio. Looking forward, we have some other complementary products that we will be introducing to support P84, but P84 is still one of our four hero product lines and something that we will continue to lean into. Doug Lane: Okay. Thanks, Carl. Carl Aure: Yep. Thanks, Doug. Operator: This concludes the question-and-answer session. I would like to turn the floor back over to Michael Beindorff for closing comments. Michael Beindorff: I want to thank all of you again for joining us today. We know that we have a lot of work to do. That said, we are optimistic. I believe we have the people and the products, and we are absolutely focused on delivering improved results for our shareholders. I look forward to reporting our progress on all of these initiatives in August, and I thank you for joining us today. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good afternoon and welcome to Occidental Petroleum Corporation's First Quarter 2026 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, we will now open the call for questions. To ask a question, you may press star then 1 on your touch tone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Unknown Speaker, Vice President of Investor Relations. Please go ahead. Unknown Speaker: Thank you for participating in Occidental Petroleum Corporation's first quarter 2026 earnings conference call. On the call with us today are Vicki Hollub, President and Chief Executive Officer; Sunil Mathew, Senior Vice President and Chief Financial Officer; Richard Jackson, Senior Vice President and Chief Operating Officer; and Kenneth Dillon, Senior Vice President and President, International Oil and Gas Operations. This afternoon, we will refer to slides available on the investor section of our website. The presentation includes a cautionary statement on Slide 2 regarding forward-looking statements that will be made on the call this afternoon. We will also reference a few non-GAAP financial measures today. Reconciliations to the nearest corresponding GAAP measure can be found in the schedules to our earnings release and on our website. I will now turn the call over to Vicki. Vicki Hollub: Thank you, and good afternoon, everyone. I want to take a moment to acknowledge the ongoing challenges and uncertainty in the Middle East. First and foremost, I want to thank our frontline employees in the region for their professionalism and focus under very difficult conditions. Their safety remains our top priority, and, thankfully, our teams continue to operate safely with no adverse impacts to our personnel. I also want to recognize the continued support of our partners and host governments in the UAE, Oman, and Qatar. Their collaboration and shared focus on safety and asset integrity remain critical as conditions continue to evolve. Recent developments have driven sharp price movements and increased volatility across global markets. These dynamics underscore how quickly supply expectations and trade flows can change, and why reliability, resilience, and financial strength matter. While volatility can influence near-term price, long-term value is created by companies that execute consistently across cycles while protecting their people and assets. During this period, Occidental Petroleum Corporation executed as we planned. More importantly, we demonstrated that the strategy we have built over more than a decade can perform well through disruption. Over the past ten years, we have fundamentally transformed Occidental Petroleum Corporation's portfolio to emphasize quality, balance, and durability. From the beginning, we operated with clear conviction that the world will continue to need oil for decades to come and that the Permian would play a critical role in meeting that demand. That conviction shaped a strategy grounded in subsurface capability and operational excellence to lower full-cycle cost across the portfolio. As we sharpened that focus, we exited noncore assets and redirected capital to competitive positions where our technical capabilities could create the greatest value. We invested consistently in our people, knowing that subsurface expertise and disciplined execution would be key differentiators for Occidental Petroleum Corporation over the long term. As part of that deliberate work, we shifted to a substantially more domestic portfolio. Today, 83% of our current production and 88% of our total oil and gas resources are in the United States, concentrating our operations in a more stable operating environment. Recent global events reinforce the importance of those decisions. Through this transformation, we built both scale and depth. Since 2015, we more than doubled production, going from 150 thousand BOE per day to over 1.4 million BOE per day. We also more than doubled our reserves and resources, increasing reserves from 2.2 billion BOE to 4.6 billion BOE and total resources from 8 billion BOE to approximately 16.5 billion BOE. These resources are high quality and low cost, with a runway of more than 30 years. At the same time, we diversified and balanced our mix of assets in the portfolio, with roughly half of our resources in short-cycle, unconventional assets and the other half anchored in lower-decline assets across EOR, the Gulf Of America, Oman, Abu Dhabi, and Algeria. This balance positions us to reduce our base decline to below 20% by the end of the decade and support lower sustaining capital over time. Subsurface and technical excellence have also been core to our success. Over the past decade, we have invested in data acquisition, reservoir characterization, and development design to build a superior understanding of the subsurface. This enables us to optimize development plans by basin, section, and formation rather than rely on a one-size-fits-all approach. Our teams have delivered, and the data backs it up. Quarter after quarter, we have achieved industry-leading unconventional well performance across every basin in which we operate. Since 2016, we have maintained a reserve replacement ratio above 100%. This capability continues to expand and improve our resource base, unlocking new opportunities across EOR, the Gulf Of America, and our international assets. Looking ahead, this capability will only get stronger as we combine our data and technical foundation with advanced analytics and AI to further optimize development and performance. Today, with the portfolio, resource base, and capabilities we have built, Occidental Petroleum Corporation is positioned to deliver even greater value for decades to come. In the first quarter of this year, we remained disciplined in our capital allocation, maintaining a steady development program aligned with our 2026 plan. And we continued to prioritize balance sheet strength to preserve flexibility and support sustainable shareholder returns. Our first quarter results reflect that progress. Now I want to take a minute to reflect on the leadership succession plan we announced last week. As I am sure you saw, I will be retiring as President and CEO of Occidental Petroleum Corporation on June 1, and with the approval of the Board of Directors, Richard Jackson will succeed me as President and CEO. I will continue to serve on Occidental Petroleum Corporation's Board, and Richard will join the Board as well on June 1. I have worked with Richard for almost 20 years and have always been impressed with his drive for excellence, integrity, and ethics. He brings deep experience across our business and a strong track record of execution, making him a great choice for the next phase of our strategy, which includes the development of our extensive portfolio. The Board and I have full confidence in his leadership as he carries forward the strong performance and foundation we have built at Occidental Petroleum Corporation. As Occidental Petroleum Corporation enters this next phase, I also have great confidence in our innovative leadership team and our employees who will continue to excel at what we do best, and that is oil and gas development and operations. This is our forte. Occidental Petroleum Corporation's future is in excellent hands. With that, I will now turn the call over to Richard to discuss our forward trajectory in more detail. Richard Jackson: Thank you, Vicki. I appreciate being able to speak with you all today, and I am grateful for the opportunity in front of us at Occidental Petroleum Corporation. It is a privilege to be part of our team, and I am looking forward to my new role to help support and drive value delivery. I want to start by acknowledging the strong foundation that Vicki's leadership has built over the last decade. It has been a remarkable transformation of resources and capability across Occidental Petroleum Corporation. Her vision of transformation combined with a strong drive to deliver has positioned us where we are today. More personally, all of us at Occidental Petroleum Corporation recognize and appreciate the impact Vicki has had on our team and on each of us individually. Her passion to develop our team and her people-first approach is something that will endure and shape how we grow together in the future. As we look forward, our focus now is on execution and delivery. As Vicki noted, we have a 30-plus year resource base that is high quality, right-sized, and balanced. We believe each of these are important to help drive our results across any cycle. We are operating from a well-understood resource position with significant value upside and are now set for organic development to achieve our objectives. Our focus starts with continuing to improve our advantaged resource base through sustained improvements in new well performance and base production. Today, we are a leader in U.S. unconventional well performance where much of our future resource development will occur. In 2025, we were top tier in every basin where we operate, delivering at least 10% better new well performance than industry average on a six-month oil-per-lateral-foot basis. We continue to see opportunity for further new well performance improvement across our global assets. Base production is also a key contributor to our results, where we have improved uptime in all operating areas. I want to give special recognition to our Gulf Of America team whose focus on maintenance and platform reliability has led to strong base production performance, with a record topside uptime of 98% in Q1. Beyond well performance, we will continue to improve our resources through advanced recovery across four differentiated capabilities: U.S. unconventional secondary bench development; expansion of EOR across the portfolio; low-cost development and waterflood projects in the Gulf Of America; and a focused exploration strategy in both our Gulf Of America and our international operating areas. These are all areas where our subsurface capabilities and approach are delivering results and where we have significant opportunities to unlock more value. Another key focus will be continuing to deliver cost efficiencies. Since 2023, we have delivered $2 billion in annual cost savings through operational efficiencies. And in 2026, we are on track for an additional $500 million in oil and gas cost savings across new well and facility costs, operating costs, and transportation. Looking ahead in the near term, we see a clear path to grow free cash flow and value at any price, with significant upside opportunities. Our value improvement starts with executing from a strong balance sheet, continuing to organically improve our resources, and further driving cost efficiencies. 2026 is an important first step as we are targeting more than $1.2 billion of incremental free cash flow relative to 2025 before the positive impacts of higher prices. As a next step, we are developing plans to deliver significant additional cash flow by 2029 through continued oil and gas cost efficiency and lower decline rates, improvements from midstream and LCV, and lower corporate costs driven from lower debt interest and workforce efficiency. Our forward plan gives us a clear pathway to grow value through any cycle. At lower prices, we will be able to sustain production and grow the dividend. At higher prices, we have the opportunity to further accelerate value by adding measured reinvestment and share repurchases aligned with our disciplined cash flow priorities. We will also remain leveraged to higher oil prices, enabling us to generate substantial incremental cash during these times. Simply put, advantaged resources, lower cost, and lower decline rates drive lower sustaining capital and durable free cash flow to grow value in any cycle. Now let me turn to our first quarter results and progress. In our Middle East operations, our core focus has been on the safety of our people and operations. We want to thank our teams and partners as we continue to work through the events in the region. Sunil will talk through these impacts as he covers guidance for the second quarter and total year. We exceeded the high end of guidance in both our Oil & Gas and Midstream & Marketing segments in the first quarter. We delivered 1.426 million BOE per day production, a 21 thousand BOE per day beat against the midpoint of guidance, largely driven by strong new well performance and uptime across our domestic portfolio. We also made strong progress on our U.S. onshore oil and gas cost savings this quarter, where we are delivering top-tier capital efficiency. We are building on the successful improvements we have made over the last few years, and we are on track to deliver approximately 7% new well cost improvement in our 2026 plan. Additionally, last month, we announced the Bandit discovery in the Gulf Of America. This is the third Gulf Of America exploration discovery we have had in the last three years, highlighting our subsurface capability and the success of our infrastructure-adjacent, capital-efficient exploration approach. I also want to provide an update on Stratos. The construction of Phase 2 is now complete. This is the second 250 thousand tons per year of capacity and includes the final two air contactor trains and updated pellet reactors based on the new design. We also completed commissioning of the Phase 1 unit operations, which includes operating air contactors and the central processing facility. During commissioning, the technology and process unit operations performed as expected. After these Phase 1 commissioning activities, we identified an issue related to non-process components of the facility unrelated to the technology. We are currently evaluating the repair timeline and assessing the impact on the operation schedule and will provide an update next quarter. While still early in our assessment for repair, we do not expect this to impact capital range for the year. I want to close again by thanking Vicki for her leadership and commitment to Occidental Petroleum Corporation. Many of us have grown and developed together over the years, and the team and capability we have built is one of the strengths I am most proud to be a part of. We have made important progress, but we also recognize there is more