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Operator: Good day, everyone. My name is Ryan, and I will be your conference operator today. At this time, I would like to welcome you to the Ameren Corporation First Quarter 2026 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time and you have joined via the webinar, please use the raise hand icon, which can be found at the bottom of your webinar application. At this time, I would like to turn the call over to Andrew Kirk, Senior Director of Investor Relations and Corporate Modeling. Thank you, and good morning. Andrew Kirk: On the call with me today are Martin J. Lyons, our chairman, president, and chief executive officer; Lenny Singh, our executive vice president and chief financial officer; and Michael Main, group president of our Ameren Utilities, as well as other members of the Ameren Corporation management team. This call contains time-sensitive data that is accurate only as of the date of today’s live broadcast, and redistribution of this broadcast is prohibited. We have posted a presentation on the amereninvestors.com home page that will be referenced by our speakers. As noted on page two of the presentation, comments made during this conference call may contain statements about future expectations, plans, projections, financial performance, and similar matters, which are commonly referred to as forward-looking statements. Please refer to the forward-looking statements section in the news release we issued yesterday as well as our SEC filings for more information about the various factors that could cause actual results to differ materially from those anticipated. Now here is Martin J. Lyons, who will start on page four. Martin J. Lyons: Thanks, Andrew. Good morning, everyone. Thank you for joining us to cover our first quarter performance and progress toward achieving our 2026 strategic objectives. Yesterday, we reported first quarter 2026 earnings of $1.28 per share compared to earnings of $1.07 per share in 2025. The year-over-year increase of $0.21 per share reflected increased infrastructure investments across all operating segments that will drive significant long-term benefits for our customers. The other key drivers of our results are summarized on this slide. Further, we reaffirmed our 2026 earnings per share growth guidance range of $5.25 to $5.45, reflecting solid execution across our business. Turning to page five. At Ameren Corporation, we remain committed to the customers and communities we are privileged to serve: the 2.5 billion electric and 900,000 natural gas customers who count on us every day. Our infrastructure investment decisions are made with that responsibility in mind, focused on strengthening the system, delivering reliable, cost-effective service, and positioning our communities for long-term growth. Through execution of our three-pillar strategy—investing in rate-regulated infrastructure, advocating for constructive regulatory and legislative frameworks, and optimizing our business—we strive to provide exceptional value for our customers, communities, and shareholders. Turning to page six. Here, we outlined our strategic priorities for 2026, which we provided in February. To date, we have made meaningful progress, which Lenny and I will discuss as we cover the pages that follow. Of course, key to serving customers well and driving growth are targeted and timely infrastructure investments. As shown on the right, you see that we made more than $1.5 billion of infrastructure investments during the first quarter to maintain and enhance our quality of service. Importantly, our infrastructure investments continue to strengthen the reliability and resiliency of the grid, minimizing customer outages during multiple instances of severe weather during 2026. For example, in January, during the multiday winter storm Fern, Ameren Corporation’s diverse generation fleet performed exceptionally well, ensuring our customers had access to power under extreme conditions. At the same time, our Ameren Illinois gas storage portfolio helps shield customers from extreme market prices, saving about $63 million, while ongoing upgrades to our underground storage fields continue to lower long-term operating costs and support winter reliability. Then we saw the benefits of our investments again in March, avoiding 4.3 million outage minutes for nearly 20,000 Ameren Missouri customers and again during late April storms, where system automation helped avoid an additional 43,000 customer outages and 12 million outage minutes each over a two-day period, effectively reducing the overall customer impact of these severe weather events by nearly half. To enhance the performance of our existing generation fleet for summer and winter peak demand periods, and as overall demand grows, we are investing in projects designed to maximize capacity and availability. For example, optimization efforts underway at our Audrain Energy Center will improve winter reliability by adding up to 700 megawatts of capacity on the coldest days. And at our Labadie Energy Center, significant boiler enhancements this year are designed to reduce the number and length of prospective outages. Alongside these enhancements, we continue to execute our Missouri integrated resource plan to add new generation resources. In total, the work we are doing across our generation fleet is designed to ensure customers can continue to rely