to do. Our focus will be on consistent execution of our priorities to deliver enhanced, durable value for our shareholders, employees, and partners. I will now turn the call over to Sunil to review the financials. Sunil Mathew: Thank you, Richard. In the first quarter of 2026, we generated adjusted earnings of $1.06 per diluted share, and reported earnings of $3.13 per diluted share. The difference was largely driven by the gain on the OxyChem sale, partially offset by the impact of derivative losses and early debt retirement premiums. Strong operational execution along with higher commodity prices enabled us to generate approximately $1.7 billion of free cash flow before working capital in the first quarter, and we exited the quarter with more than $3.8 billion of unrestricted cash. Even with oil prices roughly in line with 2025, we generated approximately 52% higher free cash flow from continuing operations, demonstrating our continued focus on cost and operational efficiency. We had higher first-quarter working capital use driven primarily by higher receivables associated with stronger oil prices in March. This was in addition to normal first-quarter items, including semiannual interest payments, annual property taxes, and compensation plan payments. As Vicki and Richard highlighted, our Oil & Gas and Midstream segments delivered exceptional results and exceeded our original expectations. Our production averaged 1.43 million BOE per day in the quarter, exceeding the high end of guidance. Strong base and new well performance in the Permian and Rockies, along with strong uptime in the Gulf Of America, drove domestic outperformance, exceeding the midpoint of guidance by 33 thousand BOE per day. This was partially offset by lower international production due to Middle East disruptions and PSC impacts due to higher oil prices. We also continue to deliver on our cost efficiency targets. Domestic lease operating expense outperformed at $7.85 per BOE, a 5% improvement compared to our first quarter guidance, due to maintenance schedule optimization in the Gulf Of America and higher production. Our Midstream segment outperformed in the first quarter, generating positive earnings on an adjusted basis of approximately $400 million above the midpoint of guidance. This was driven by gas marketing optimization and higher sulfur prices at Alosund, partially offset by lower sulfur sales. We also benefited from higher crude marketing margins due to timing impacts of cargo sales and fluctuations in commodity prices, which are offset in mark-to-market. While the duration of these impacts remains uncertain, our performance highlights the ability of our Midstream business to capture value during periods of volatility. We have continued to make significant progress on our deleveraging. We reduced principal debt below the $14.3 billion level announced on our last call, and today, our principal debt stands at $13.3 billion. This brings a go-forward run rate on interest payments to $845 million per year, which is approximately $550 million lower than our interest payment in 2025. This progress reflects the strength and durability of our free cash flow and our continued commitment to disciplined capital allocation. Our near-term cash flow priority is to reduce principal debt to $10 billion. Reaching this milestone will further strengthen the balance sheet and enhance our financial flexibility across cycles. As discussed on our fourth quarter call, near-term debt maturities remain low, with $450 million due through 2029. This provides meaningful support through periods of market volatility. In the current environment, higher oil prices are generating incremental cash flow that continues to support this deleveraging path. After we achieve the $10 billion principal debt milestone, we will reassess our cash flow priorities based on the macro environment, including the appropriate balance between building cash on the balance sheet ahead of preferred equity redemption in August 2029, additional principal debt reduction, and opportunistic share repurchases. Any increase in reinvestment would be driven by clear macro conditions and supported by continued cost and operating efficiency. Until these conditions are met, we intend to remain disciplined and balanced in how we deploy incremental cash flow. We are well positioned to increase reinvestment from a highly advantaged resource base at the appropriate time. Let me briefly comment on hedging. We have not historically been active in hedging as we believe we create shareholder value over the long term by maintaining exposure to commodity prices. That said, we have selectively hedged under specific circumstances. In February, prior to the conflict escalation in the Middle East, we put in place a modest amount of oil hedges using costless collars. At that time, we saw increased downside oil price risk and an opportunity to take measured action to preserve operational momentum and support our 2026 capital plan with a steady development program and without using the balance sheet. We hedged 100 thousand barrels of oil per day from March through December 2026 with a floor of $55 WTI and a volume-weighted average ceiling of approximately $76 WTI. This was primarily an operational decision and not a change in our hedging strategy. As volatility increased and prices moved higher, we stopped adding new hedges and do not intend to do more. Looking ahead to the second quarter, we expect performance to remain strong, reflecting disciplined execution and durable efficiency gains across our domestic portfolio. Our forward outlook incorporates a few discrete impacts driven primarily by two factors. First, in the Middle East, modest operational constraints at Alosan are expected to impact volumes. These began in mid-March and are anticipated to normalize before the end of the second quarter. In addition, higher prices under PSC terms will result in lower net production. Second, we executed transactions to further optimize our EOR portfolio, increasing working interest in our core operated floods while divesting scattered noncore fields and associated facilities. While this lowers our EOR production modestly, these actions are free cash flow accretive, shifting the portfolio toward higher-margin, oilier production and meaningfully lower operating costs. Overall, this improves both the quality and durability of our EOR asset base. Strong U.S. onshore execution is expected to partially offset the impact of our EOR portfolio optimization. In the Permian, unconventional production is expected to increase in the second quarter, supported by higher activity and resilient base performance. In the Rockies, second quarter volumes are expected to be roughly flat excluding prior-period adjustments. In the Gulf Of America, second quarter volumes are expected to decline modestly, reflecting planned facility maintenance and the beginning of tropical weather season. As a result of the Middle East disruptions and strategic EOR actions, we are adjusting the midpoint of full-year production guidance to 1.44 million BOE per day. We are maintaining our previous guidance for domestic lease operating expense, as increasing CO2 cost pressure related to higher oil prices is offset by the benefits of the EOR optimization transactions. Turning to Midstream, we expect earnings to remain strong in the second quarter, driven by gas marketing optimization opportunities, given the wide Waha-to-Gulf Coast natural gas spread seen quarter to date. Our guidance assumes impacts to sulfur sales in the quarter due to disruption in logistics from the ongoing Middle East conflict. We expect sales to normalize in the second half of the year, recognizing conditions in the region can change quickly. Given strong performance year to date, we are raising the midpoint of full-year Midstream guidance to $1.1 billion, an increase of approximately $800 million from the full-year guidance provided on our last call. We continue to expect the Waha-to-Gulf Coast spread to narrow later this year as additional pipeline capacity comes online, and we believe we remain well positioned to capture marketing optimization opportunities as they emerge. Capital spending in the first quarter was in line with our 2026 plan, with activity weighted toward the first half of the year. We are maintaining our full-year capital guidance range of $5.5 billion to $5.9 billion, with second quarter capital expected to be higher than the first quarter. Even in a highly dynamic macro environment, our outlook remains strong. Our short-cycle U.S. onshore portfolio continues to be a key competitive advantage, with low breakevens enabling efficient, stable activity while providing significant capital flexibility in extreme price scenarios. We complement our U.S. unconventional onshore investments with selective lower-decline, mid-cycle investments that reduce sustaining capital and strengthen cash flow durability across price environments. Together with continued balance sheet progress and disciplined capital allocation, we are well positioned for the future, delivering strong, consistent operational results, providing resilience through volatility, and the ability to opportunistically return capital. I will now turn the call back to Vicki. Vicki Hollub: Thank you, Sunil. Since becoming CEO in 2016, I have worked with our Board and management team to operate with integrity and discipline, and we have invested in technical capabilities that differentiate Occidental Petroleum Corporation. And we built a portfolio designed to endure. The progress we have made reflects that focus and, above all, the expertise and commitment of our people. I again want to thank our leadership team and our employees throughout the company for their performance over the past ten years. They consistently exceeded my expectations with incredible passion, perseverance, and loyalty. I also want to thank our Board for their strong guidance and support. In addition, I want our owners to know that I very much appreciated your trust and long-term perspective. I found our one-on-one meetings to be very valuable and informative. It has been a privilege to spend my 45-year career at Occidental Petroleum Corporation and to lead this company alongside such talented and dedicated employees. With that, we will be happy to take your questions. As well, Unknown Speaker and Kenneth Dillon will join us today for the Q&A. We will now open the call for questions. Operator: To ask a question, you may 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. To withdraw your question, please press star then 2. Please limit questions to one primary question and one follow-up. If you have further questions, you may reenter the question queue. At this time, we will pause momentarily to assemble our roster. The first question today comes from Doug Leggate with Wolfe Research. Please go ahead. Doug Leggate: Thanks. Good afternoon, I think it is, everybody. Vicki, it has been fun watching you reposition the company. I am sure you are not going to miss us, but we are all going to miss you. So congratulations, and good luck to you. Now, Richard, you are taking the seat, obviously, and I think the obvious question to ask is, if anything, how do you see things for Occidental Petroleum Corporation strategically? I do not know if you are able to give your top priorities, but as CEO what does the strategy look like under Richard Jackson's tenure? I have a follow-up, please. Richard Jackson: Great to be with you, Doug. Appreciate the question. I will start with a couple of perspectives. Near term, there are several things that we are very focused on in terms of delivery, and I think that is a key thing that I will continue to repeat. First, execution of our current program—2026 as we go into 2027—is critical. We came out this year very proud of the program that we put together; I think it really highlights the efficiency that we have in the program and the quality of the resources that we have been talking about. So we certainly want to spend time with our teams making sure that we have those put together with our partners as we extend those opportunities to our global operations. So focusing on near-term execution is critical. The second piece maybe gets a bit more strategic. One thing we have been working on—and we mentioned it in our script—is free cash flow improvement near term. This year was a big step with the free cash flow that we identified, but over the next several years, we feel like there are some very clear drivers that, at any price, will significantly improve our cash flow outlook: continuing cost efficiency; our lower decline of production that is coming forward—having the opportunity this year to invest in things like the Gulf waterfloods and even EOR is significantly contributing to lower decline as we go over the next few years; improvements in our Midstream and LCV; and, of course, debt interest as we continue to make great progress on deleveraging. Being very clear on that free cash flow plan is important, and then that turns into a value plan. For us, it is simple: drive sustainable cash flow up—both free cash flow and cash from operations—and drive our sustaining capital down through lower cost and lower decline. When we do that, we are built to generate significant cash flow at any price. At lower prices, we can continue to grow our dividend; at higher prices, we get the opportunity to further grow our dividend, reinvest in this high-quality resource base, and look at opportunistic share repurchases. We want to be aligned on those plans, articulate the clear drivers, and engage to help our investors understand when and how these improvements show up. The last thing I will say is our people. We have great people, and these are opportunities to work on growth, succession planning, and how we continue to develop. We have been doing quite a bit of work on workforce—whether that is technologies like AI or relooking at our processes and priorities—to make sure we are focused on the delivery I am describing. Those are the big ones that we will be focused on initially. We look forward to delivering in the near term as well. Doug Leggate: Well, congratulations to you as well, Richard. It has been fun watching you evolve as well. My follow-up, if you do not mind: I am looking at Slide 20. Sunil, you talked about getting to the $10 billion principal debt milestone. Obviously, your net debt is sitting a little over $11 billion, at least it was before you paid down the May bonds. But the next line item on Slide 20 says ongoing net debt reduction. I really want to understand what that means. Are you prepared to take this balance sheet to a level that essentially prepositions to redeem the prefs when they come due? That would essentially mean zero net debt. What are you signaling? Thank you. Sunil Mathew: Hi, Doug. Just to put things in context, let me first walk through the progress we have made with respect to deleveraging in the last six months. At the end of Q3 last year, our principal debt was approximately $20.8 billion, and since December, we have paid down $7.5 billion. Today, principal debt is $13.3 billion, which is below the target we set in Q4 last year of $14.3 billion. We want to further strengthen our balance sheet, so near-term focus in terms of cash flow priority is to reduce principal debt to $10 billion. Once we get to the $10 billion of principal debt, we will reassess based on the macro, and we have multiple options. One is build cash on the balance sheet to redeem the preferred in August 2029, when we can redeem the preferred without the $4 per share return of capital trigger. Like you mentioned, that is the option of reducing net debt and being ready to redeem the preferred in August 2029. The other option is reduce principal debt beyond $10 billion. And the third is opportunistic share repurchases if there is a major dislocation between share price and oil price. We do not have a specific net debt target; ultimately, it is going to depend on the macro, and we will take the appropriate action at that point based on what we believe maximizes shareholder value. As we also think about potential reinvestment opportunities—once we have clarity on the macro and supported by continued cost and operating efficiency—that is something we would consider because of the portfolio that we have and our operational performance. The last thing I want to highlight is what Richard mentioned about having a sustainable and growing dividend even at low oil price. In 2029, after we have redeemed the preferred—and even if you were to assume no principal debt reduction after $10 billion—the cash flow improvement between preferred dividend and interest payment will be approximately $1.2 billion better compared to 2025. Our current common dividend payment is approximately $1 billion. That implies a significant opportunity to have a sustainable and growing dividend even at lower oil prices. Operator: The next question comes from Nitin Kumar with Mizuho. Please go ahead. Nitin Kumar: Hi. Good afternoon, everyone. Vicki, first of all, congratulations on the milestone, and thanks for your support over the years. Richard, you have been very clear about this new $10 billion target—that is the first priority. A lot of your peers have formulaic return-of-cash programs in place. You are still talking about opportunistic buybacks. What is the hesitation in adopting something like that? Is it because you feel the macro is too volatile, or are there any other reasons for not adopting something like that? Richard Jackson: Thank you for that. You are right—we have preferred not to have a formula-based approach to our returns. For us, the cash flow priorities lay out how we think about, and then—as I walked through—the value proposition of how we turn what we do into shareholder value. Having flexibility through uncertainties has given us advantages to be able to move and do that. What does not change are the fundamentals of driving the cost efficiency into our program. If you think about how we create additional cash—capital efficiency, lower operating expense, and lower decline—that is where we are fundamentally focused. In terms of our cash flow priorities, bigger picture, dividend—as Sunil mentioned—is where we go. If we think about share repurchases, we do want to be able to create those opportunities, but as we look to the future, especially as we build an even stronger balance sheet, continuing share repurchases through the cycles gives us opportunity and it even helps our dividend growth as we are able to do that on a consistent basis. So, for us, a lot of what we do focuses on the opportunity to grow the dividend as we put these pieces together. Nitin Kumar: Thank you for that clarity. And then just, you talked about discipline and maybe staying the course on at least 2026 and not chasing growth. One of your peers talked about increased nonoperated activity in the Delaware Basin. Anything that you are seeing on the ground—you have a big position and a big operation there—in terms of others chasing growth? Richard Jackson: I think we are managing that. That was one of the uncertainties we had early in terms of our capital range for the year. Our teams have been continuing to work that and have not seen anything that has put us out of our plan. The teams have done, even after the EOR optimization that we talked about, strong work—the core components of our production were strong, with over 9 thousand barrels per day on the total year that we improved. In the Permian, we are growing; Gulf Of America, we are growing. As we have been able to think through the current price environment, within our plan and within our spend, we are seeing time-to-market optimization. We are seeing opportunities in our operating expense categories, both in Gulf Of America and EOR, to accelerate. These have been the controllables that we have been really focused on—staying within plan for the year. Operator: The next question comes from Arun Jayaram with JPMorgan. Please go ahead. Arun Jayaram: Vicki, I also wanted to express my best to you as you move into the next chapter. And Richard, congratulations to you as well. My question is: you are targeting principal debt to reach a $10 billion number this year, given the improvement in strip pricing. How are you thinking about capital allocation post reaching this objective? Richard, you mentioned the potential to shift into some measured reinvestment to deliver a modicum of growth. Walk us through how that pivot into a little bit more reinvestment could look like for Occidental Petroleum Corporation. Is this a 2026 opportunity or more longer dated? And talk to us about between short cycle and long cycle where your thought process is. Richard Jackson: Appreciate that. This year, we know delivery is critical—it always is—but we really wanted to demonstrate the capital efficiency that we have in the program, and certainly the milestone of $10 billion and what we are able to deliver this year is helping. For reinvestment conditions, a few things: the macro being more clear is important. Obviously, the dollar we spend today does not turn into production—or at least peak production—until next year. The efficiencies that we are delivering this year are largely built on what I call development efficiencies—more wells per pad, longer laterals, more simul-frac. These take integrated development planning to put together. While we are always looking to improve the program and optimize, these are things that are more difficult to change without impacting that efficiency, so clear macro support before we add is important. Decline rate is another. We like what we are doing this year in terms of investment into EOR and the Gulf waterfloods. Being able to go from mid‑20s toward 20% or less over the next few years in terms of decline rate reduces our sustaining capital by hundreds of millions of dollars, which gives us more headroom for return of capital. At low prices, that is important to establish. When we do feel like reinvestment comes, we want to provide clear outcomes—returns, cash flow timing, decline rate. We want to demonstrate that everything we do improves the value proposition we talk about. When I say measured, it is taking that approach. With that said, we have an amazing resource base, very balanced, and we have the opportunity to accelerate value over the long term whether we are sustaining or growing production. Getting that balance right between short-cycle and mid-cycle is really important. Sunil Mathew: I just want to add, in the last quarter we mentioned that for 2027, you can use $5.9 billion as a starting point for sustaining capital. The assumptions behind that $5.9 billion were: U.S. onshore capital assumed to be flat compared to this year, with growth largely driven by capital efficiency—like what we have been demonstrating for the last few years—and the balance between unconventional and conventional to manage base decline and reduce sustaining capital. In Gulf Of America next year, related to the on‑mountain waterflood projects, we will be drilling two injectors, so you will see some increase in Gulf Of America next year. Exploration—we typically participate in three wells with around 30% working interest. This year, we reduced exploration activity, so that might go back to on average around $150 million, which is what we have done over the last few years. And then you have the roll-off of the LCV capital. So $5.9 billion would be a starting point in terms of sustaining capital. Any increase in reinvestment is largely going to be driven by the macro, but we are well positioned to do it at the appropriate time. Arun Jayaram: That is super clear. For my follow-up: service companies are talking about pushing some price on rigs, frac, and consumables. You reiterated your CapEx range at $5.5 to $5.9 billion for the full year. Can you talk about these inflationary pressures, and does it change where you expect to land within that range? Richard Jackson: I will start, but invite Kenneth to add. Our approximately 7% new well cost improvement is largely driven by efficiencies today. We have seen some ups and downs in pricing but are largely holding flat. We work closely with our service partners on performance—addressing their needs in terms of utilization or pricing while ensuring our performance is delivered. We are more levered to the cost of the well, so we have worked with them to continue to drive our cost down. Diesel and other items are playing a role, but not a major role. We do not see inflation impacting our range, and our cost improvement is intact through efficiencies. Kenneth? Kenneth Dillon: Middle East supply chain has been a huge success during this period. Everyone has worked really well, so we have not had any shortages in production due to material deliveries or costs. All of our vendors have really stuck with us. We have seen increases in some areas offset by others. We still see vendors really interested in market share as opposed to individual line-item wins. Given our scale and mass in each of our locations, that is paying off for us, especially as we concentrate activities on one pad. Utilization becomes really clear for the vendors. Overall, a very good story by supply chain. Operator: The next question comes from Analyst with Barclays. Please go ahead. Analyst: Hi, team. I want to share my congratulations to Vicki and Richard as well. My first question is a bigger picture one. Your Slide 3 really laid out what Occidental Petroleum Corporation was focused on in the last ten years versus where the next ten years could look like. You already have built the foundation for the portfolio today. Where do you think is the biggest opportunity to extract value from the current portfolio from here in the next phase—this execution phase? The free cash flow expansion we can clearly see, but where are you most excited—whether that is the resource expansion or from the cost efficiency side? Richard Jackson: Great question. There is a lot to be excited about. Our advanced recovery—whether in the Gulf Of America with waterfloods, CO2 EOR, our conventional opportunities, and now our unconventional even internationally—will be a distinct advantage over the next ten years. This has been building for some time. It translates to lower sustaining capital and more value for our shareholders. Operational excellence continues—we have a great team that understands how to put things together not only for CapEx but also operating expense and base production. One of the best things we demonstrated over the last year was production uptime in the base. Workforce efficiency is another—being innovative and deploying technology. AI is taking on a larger role across all disciplines. Partnership does not change—we have done a great job internationally creating win-wins, like our exploration program. Oman is a great example of how we are different in exploration: taking more difficult new reservoirs and growing them to scale near existing facilities. All of these come together to drive the value proposition, starting with the resource—we are in an outstanding position today. Analyst: That sounds great. Maybe digging a bit more into the base optimization—I appreciate the focus on mitigating decline. Can we get an update on the unconventional EOR projects? What do you need to see to scale these projects, and what are some of the limiting factors longer term? Richard Jackson: We have the three commercial projects that we talked about starting. Most of this year is getting early construction and long-lead items moving—mainly compression. Those are expected online in 2028. We have continued demo work, including in the Midland Basin around Barnett—we are happy about our primary production and now excited about CO2 EOR there, seeing very good results on our first cycle. Proof points continue on CO2 EOR. Another item in EOR: we have had success with some sidetracks in San Andres on the Central Basin Platform edge and in the Platform. We optimized the program to actually add production this year. One advantage of the EOR divestment and acquisition optimization is concentrating our working interest where these opportunities lie. Today, EOR is about 100 thousand barrels per day. We are concentrated with the right low-cost structure and advantages to take into both our conventional and unconventional assets. Operator: The next question comes from Neil Singhvi Mehta with Goldman Sachs. Please go ahead. Neil Singhvi Mehta: Congratulations, Vicki, and congratulations, Rich, as well. Maybe, Vicki, give you an opportunity to share your perspective. The last ten years have been very volatile for the energy sector. Any perspective on the decade ahead—what leaves you optimistic, and what are the biggest concerns that we as an investment community should be spending time on? Vicki Hollub: Volatility is going to be with us forever. It has always been volatile and will continue to be. It seems more volatile now because we see the numbers as they change daily. A lot of things have happened in the history of our industry—going back to the Suez Crisis, Yom Kippur, Iranian Revolution, Iran-Iraq war, price wars, and more. When oil prices changed dramatically in real terms was around the PDVSA strike in Venezuela, the Iraq war, Asian growth, and a weaker dollar—that is when WTI prices started being driven up. Through all the volatility, some things are consistent. From January 1974 to today, WTI averaged $76.32 in real prices. If you look at this century—from 2001 to now—the average real price was $81.67. If you take out the nine years in this century that prices were above $100, that still takes prices to a healthy level at $66.76. We tend to remember the bad prices and times versus when things were okay, and that is why we built our portfolio to last through cycles and be able to create value for our shareholders now and going forward. Two big things are important. First, pricing—I think if you are built to last and make it with cash flow generation through the cycles and a dividend that you can support in years when prices are lower, you must be prepared to pay the dividend through cycles. Second, in the U.S., we expect that between 2027 and 2030, the U.S. is going to hit a plateau; production will then start to decline. Where we sit today is with a better inventory than any company with respect to our U.S. base. We will be prepared in the U.S. to help offset that decline because we not only have great assets in the United States, we have the ability—as Richard described—to apply EOR to get more oil out of the reservoirs we have, and we will do that internationally as well. Internationally, we are in places where we have great relationships with the government—Oman, Abu Dhabi, and Algeria. Now that resources are becoming a real issue for some companies—because 80% of the current oil reserves in the world are held by NOCs or governments—trying to get reserves if you do not have a strong and large inventory today is getting more challenging. Going to international locations where we decided, as part of this transformation, not to go to may offer better contracts in bad places, but that usually does not end with a better result. We believe that for decades to come, oil is going to be needed, and peak supply will occur before peak demand—not just for the United States, but for the world. We are perfectly positioned with where we are today—the capabilities and the portfolio—to help address that. Neil Singhvi Mehta: Really great perspective, Vicki. The follow-up: you are now long inventory through M&A and good reserve replacement, so the probability of needing to do large M&A is diminished. Richard, I would love your perspective as well. Is that the view the leadership team shares—really an organic story? Vicki Hollub: We did not go through what we went through to build this portfolio to let it sit there for 30 years. Richard, to you. We are very focused on organic development. Richard Jackson: What has been done has put us in an outstanding place. Our responsibility now is to extract value from it. We are laser-focused on the fundamentals—capital efficiency, operating efficiency, and subsurface work. There will be opportunities around assets to continue to improve—trades and other things—but we could not be more excited about the balance and what I like to call the right-sized resource base that we have. We work to deliver the most value. We look at a lot of scenarios—we are put together to deliver the most value. That is clearly what we are focused on. We are excited to do that and appreciative of what we have to work with. Vicki Hollub: Thank you, Neil, for the question and helping us to clarify that. And with that, we are done with the Q&A. Thank you all for joining us and for your questions, and have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, and welcome to the Flowco Holdings, Inc.'s First Quarter 2026 Earnings Call. Today's call is being recorded and we have allocated 1 hour for prepared remarks and Q&A. At this time, I would like to turn the call over to Andrew Leonpacher, Vice President, Finance, Corporate Development, and Investor Relations at Flowco. Please go ahead. Andrew Leonpacher: Good morning, everyone, and thanks for joining us to discuss Flowco's first quarter results. Before we begin, we would like to remind you that this conference call may include forward-looking statements. These statements, which are subject to various risks, uncertainties and assumptions, could cause our actual results to differ materially from these statements. These risks, uncertainties and assumptions are detailed in this morning's press release as well as our filings with the SEC, which can be found on our website at ir.flowco-inc.com. We undertake no obligation to revise or update any forward-looking statements or information, except as required by law. During our call today, we will also reference certain non-GAAP financial information. We use non-GAAP measures as we believe they more accurately represent the true operational performance and underlying results of our business. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Reconciliations of GAAP to non-GAAP measures can be found in this morning's press release and in our SEC filings. Joining me on the call today are our President and Chief Executive Officer, Joe Bob Edwards; and our Chief Financial Officer, Jon Byers. Following our prepared remarks, we'll open the call for your questions. With that, I'll turn the call over to Joe Bob. Joseph Edwards: Thank you, Andrew. Good morning, everyone, and thank you for joining us today. I'll start today's call with a review of our first quarter performance and key operational highlights, followed by an update on how our recent acquisition of Valiant Artificial Lift Solutions is progressing after we closed the transaction in early March. Jon will then cover our financials, including segment performance and provide additional detail on capital allocation and on the balance sheet. I'll close with our perspective on the current market environment as well as our outlook for the next quarter. Flowco delivered a solid start to 2026 during the first quarter, generating adjusted EBITDA growth and consistent execution across both operating segments. We generated $85.5 million of adjusted EBITDA during the quarter, at the upper end of our guidance range. We sustained our industry-leading margins, driven by the strength of our rental platform and modest sequential improvement in gross margins quarter-over-quarter. During the first quarter, we generated $52 million of free cash flow, enabling us to reduce debt while continuing to return capital to shareholders through dividends and share repurchases. Pro forma for the Valiant transaction, we remain conservatively leveraged with ample liquidity to continue executing on our strategic priorities. Turning to operational performance. Our rental platform continued to build momentum during the quarter. Rental revenues increased approximately 9% sequentially, driven by steady demand across our surface equipment and vapor recovery rental solutions as well as our newly added ESP offering acquired with Valiant. Customers continue to adopt these technologies to maximize production and optimized returns across the life cycle of the well. Spending a moment on each. Within surface equipment and in particular, high-pressure gas lift, we are seeing incremental demand in the early part of the year as operators increasingly deploy this technology to accelerate production in a constructive commodity price environment. Given its high uptime and ability to operate efficiently at elevated GORs, HPGL enables operators to bring on production earlier and sustain higher output, ultimately improving well-level economics. Our vapor recovery units are becoming increasingly ubiquitous in pad development as operators use this capital-efficient solution to capture and monetize gas that would otherwise be vented or flared, thereby turning emissions into incremental revenue with minimal additional investment. Importantly, these captured vapors include not just methane, but also the heavier hydrocarbons that are significantly more valuable, often resulting in gas stream values multiple times higher than dry gas, particularly in the current NGL pricing environment. As announced in March, we completed the acquisition of Valiant Artificial Lift Solutions, a leading pure-play provider of ESP systems with an established Permian Basin presence. This transaction expands our capabilities into the largest addressable segment of the artificial lift market, allowing us to offer ESPs where they are the optimal solution for a given well. Valiant performed slightly ahead of expectations in March and the integration is off to a very strong start. We are encouraged by the early alignment across the organization as we begin to identify incremental opportunities from the combination. Let me highlight 2 early examples. First, the Valiant team is now utilizing Flowco's in-house ESP cable installation capabilities, reducing reliance on third-party providers. Second, we are leveraging insights from ESPs on Valiant's well monitoring platform, Optimus, to better identify follow-on gas lift candidates as wells mature and become better suited for alternative forms of lift. Opportunities like these give me confidence in our ability to drive significant revenue synergies as we integrate Valiant's operations with ours. Across all 3 of these rental-oriented product lines, HPGL, VRU, and ESP, rental revenue is largely contracted and recurring in nature, supporting strong visibility and consistency in our financial profile. As a company, rental revenue represented nearly 60% of total revenue during the quarter. Shifting to product sales. We delivered another solid quarter with sequential growth driven by performance within our downhole components offerings. Within Natural Gas Technologies, we saw consistent demand in vapor recovery sales as well as third-party sales and natural gas systems. Our sales-focused businesses remain a key contributor to free cash flow given their minimal incremental capital requirements quarter-over-quarter. Overall, I'm very pleased with how the team executed during the first quarter. We delivered disciplined results, generated strong levels of free cash flow while returning capital to shareholders. And we successfully closed on the Valiant acquisition. We are very well positioned to build on this momentum as we move through 2026. And with that, I'll turn it over to Jon. Jonathan Byers: Thanks, Joe Bob. Turning to our financials. First quarter performance was at the higher end of our guidance range, driven by ongoing expansion in our high-margin rental business and 1 month of contribution from Valiant. Total revenue increased 6% sequentially to $209 million, primarily driven by growth within Production Solutions. Building on this revenue growth and supported by margins underpinned by our high-return rental model, adjusted EBITDA increased by $2 million quarter-over-quarter. As Joe Bob mentioned, we maintained our industry-leading margins in the quarter, achieving adjusted EBITDA margins of 40.8%, even while absorbing some incremental corporate costs in the quarter, which I'll touch on later. This performance reflects disciplined execution and strong operating leverage as customers continue to recognize the value of our differentiated solutions. In our Production Solutions segment, first quarter revenue increased 10% sequentially to $140 million, while adjusted segment EBITDA increased approximately 7% to $61 million, driven by growth in Surface Equipment and the contribution from the Valiant acquisition. Within the segment, Valiant is now reflected in downhole components as our ESP offering. Adjusted segment EBITDA margins decreased 125 basis points quarter-over-quarter, primarily driven by a revenue mix shift towards downhole components following the inclusion of Valiant. In our Natural Gas Technologies segment, first quarter revenue was consistent with the prior quarter at $69 million, while adjusted segment EBITDA was also in line at approximately $30 million. The segment benefited from growth in vapor recovery rental revenue and increased sale of natural gas systems, which were offset by a modest decline in vapor recovery unit system sales quarter-over-quarter. Turning to corporate costs. First quarter corporate expenses increased to $5.6 million from approximately $4 million in the prior quarter. This increase was driven by incremental filing and legal expenses associated with our S-3 filing on February 4, 2026, and subsequent secondary offering. Costs we do not expect to recur on a regular basis. Looking to the remainder of 2026, we expect corporate expenses to normalize to approximately $5 million per quarter. Overall, consolidated first quarter adjusted EBITDA was $85.5 million, reflecting continued execution and the resilience of our operating model. In the first quarter, we invested $26 million of growth capital, primarily to expand our rental fleet across surface equipment and vapor recovery and our annualized adjusted return on capital employed for the quarter was approximately 18%. Looking to the remainder of 2026, our capital outlook is unchanged from last quarter, supporting meaningful free cash flow generation. We will continue to pace investment alongside customer activity, focusing on high-return opportunities. With a 6-month lead time on our equipment, combined with our vertically integrated manufacturing model, we retain meaningful flexibility to adjust capital deployment as conditions evolve in the current market backdrop. On March 2, we closed the acquisition of Valiant Artificial Lift Solutions for approximately $200 million in total net consideration. Integration is progressing well with teams working closely across the organization to align operations, systems and commercial activities. Looking to the remainder of the year, we remain confident in Valiant's ability to generate approximately $52 million of adjusted EBITDA for the full year 2026, consistent with the expectations we previously outlined. As integration progresses, our focus is on executing a disciplined plan to capture incremental revenue opportunities. And we have the capacity and flexibility to support additional activity as those opportunities develop. Turning to our balance sheet, liquidity, and capital allocation. We ended the quarter in a strong financial position and have continued to build on that momentum. As of May 1, 2026, we had $333 million of borrowings outstanding under our credit facility. With a borrowing base of $722 million, this represents approximately $388 million of available capacity. On a pro forma basis for the Valiant transaction, leverage remains at a conservative level below 1x. Our balance sheet strength and cash flow profile provide flexibility for both reinvestment and shareholder returns. During the quarter, we utilized $16.5 million of cash flow to repurchase 780,000 shares in connection with the secondary offering by selling shareholders. As a related note, our average daily trading volume has more than doubled year-to-date following the secondary offering. And with our increased public ownership, we have emerged from controlled company status. Shifting to the dividend. On May 1, our Board of Directors unanimously approved a 12.5% increase to our cash dividend, raising the first quarter dividend to $0.09 per share. This decision reflects our confidence in our growing and sustainable free cash flow profile, which enables us to execute on our long-term growth plans while also returning capital to shareholders. In conclusion, we delivered a strong quarter with results at the high end of our adjusted EBITDA range. We've entered 2026 with a durable earnings foundation and strong cash flow generation, supported by our positioning within production optimization and a constructive market environment. Back to you, Joe Bob. Joseph Edwards: Thanks, Jon. Let's turn now to the market outlook. Recent geopolitical and military developments in the Middle East have heightened the world's focus on energy security and have reinforced the need for reliable, diversified sources of supply to satisfy energy demand. With the Strait of Hormuz closed and the U.S. Navy blockading Iranian oil exports, industry experts estimate that approximately 10% of global crude oil supply and 20% of global LNG supply is effectively offline. Emergency inventories are being depleted at a rapid rate. Approximately 60 days into this conflict, industry sources estimate that up to 15% of strategic petroleum reserves globally have been consumed to satisfy this supply disruption. And the longer this conflict endures, the tighter the supply chains that rely on this supply will become. Of course, we are all hoping for a swift conclusion to the current situation. But whatever the new normal looks like on the other side of this conflict, we believe the world will increasingly look to North America to produce the most reliable and secure energy to drive economic activity. So with that backdrop, what are we hearing from our customers? As others have reported, we are not seeing material activity increases as of yet. Rather, those with access to short-cycle opportunities to increase production, thereby taking advantage of today's improved pricing environment are selectively pursuing high-return investments. More broadly, though, our customers are increasingly focused on existing production. How do I optimize what I'm currently operating? How do I improve recovery factors? How can I manage my artificial lift system more efficiently to drive more production? Flowco's product and service offerings sit at the epicenter of these conversations. And I would expect us to contribute meaningfully to our customer success over the coming quarters. Against this backdrop, we are forecasting another quarter of profitable growth in the second quarter of 2026 with adjusted EBITDA expected to be in the range of $93 million to $97 million. We will benefit from a full quarter of contribution from Valiant. And we anticipate continued growth across our surface equipment and vapor recovery rental businesses. We remain focused on building our position as a leading provider of production optimization solutions for our customers. The addition of Valiant significantly strengthens our platform. Throughout the balance of 2026, we expect to identify additional revenue synergy opportunities as we integrate our commercial efforts. And of course, we will continue to look for creative and accretive ways to round out our product portfolio as we strive to deliver on our aim to offer our customers the right solution in each well every time. With that, I'll turn it back to the operator for Q&A. Operator: [Operator Instructions] Your first question comes from Derek Podhaizer from Piper Sandler. Derek Podhaizer: So I totally appreciate you're not necessarily seeing material activity increases as of yet. But obviously, we've had a lot of news flow over the last couple of days, players like Diamondback given the green light, Conoco adding another rig. So maybe just if you can help us understand the opportunity set as we work through the year, that call on short-cycle barrels, your ability to optimize production for your big customers. So how do you think about that when you're looking out, especially when we're hearing some of these larger E&Ps, the publics coming back to work along with the privates? Joseph Edwards: Yes, Derek, certainly, you've nailed it. Some of the larger and more nimble companies are starting to get -- to increase activity. And those are green shoots for us. As you know, our production-oriented business will follow incremental rig activity, incremental frac spread deployment. Companies that are accessing their DUC inventory to turn wells in line more aggressively to take advantage of this environment. All that is beneficial for us. So when we say we're not seeing material activity increases as of yet, we're certainly seeing the early days of what we think is sustained higher activity, which will drive business for us. I think it's a back half of the year kind of phenomenon for us and shaping up for a very strong 2027. Derek Podhaizer: And then maybe switching to VRUs. I mean, very interesting comments as far as how the VRU side can also benefit from more of this call on short cycle just given the elevated commodity price, especially NGL versus dry gas. Anything to read into as far as more rentals for VRUs versus more sales? I think that was one of your initial investment thesis where you wanted more of the rental market to pick up versus sales. But is this just an in-quarter phenomenon? Is this just more idiosyncratic to this quarter? How should we think about VRU, the rental versus sales mix as we move through the remainder of the year and into '27? Joseph Edwards: Yes. Listen, on VRU, we are listening to our customers' preferences and through commercial activities on our end. We are incentivizing them to rent more than they buy. But look, certain customers like to have these assets as a permanent installation in their production infrastructure. So if customers would like to buy them and rely on our aftermarket and our technology to help run them as an owned asset on their balance sheet, we'll certainly go that way as well. But we do see incremental demand for more rental units. Customers like the ability to size down the units over time as the pad matures. And so as you know, we've got every size of VRU imaginable. So we can work with customers along the way with rental terms that incentivize them to size these units down over time. But yes, we're seeing incremental rental demand from customers. I think you'll see that reflected in our CapEx estimates for the rest of the year. Operator: Your next question comes from Arun Jayaram from JPMorgan. Arun Jayaram: Joe, I was wondering if you could and Jon could maybe characterize kind of the growth opportunities you see over the balance of the year in natural gas technologies and perhaps compare and contrast that to what you're seeing on the Production Solutions side. Joseph Edwards: Yes, Arun, thanks for the question. I'll start in reverse order on the Production Solutions side. With the acquisition of Valiant, we now are having much more constructive conversations with customers around the right lift solution for the early stage of a well's life as newly completed wells get turned online. There are really only 2 choices that an oil company has. You can produce that well with a high-pressure gas lift system or with an ESP. And we've got both. So I would anticipate to the extent CapEx may be biased to the upside in this environment, I would anticipate those dollars flowing into our highest return investment opportunities, which are high-pressure gas lift and ESP. So I think that's going to be the priority for us is to look for ways to deploy incremental capital there. On the NGT side, mainly our vapor recovery offering, it's steadier. As I just said in Derek's question, we are incentivizing customers to rent more than to buy. And so yes, we'll see incremental demand there, but it's going to be a little steadier, a little later stage. But yes, we're very pleased with the market backdrop setting up for an incremental investment from us throughout the balance of the year. Arun Jayaram: And my follow-up is just your thoughts on scaling your business opportunities within the Valiant assets, ESPs. Jon, you guys reiterated your outlook for, call it, $52 million of annualized EBITDA from there. But Joe Bob did mention that things were trending perhaps a little bit better than you expected in March. But just wanted to talk about the scale because you did mention on the last call that the supply chain is a little bit longer than what you're seeing on the HPGL side. And maybe just an updated thought on CapEx because I think last quarter, you highlighted $115 million of CapEx for the full year. But I don't think you gave us an estimate on CapEx related to Valiant. Joseph Edwards: That's right. That $115 million did not include Valiant. For Valiant, we're expecting around $20 million to $25 million in incremental CapEx over the 10 months that we'll own it in the course of the year. Arun Jayaram: And Jon, just thoughts on scaling that business. Jonathan Byers: Yes. Arun, look, we are very optimistic. And I tried to convey this in our prepared remarks. This is a revenue synergy story. We're seeing some very early, very positive indications that we're going to be able to grow that business with customer overlap. And I'll highlight really 2 key areas there. Valiant's customer base consists of about 30 to 35 customers, Flowco's customer base more broadly consists of over 300 customers. In high-pressure gas lift alone, we work for over 65 individual oil companies. So you can understand the playbook when we say we're going to approach key accounts with a truly agnostic offering, whereas before, we were trying to convince customers for every one of their newly drilled and completed wells to use a high-pressure gas lift system. Now we can go in and actually be more thoughtful about the right solution for that well. So that's sort of point one. And then point two, it can't be emphasized enough. After you have a high-pressure gas lift system or now an ESP in a well for a period of time, call it, anywhere from 1 to 3 years, that well has to be handed over to another form of lift. And now that we have the ESP data that we're collecting every day in our proprietary digital technology that we can monitor remotely well conditions with each of the ESPs that we have in the well. We can get ahead of well handovers, failures that occur when a well gets out of spec for an ESP production. So we can be in a customer's office proactively with a gas lift solution or a plunger lift solution before a well goes down, before that customer goes out for bid on the well for the next phase. So that's a synergy opportunity that I think very few can have. And we're unlocking with the Valiant acquisition and our disciplined integration efforts. Operator: Your next question comes from Phillip Jungwirth from BMO Capital Markets. Phillip Jungwirth: When you talk about rounding out the product portfolio, could this at all involve going deeper into ESPs just given how large a market it is? Or are we more talking about unrelated production optimization areas that you're not currently in? And just the creative comment, was that meant to imply that you could look at avenues beyond just normal M&A? Joseph Edwards: So yes. We're -- we have a very active M&A pipeline, as you would expect. And I would hope that we can have the stars aligned on incremental M&A throughout the balance of this year and heading into 2027. We're in most every form of artificial lift. We are missing a couple of specific products that we've been pretty candid. We'd love to add to the portfolio. And there are some complementary services that go along with artificial lift that we evaluate similarly. What are adjacent to the lift systems that we are selling to our clients? What else does the customer procure as they think about the optimum lift solution for a well? So yes, we're evaluating how to enter these adjacencies, both organically and inorganically. Obviously, the easiest way is to buy a business that is already in those markets that comes with a group of people and a management team and a built-in book of business from clients. But we certainly are not afraid of standing something up from scratch. So we're going to continue to listen to our customers of what they are looking to us to do for them and try to add value as we look at our M&A pipeline and our organic efforts as well. Phillip Jungwirth: And then Flowco was never really impacted by tariffs, but I believe Valiant was as an ESP provider. Just curious what's the ability to recoup any past payments here? And if so, what's that process look like? Joseph Edwards: Yes. There is an opportunity to recoup the tariffs. That's a process that's underway. The portal, I believe, is open. And so we're in the process of trying to recoup those tariffs. Some of those may end up going back to customers. We'll see. But right now, the process is still a little bit murky. So time will tell on that. Operator: Your next question comes from Keith Beckmann from Pickering Energy Partners. Keith Beckmann: I wanted to ask, you kind of talked about the rental nature of high-pressure gas lift, VRU, and ESP. I mean, obviously, ESP and high-pressure gas lift go on the wells for a little while. I wanted to get a sense of maybe is there a typical or average contract term length for kind of each of those 3 between high-pressure gas lift, VRU, and ESP? Just trying to get a better sense on how the contract terms work there for the rentals. Joseph Edwards: Yes, Keith, it's all over the map, candidly. Customers on each of those have their own objectives they're trying to solve and it's complicated. So there's not a one size fits all. On the high-pressure gas lift product line, some customers are shorter term in nature. Some are multi-years. On the VRU, it's a shorter term by intent. We want to work with customers on the sizing down project that I described earlier. So a shorter-term contract is desired there. But we've done some extensive analytics, as you would expect. And the average time on location for a given VRU extends well beyond what the contract term is. And then for ESPs, look, it's even more complicated. Some customers prefer to own their fleet of ESPs. They view it as a CapEx item. Some prefer to rent and some prefer a hybrid model where they rent the surface drive unit that helps power the ESP and they buy the downhole. So hard to give you a one-size-fits-all answer. It's a pretty dynamic commercial model. Keith Beckmann: Then my second question I wanted to ask was just around the really strong free cash flow quarter. How should we kind of be thinking about free cash flow conversion for EBITDA through the rest of the year, obviously, as potentially increased CapEx with things getting stronger here in the back half of the year? Jonathan Byers: That's right. I think with $25 million of -- or $26 million of CapEx in the quarter, you can do the math and see that we expect to ramp into Q2 and Q3. So obviously, that's going to have an impact on free cash flow. Second, even though we added Valiant, that added about $50 million of working capital, the underlying kind of pre-Valiant business actually had a reduction in working capital that we don't think is sustainable into Q2. We'll see some of that come back. So I think we would expect to see free cash flow moderate a little bit in Q2. Operator: Your next question comes from John Daniel from Daniel Energy Partners. John Daniel: As the market begins to inflect here, can you guys just speak to how that impacts your pricing strategies over the next several quarters? Joseph Edwards: Yes. Good question, John. Listen, we've -- being in the production phase, we're not subject to the big swings in utilization and the supply-demand imbalances that come with businesses that are levered to drilling and completion like rigs or frac spreads, right? So we don't suffer the pricing decreases on the way down. And we don't get the benefit as much on pricing increases on the way up. It's much, much more stable. So we would anticipate pricing to be pretty consistent with where we've been. We will, of course, look for ways to drive price where we can, where we can still be constructive with our customer base. But I wouldn't say that pricing on any particular one of our products is going to be a particular driver for the back half of this year. John Daniel: And then going back to the growth opportunities from an organic perspective. If you were to feed some money to some guys to go start up something new, Joe Bob, like how much grace period will you give them to get it going? Like what's an expectation for time? Joseph Edwards: Yes, it's a good question. Within a business of our size and given the focus that we have and the discipline we have around free cash flow generation, John, the answer is very little. We want something to be immediately accretive to both earnings, free cash flow and returns. So if we don't see an immediate path to something earning its keep, we're likely not even going to hit the go button. Operator: [Operator Instructions] Your next question comes from Jeff LeBlanc from TPH. Jeffrey LeBlanc: You referenced the increased interest in artificial lift. But can you talk about regional trends and how prominent outside of the Permian? Joseph Edwards: Yes, Jeff, you're a little faint on your question. I think you were asking about regional trends on specific lift techniques across the U.S. onshore, not just the Permian. Is that right? Jeffrey LeBlanc: Well, more broadly, just the inflection in demand and activity outside of the Permian specifically. Joseph Edwards: Got it. So look, I think you'll see it in some of the oilier basins, okay, the Bakken, South Texas, parts of the DJ. But everything is dwarfed by the Permian, as you know. It produces half of the barrels that come out of the U.S. It's where most of the short-cycle inventory is located. So I think you'll see the vast bulk of activity increases there. But the other basins, I think, will -- they'll be there as well. But I think most of what we are seeing is going to be bound for Texas and New Mexico. Operator: And there are no further questions at this time. I will turn the call back over to Joe Bob Edwards, CEO, for closing remarks. Joseph Edwards: Thank you all for tuning in. And we'll talk to you in 90 days. Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you.
Operator: Good morning. My name is Michelle, and I will be your conference operator today. I would like to welcome everyone to The Chemours Company First Quarter 2026 Results Conference Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded. I would now like to hand the conference over to Brandon Ontjes, Vice President, Head of Strategy and Investor Relations for Chemours. You may begin your conference. Brandon Ontjes: Good morning, everybody. Welcome to The Chemours Company's First Quarter 2026 Earnings Conference Call. I'm joined today by Denise Dignam, Chemours' President and Chief Executive Officer; and our Senior Vice President and Chief Financial Officer, Shane Hostetter. Before we start, I would like to remind you that comments made on this call as well as in the supplemental information provided on our website contain forward-looking statements that involve risks and uncertainties as described in Chemours SEC filings. These forward-looking statements are not guarantees of future performance and are based on certain assumptions and expectations of future events that may not be realized. Actual results may differ, and Chemours undertakes no duty to update any forward-looking statements as a result of future developments or new information. During the course of this call, we will refer to certain non-GAAP financial measures that we believe are useful to investors evaluating the company's performance. A reconciliation of non-GAAP terms and adjustments is included in our press release issued yesterday evening. Additionally, we posted our earnings presentation on our website yesterday evening as well. With that, I will turn the call over to Denise Dignam. Denise Dignam: Thank you, Brandon, and thank you, everyone, for joining us. During today's call, I will begin by discussing highlights from our recent performance before turning it over to Shane, who will provide details around our outlook for the second quarter of 2026 and some commentary on the remainder of the year. Finally, I will provide updates on our meaningful progress against our pathway to drive strategy and current view of our operating environment before taking your questions. We started 2026 with strong results, delivering the first quarter that was well above earnings expectations and showcased the strength of Chemours disciplined execution and strategic focus across the company. Both thermal and specialized solutions and Titanium Technologies delivered standout performances with TSS not only achieving another quarter of double-digit year-over-year growth in up-down refrigerants, but also excelling in quota execution and capturing additional opportunities in on refrigerants through sharp market focus and agile commercial execution. TT also exceeded our earnings expectations, driven by global pricing actions, strong commercial discipline across all regions and customer segments and continued operational focus. In Advanced PerformanceMaterials, the business worked to quickly stabilize operations following the Washington Works outage and the same strength in our Performance Solutions order book, especially in high-value data center and semiconductor markets. Adding to the strong performance and aligning with our efforts to improve our balance sheet, we completed the sale of nearly all of our Kuan Yin properties ahead of schedule and promptly use the available proceeds to pay down a meaningful portion of our near-term debt, further strengthening our balance sheet and enhancing Chemour's financial flexibility as we look ahead. We remain on track to complete the sale of the remaining parcel of the land in 2026, which should provide an incremental $60 million of gross proceeds. This development followed the $700 million refinancing completed in March of our 2027 unsecured notes and a portion of our 2028 unsecured notes, extending these maturities out to 2034 and increasing our balance sheet flexibility. Let me expand a bit further on the quarter's business activities. Our TSS business delivered a record first quarter with continued strength in both Freon and Opteon refrigerants, driving double-digit year-over-year growth. Net sales for TSS increased 22% versus the prior year quarter, largely driven by higher pricing stronger volume growth and a favorable product mix across refrigerant markets. Pricing benefited from automotive aftermarket from refrigerant sales in North America and Opteon blends, while overall volume growth was supported by seasonal strength. These top line results translated into record adjusted EBITDA for TSS in the quarter, with margins expanding to 33% and reflecting strong pricing realization for Freon and an improved Opteon blend mix. While higher input costs, particularly R-32 created some offset. These results underscore the power of our commercial execution and disciplined quota management. Sequentially, net sales increased 28%, consistent with the typical seasonal ramp we see cross refrigerants and pricing strength in certain products. For our TT business in the first quarter, the team executed well amid a challenging market environment. We experienced continued global stability and observed solid seasonal demand improvement in North America and Europe. However, lower volumes and less favorable product mix in certain non-western markets offset these gains, resulting in reduced global volumes overall compared to the prior quarter. While volumes trended down sequentially, net sales finished within our expectations due to disciplined global pricing execution. Notably, adjusted EBITDA exceeded our expectations, driven by our pricing actions, along with strong cost management and our focus on in line with our efforts to improve security of supply and input optimization, we signed a long-term chlorine supply contract with [indiscernible] to service our DeLisle site starting in 2028. This agreement ensures a reliable supply at value-accretive economics. Strengthening DeLisle's global competitiveness and supporting our operational excellence focus under pathway to Thrive. It also reinforces Chemour's commitment to being 1 of the lowest-cost chloride TiO2 producers worldwide. While we had previously announced our intention to pursue an on-site [ Corning ] facility at our DeLisle with a third party, in March, the supply agreement terminated and we will not be proceeding with this project. As we look ahead, our team remains agile and responsive to ongoing market changes and economic uncertainty. We continue to keep our manufacturing operations flexible, modifying production levels to meet shifting demand. Our pricing strategy is firmly in place as exemplified in our recent price increase communication, first in December and continued on April 1 across all key end markets. These announcements demonstrate our ability to adjust prices while consistently delivering outstanding and dependable service and quality. The first quarter's results with pricing up 3% sequentially, reflect the initial impact of implementing these price changes alongside our progress in operational reliability, which strengthens our ability to respond effectively to shifts in market demand. ATM results in the first quarter reflected both operational and portfolio-related headwinds with net sales down year-over-year due primarily to lower volumes. Overall, first quarter sales were constrained by the Washington Works outage and the prior closure of the Advanced Materials SPS Capstone line. These factors provided a difficult comparison to last year and the outage weighed meaningfully on sales and incremental costs, resulting in a $25 million headwind in adjusted EBITDA. While our first quarter performance was not what we believe the business is capable of. With these discrete events now behind us today, APM is building a more effective and efficient foundation for coming quarters. Notably, our Performance Solutions order book is seeing particular strength in high-value markets. positioning APM for continued improvement as we move through 2026. Separately, our corporate level performance also showed a significant decrease in expenses compared to the same quarter last year. largely due to lower costs associated with legacy litigation activities. We remain focused on balancing the timely execution of global corporate initiatives with appropriate cash expenditures. With that, I'll turn it over to Shane to walk through our outlook for the quarter ahead and provide thoughts on what remains for 2026. Shane Hostetter: Thank you, Denise, and good morning, everyone. As shared in the earnings materials available on our investor website. I now would like to discuss our expectations for the second quarter and provide some updates on our business as we look ahead. Beginning with TSS. For the second quarter, we project net sales to rise sequentially in the low to mid-teens percent range, primarily attributable to favorable seasonal trends related to the cooling season in the Northern Hemisphere. It is worth noting that some demand and associated sales having about a $10 million impact on adjusted EBITDA was pulled forward into the first quarter due to timing, which modestly tempers the sequential progression we would have otherwise expected and added strength to our first quarter ESS performance. Despite this pull forward, the seasonal uplift we anticipate for TSS will be underpinned by strength across our Opteon and Freon channels. Adjusted EBITDA for PFS is also expected to grow sequentially, ranging from $210 million to $225 million, primarily driven by seasonality as well as specific opportunities our commercial team is capturing in the Freon aftermarket and continued transition to Opteon referrers. In the first quarter and into the second, weakness in residential demand was more pronounced than anticipated. This softer demand has been largely driven by a slower start to the reference cooling season, which has delayed equipment and simulations and associated aftermarket activity. and is consistent with what we are hearing more broadly across the residential HVAC value chain. Specific to expectations in the first quarter and into the second quarter, overall aftermarket demand has slowed as new equipment demand has decelerated into distribution networks, an important leading indicator for downstream demand. Looking to the full year, we continue to expect year-over-year growth in the business supported by our strong market position, regulatory tailwinds and overall pricing. However, we remain appropriately cautious on residential demand segments. One other important factor to consider is that TSS is a determined business. Our company can drive differentiated value through disciplined execution allocating our available quota to the most attractive pockets of demand. While we do not expect the same year-over-year double-digit top line growth for the remainder of 2026 as comparisons begin to reflect the regulatory-driven adoption under the U.S. AIM Act that drove robust demand in late 2025. We remain bullish on the opportunity ahead as we allocate our quota to achieve optimal profitability. Overall, demand across our Opteon channels, together with continued momentum in the Freon automotive aftermarket supports the growth profile and consistent margins we outlined last quarter. For our PT business, we expect sequential net sales to increase in the mid- to high teens percentage range in the second quarter, driven by a more favorable seasonal comparison and related pricing actions. This improvement is supported by increased mineral sales following first quarter timing dynamics related to our mining restructure as well as some strength we are seeing in our TiO2 pigment sales amid actively developing global market conditions. Our guide for the second quarter anticipates the initial effects of the price increase on April 1, as well as the continuing effects from pricing increases announced in December. These adjustments are being applied across our key end markets as contracts allow. Although global geopolitical events continue to affect supply chains and impacts the worldwide TiO2 market, both directly and indirectly, we are confident that our PC business is strategically positioned to take advantage of emerging opportunities. Aligned with the current market environment and the improved agility of our operational circuit for the second quarter, we expect TT's adjusted EBITDA to range between $40 million and $50 million. Although geopolitical outcomes remain uncertain and the related market impact is unclear, recent enhancements to our operating circuit and improved visibility of order time to support the second quarter earnings. As the year develops, consistent with prior messaging, we are controlling what we can control, and we intend to stay true to our commercial strategy, which will be supported by robust pricing efforts that will continue based on our assessment of market conditions. We remain resolute in our belief that this strategy positions our TT business for success regardless of market and demand conditions. Now for our APM business. For the second quarter, we anticipate net sales to increase within the low to high 30% range on a sequential basis, primarily due to the resumption of normal operations at the Washington works specifically. Adjusted EBITDA is forecasted to be between $12 million and $18 million. While sequential growth in EBITDA is expected, earnings remain in the low targeted levels as cost pressures and volume limitations related to the Washington Works downtime experienced in the first quarter continued to weigh with second quarter profitability. Although we are facing outage related constraints, our APM order velocity has reached a level that has not been experienced in the past several years. Within our Performance Solutions portfolio, demand remains strong in the semiconductor and data center end markets, which are driving orders for our Performance Solutions products. These sectors are tied to growing and sustainable demand for APM's products and are areas where Chemours is uniquely positioned to serve these loans. In addition to our higher-value end market activity, our Advanced Materials portfolio was also experiencing strong order levels. While the industrial end markets that advanced materials generally serve remain weak, our commercial team is seeing signs of destocking for specialty materials that may have been overbulk in prior years. While the impact of these demand tailwinds is limited in our second quarter outlook, we see the rest pathways to achieve significant second half strength while the macroeconomic environment remains tepid. On a consolidated basis, we anticipate our second quarter net sales to increase in the range of 15% to 20% sequentially with consolidated adjusted EBITDA expected to range between $220 million to $250 million. Also, we anticipate corporate expenses to range between $45 million and $50 million. Our capital expenditures for the second quarter are expected to be in the range of $50 million with free cash flow generation of at least $100 million. In connection with the strong free cash flow we anticipate for the second quarter, we expect to realize interest expense savings in the quarter as we reduced our debt by approximately $160 million in. Also, we remain committed to enhancing our balance sheet flexibility, including the $700 million refinancing completed in March, which builds on the close to $2 billion of near-term debt we have addressed since the fourth quarter of 2025. We are proud of these efforts, which strengthen our balance sheet and enhance financial flexibility. Key enablers of our [indiscernible] strategy. Turning to the full year. Despite a mixed global operating environment that includes challenging commercial end markets and overall raw material and other cost inflation. We still expect our full year consolidated net sales, adjusted EBITDA and capital expenditure forecast to align with our previous guidance. Full year free cash flow conversion is now expected to be above 20%, slightly lower than our prior guidance, driven by one in land sale tax implications, which impact free cash flow. That said, the earlier than anticipated closure of the majority of the quality of parts positions Chemours to immediately begin to deliver as we pay down approximately $150 million of our outstanding Euro Term Loan B in rating. As we close the final Kuan Yin land parcel and repatriate the remaining proceeds expected this year, we intend to use those proceeds to continue redeeming future debt maturities -- this positive development carried with our diligent cash management activities provides us with confidence towards achieving our liquidity objective of net leverage below 3x adjusted EBITDA. For 2026, we now anticipate our net leverage ratio will be below 3.8x adjusted EBITDA by the end of the year. Additionally, our efforts will provide approximately $9 million in interest expense savings to the company going forward annually by year-end after the reference repayment need. Overall, we started the year out well. And looking at that, we see strong pricing momentum in TT, robust refrigerant demand and operational reliability improvement across our sites, which gives us confidence to deliver a step up performance in the second half of the year. enabling us to deliver on our full year guide. Also, we remain front-footed on our assessment of operational and commercial impacts stemming from geopolitical considerations around the globe to ensure we address inflation ahead of any financial impact as well as addressing any potential opportunities as they present themselves. We have the right team in place and a strong understanding of our customer base who achieved the goals and outlook we have laid out for the current year. Given these perspectives on the second quarter and the remaining year, I'd like to now hand the call back over to Denise to share her closing thoughts and perspectives. Arun Viswanathan: Thank you, Shane. As I look across our first quarter performance, we continue to see clear progress against our Pathways strategy, which remains the foundation for how we operate allocate capital and create long-term value. We remain on track and are seeing tangible accomplishments across all pillars, including improved operational reliability, disciplined cost execution, targeted growth investments, continued portfolio improvement and efforts to de-risk our balance sheet aimed at strengthening the business over time. Our teams are performing effectively across all [indiscernible] 5 pillars. In the area of operational excellence, we continue to integrate the Chemours business system to implement lean principles, ensuring a high standard of consistency, reliability and cost efficiency. Although CBS was implemented earlier this year, we are already observing positive outcomes. For enabling growth, our focus remains on areas that set us apart and provide clear market advantages. This is evidenced by ongoing momentum in Opteon refrigerants, increased engagement within high-value end markets across TSS and APM and continued efforts to drive value through recent pricing strategies. For portfolio management paired with our disciplined capital allocation approach, we've improved our balance sheet with the nearly completed Kuan Yin land sale and existing cash reserves, enabling a reduction in debt that will continue through the year. We are dedicated to aggressively reducing our leverage while making steady progress and are strengthening the long-term pillar where we are progressively working to reduce our exposure to legacy matters. These efforts highlight our focus on derisking Chemours to ensure our ability to secure our future in exciting high-value end markets and opportunities. In taking a broader view of Chemours, we are closely monitoring the ongoing conflict in the Middle East and the resulting volatility across energy markets and global chemical supply chains, which is adding uncertainty to the broader macro environment with the potential to weigh on demand, particularly in more impacted regions. To this, we are focused on actively working to mitigate cost headwinds through core price and other pricing mechanisms. As sulfur markets tightened due to this conflict, sulfate-based TiO2 producers are seeing tangible cost inflation, creating potential opportunities for those positions to respond. Chemours has decades of leadership in the titanium dioxide market with deep technical, commercial and regional expertise. As conditions evolve and potential tailwinds emerge, we are applying that experience with discipline, remaining selective and deliberate as we monitor the macro environment and act accordingly. In parallel, we are taking a disciplined approach to risk management across the enterprise, prioritizing cost control, supply chain resilience and capital allocation to ensure flexibility in the Chemours uncertain macro environment. We believe that our positioning, considering these market dynamics provide opportunities for Chemours as we move into the second half. Before we move to questions, I want to thank our employees around the world for their continued focus, resilience and commitment. Their execution and adaptability are central to our performance and our progress against Pathway to Thrive. I'd also like to thank our customers for their ongoing partnership and trust as we support their needs across critical end markets. With a strong start to the year, the right strategic actions underway and a proven ability to execute through uncertainty, Chemours is well positioned to deliver on our commitments and drive sustained value creation for all of our stakeholders as 2026 progresses. With that, I'd like to open the line for your questions. Operator: [Operator Instructions] First question is going to come from the line of Joshua Spector with UBS. Joshua Spector: I wanted to ask just on TSS and specifically in first quarter, where you're talking about some of the benefits from the pricing step up in the Freon products into the auto aftermarket. I was wondering if you can characterize that. Was that more of a step up in some contract type structure? Or is that more of a tightening of the legacy refrigerant market? And did you expect that, I guess, when you gave your guidance earlier in the year? Denise Dignam: Thanks for the question, Josh. Yes. From Freon, we -- first of all, we as a business are always looking to optimize our EBITDA per quota. So we do see strength in the auto aftermarket, but we are uniquely positioned when it comes to the auto aftermarket. We have 1 of 2 domestic suppliers of 134a versus other foreign suppliers. We also have a great quoted position. And then also, there are some constraints for other suppliers that are stemming from EPA regulated phasedown of a key raw material that goes into the process of TCE. So we see this as very sticky. I would say, going into the quarter, we did anticipate strength going in, maybe not as high as it turned out to be, but we certainly expect that to continue. Joshua Spector: Okay. And I guess just sticking with TSS and thinking about 2Q, I think your comments clearly say you expect weaker resi OEM. I think that's the interpretation. So you're being somewhat conservative there. Does that help your view on margins in the quarter? And I guess there's just a bunch of moving parts now, the costs moving up, you're trying to get pricing and generally just trying to understand kind of the margin cadence you'd expect as either OEM comes back into the mix or some other factors maybe help on the cost side as you go further through the year? Denise Dignam: We always talk about the TSS business to be around the 30%, 30% margin or higher in the low 30s. So that's kind of where we are. When I think about equipment installations in 2026, we're really around -- the projection is around 7.5 million units which is really low. And we expect that to grow as there's more optimism around housing and expecting more around a 9 million units on a longer-term basis. We see a lot of strength in our aftermarket positioning and see a lot of growth that's coming from that. So we anticipate around Opteon still a really good growth year for us. Shane Hostetter: Josh, just to add, too. I mean you mentioned about the Q2 guide a little bit weak. I do want to emphasize in the script, you talked about a $10 million adjusted EBITDA impact that was pulled into the first quarter. Our commercial team has been, great executing at the last part of the quarter, and we shifted about $10 million in EBIT in the first quarter. So if you normalize the Q2 for that $10 million, I think you would see more seasonal trends. Operator: Our next question is going to come from the line of John Roberts with Mizuho. Unknown Analyst: This is [indiscernible] on for John. A question on APM. With the Washington works outage and your closure of SPS Capstone line, what should we expect to see in terms of a sustainable earnings power of the segment? And also what's the timing of this ramp? Denise Dignam: Thanks for the question. Yes, we expect the APM business to be in the $30 million to $40 million EBITDA range, and we definitely expect getting back to that range in the back half of the year. We have a really strong order book. And when you look at our Performance Solutions portfolio, really centered around semiconductor growth and data center. So you'll start to see that as you get into the back half. Unknown Analyst: And switching gears here. On Corpus Christi, I mean you share what your playbook is if the city declares the Level 1 water emergency. What levers can you pull here potentially? Denise Dignam: Thanks for the question. This is something that has been on our radar for the better part of 2 years. So we've been very proactive. We actually -- we don't see -- right now, there is a potential for a 25% curtailment, which is potentially announced for the fourth quarter. That is already dialed into our outlook. So we do not see any hiccups from that. And we also have a very barrows supply chain. So if it came to other knobs, we have other partners that we work with that we can supply our customers. Operator: Our next question comes from the line of John McNulty with BMO. John McNulty: So I wanted to dig into one of the points that you were bringing up towards the end around some of the sulfur-related impact on other parts of the TiO2, I guess, producer market. It looked -- we've seen -- because of sulfur constraints, we've seen some really significant price hikes from a lot of the Chinese producers. I guess, how do you think about your playbook as you push through the rest of this year in terms of either going after price and kind of working underneath that higher pricing umbrella that some of your competitors are pushing or going after the volumes that may be left on the table because you don't have to necessarily raise price quite as much. I guess how are you thinking about that from a playbook perspective? And can you speak to your ability to address some of the international markets that are starting to see some of that really aggressive pricing pushing through? Denise Dignam: Great. Our playbook is, as we talked about before, where our strategy is around gaining share in fair trade regions. But along with that is also profitability and prioritizing price. So we came out in December ahead of any disruption with the Iran war and start raising prices on were successful. You could see going into the first quarter, our pricing is up 3%, so we're going to continue as we see opportunities to raise price. So we already made an announcement for a price increase of the same order of magnitude in April. One thing, just to say, we are great flexibility in our contracting around driving pricing. So I would say we're going to continue around our plate books continuing around driving our share in the fair trade market but also prioritizing profitability and raising prices. it's clear with sulfur costs increasing, there is an opportunity to go back in history, at sulfur cost increase, there's a one-for-one correlation to what happens in the cost curve of sulfur pulp producers. Shane Hostetter: I would just add too, John, I mean, if markets start to occur and there's volume opportunities. You might remember in the third quarter last year, we talked about bringing capacity down about 10% to 20%. Just to align with where we thought demand was going to be. But we have flexible operating circuit that we can bring that back up to address that as well. Denise Dignam: Yes. And even in the first quarter, we saw volumes increasing over what we had expected variable to respond. John McNulty: Got it. Okay. No, that's helpful. And then I guess, can you just give us an update on your 2 PIC solution? I think NTT was doing some heavy trials on you? I think you've also got some potential capacity coming up later on this year. I guess can you give us an update as to how that's progressing? Denise Dignam: So yes, we're excited about -- towards the end of the year, we're going to have the capacity that comes on. And we're going to be using it to sample customers as well as refining our process technology for future scale up. So when it comes to NTT the 12-month field trial using our fuel was successful. There were no signs of fluid or equipment degradation. There were over prospective customers and partners that have seen the fluid in action. So we're going to continue working with NTT through 2020 and really continue to expand the visibility of that technology. Operator: Our next question comes from the line of Hassan Ahmed with Alembic Global Advisors. Hassan Ahmed: Shane, a question around your Q2 as well as full year guidance. I mean if I sort of take a look at what you guys have guided to, I mean, you're guiding to a first half EBITDA of around $404 million. And if I compare that to what that means or implies for the back half of the year, it's essentially a range of $396 million to $496 million. So I'm just trying to sort of figure out that bridge to the higher end of that EBITDA range? I mean, what gets us to that incremental, call it, almost $100 million on the higher end side of things, I mean, particularly factoring in seasonality and the like. Denise Dignam: Thanks for the question, Hassan. I'll just start by saying coming into 2026, we were very optimistic on growth 2025 to 2026. And we remain very optimistic on that world. When you think about pricing, we have very strong pricing. When you think about spine, we see very stable volumes and our cost actions are really working. So we feel good about the growth year-over-year, but I'm going to turn it over to Shane to get into more of the specifics around your question. Shane Hostetter: Thanks for the questions, Hassan. So certainly, as you just put the math to it, it looks as if we're back end weighted. But you have to remember, we started out the year really slow in ATM with Washington work outages. We mentioned $25 million in the first quarter. And then we also had some expense come through as well as constraints on overall sales into the second quarter as well. That normalized for the second half is a good runway to get to that balance. I would say outside of that, we talked a bit about TT. We really are looking at strong pricing and some tailwinds according from that side. Denise mentioned the strong adoption in December, and we just announced in April as well. So on the back of a lot of these efforts in controlling what we control as well as operating. And then also APM had a really good order book, and I mentioned in the script, the best we've seen in several years. So we feel very confident with this guide. And as we think about opportunities within TiO2, I think there's upside here some tailwinds as well. Hassan Ahmed: Very helpful. And as a follow-up, on the TT side of things, I mean, I know you guys commented on sulfuric acid and some of the price increases we've seen over there. I mean, as you take a look -- so the question really is around where costs sit today and also sort of how that impacts the rationalization that we were seeing leading into some of these sort of sulfuric acid price moves. I mean as I've run my numbers correctly, some of the sort of latest rounds of price hikes in TiO that we've seen it just seems barely cover the higher sort of cost coming out of higher such asset prices and the like. So I mean the state of the sales for TiO2-wise, was pretty dire even prior to this run-up in sulfuric acid prices. So I mean, where are the cost curves today are a large chunk of the producers still losing money despite these price hikes? And how does that impact sort of rationalization, particularly in China on a go-forward basis? Denise Dignam: Yes. Thanks for the question. First of all, let's just go back to what our strategy is, and it's really to be low-cost chloride producer globally, and we continue on that path. We don't have any of production. So we are very much on the left side of the cost curve. Clearly, for sulfate producers, they're moving to the right, depending on how much sulfur increases that can far they're going to, right? And I say what kind of decisions they're going to make around their capacity? No, but what I can say is we are clearly focused on our strategy of gaining share in the fair trade market, continuing our advocacy and being reliable suppliers to our customers. Operator: Our next question comes from the line of Arun Viswanathan with RBC Capital Markets. Arun Viswanathan: Congrats on the results here. So I guess I just wanted to follow up on the last point. So for TT, I think you're guiding to about $40 million to $50 million for Q2 EBITDA. How does that evolve as you kind of move through the year? Are there any discrete items like cost reductions or maybe something on the ore supply side that would lift that in Q3? Or is it going to be mainly dependent on demand? Denise Dignam: I would say that we definitely see improvement as we go through the year, and I would point to 2 primary factors. We are not building any volume upside into our outlook. It's really pricing and continuing cost. Our cost out work, which we definitely see evidence over. We saw in the first quarter, we see it coming through the rest of the year. Arun Viswanathan: Okay. And another question on TSS, I guess, if I could. When you think about the last year, and you did have a pretty big step-up because of the step down in the quota. How are you seeing growth play out this year in TSS? In absence of that, do you still have a strong backlog that's trying to catch up to prior orders. And also, maybe if you could comment on the pricing environment and the mix environment, will we be selling any more Freon, and would that affect the mix and positive or negative way? Or is that destocking all done? Denise Dignam: Great. Thanks for that. Yes. So a amongst, we said -- first of all, we still expect year-over-year growth in Opteon and TSS. We -- as we get to the second half of the year, we're going to see more of a slowdown as we've talked about because of this transition. But we see a lot of upside in the aftermarket as new equipment gets installed, and we have a really, really strong position in the aftermarket. When you think about Freon, and as I said earlier, we see stickiness in our pricing and in our volumes because of our position in the auto aftermarket. So we feel very optimistic about the growth in our position for the rest of the year. And as it relates to the margins, run, talked about a 30-plus margins in this business, and we feel very confident with that, seasonally, Q2, Q3 tend to be the seasonally the strongest margins, and we anticipate such again. Operator: Our next question comes from the line of Pete Osterland with Truist Securities. Peter Osterland: I just wanted to start on TT. So you called out the lower TI sales in North America in the first quarter. It looks like sales were down 12% year-over-year in the region. Was that a reflection of underlying market demand, I guess, or anything to note from a customer inventory perspective? And just going forward over the next couple of quarters, what's your outlook for the North American market? Denise Dignam: Yes. I mean, going into -- actually coming into the year, we have projected the volume. Actually, we and particularly in North America than we had anticipated. As we go into second quarter, we definitely see a step-up with the coating season. Peter Osterland: Okay. And then just as a clarification on your free cash flow guidance being lower to 20% from 25%. Does that represent anything other than the tax outflow from the Kuan Yin proceeds? I guess any other cash headwinds that you hadn't previously incorporated? Shane Hostetter: Thanks, Pete. Yes, I appreciate you bringing this up. As you mentioned, yes, this is really just specific to the Kuan Yin land sale. We had taxes that are forecasted to be in operating cash flow, whereas the Kuan Yin proceeds are going to be outside of free cash flow. So it's really just a presentation models. But I will make sure to emphasize that 20% is a floor, right? We're confident in really generating upside here, and we'll continue to focus on that free cash flow generation of this company. Operator: Our next question comes from the line of Duffy Fischer with Goldman Sachs. Patrick Fischer: Question on the new chlorine contract. One, is it more of a cost plus? Or is it a market minus type contract? And then two, if you look at it versus what you've paid over the last 2 or 3 years, is it a meaningful cost advantage for you when that rolls through? Denise Dignam: Yes. Thanks for the question, Duffy. We can't talk about specifics of the contractual terms. But all I can say is this provides secure, reliable supply on at a very attractive rate. It secures our competitive position, and it's very aligned with our drive to the left side of the cost curve. Patrick Fischer: Okay. And then on the Q1 slide deck, you called out $17 million of kind of onetime impacts that you thought were going to happen in TT. With that quarter now done, what was that -- did it come in at $17 million? Were they higher was it lower? Did some of that get pushed into Q2? Can you just talk about that? Shane Hostetter: Yes. Thanks, Duffy. I appreciate bringing that up. That was really related to some ore mix items within the cold season and our clients. I would say the $17 million we saw come through. However, we did have some onetime benefits that came through as well. So we had less than the $17 million that we saw come through, but not too much of [indiscernible]. Operator: Our next question comes from the line of Laurence Alexander with Jefferies. Daniel Rizzo: This is Dan Rizzo on for Laurence. You mentioned the Freon sticky. Is -- will you see sticky for this year where it's some sort of restock? Or is it like a multiyear growth story? And I guess, more importantly, you can provide some tailwind when the Opteon adoption kind of slows a little bit. Denise Dignam: I'm sorry, can you ask the second part of that question again? Daniel Rizzo: Well, I was wondering if Freon is going to be a multiyear growth story because as -- I mean, Opteon is still very strong. It will eventually peter out -- enough peter out, it will slow to a more I guess, longer pace. I was wondering if Freon could kind of augment that. Denise Dignam: Yes. I mean we see a multiyear trajectory around Freon strength. So as we said, we're always -- the way we run this business is managing quota and getting the best margins per CO2 equivalents. As I said, we have a very advantaged position in the U.S. relative to this product. And we have a good quota position. And we have -- our process is not impacted by some of the EPA actions. So definitely see this persistent. Daniel Rizzo: And is the demand -- I mean, and maybe a simple question, but is the demand coming entirely from auto aftermarket? Or are there other factors or other areas contributing? Denise Dignam: Yes. It's really auto aftermarket. And I would say if you look at even the trajectory of like ICE vehicles, there's a long tail for that. So that's how you can kind of think about that Freon sales. Operator: Our last question will come from the line of Vince Andrews with Morgan Stanley. Vincent Andrews: Just wondering if you could comment a little bit on the TiO2 market and what you think the impact to the market as well as to you will be from the restart of the Venator assets, I guess there's one in Italy that's restarting, and then LB seems to have gotten approval for the one in the United Kingdom. Look, it's not clear exactly when that might restart. But what will -- I know Europe is not necessarily the biggest market for you, but what do you think that will do to the market? And how will you play around there? Denise Dignam: Yes. I mean -- thanks for the question. I think there's definitely -- will be a small impact. We'll see how those assets start up. They definitely need some work to get started. So I think if anything, we could start seeing something maybe next year. But we feel, especially around, say, the U.K. asset. There's going to be -- I would say, our biggest concern there is that have that asset be used for pull-through of other Chinese volume? And we see the risk of that low. We have a lot of trade advocacy going on, making sure we're not -- there's no circumvention of antidumping tariffs and also really strengthening, working with authorities to strengthen the world of origin definition. So I would just say it's really not something that we see as a big impact. These are also very high cost to operate facilities. Vincent Andrews: Okay. And then, Shane, if I could just follow up on the cash flow. The fourth quarter, when you put out the 25% number, obviously have announced the sale of the land. At the time, did you just think there was going to be a way to not incur taxes on that and then that didn't play out? Or just what would happen there? Shane Hostetter: Yes. Thanks, I appreciate the question. I'd say as we announced that, I think we were fine-tuning the overall distribution plan out of Taiwan. We are going to carry with it. That said, we are -- we've announced net proceeds of $290 million here way ahead of time, right, as well as we're seeing net-net probably more than we effective. We said net roughly around $300 million. I would say net, we're roughly in the $310 million range. So yes, the original 25% did not take into account that tax item, but it was more presentation, we anticipated that net item being kind of netted with the quantity and proceeds instead of being presented in operating cash flow. Operator: And I'm showing no further questions at the time. Ladies and gentlemen, this will conclude today's question-and-answer session as well as today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.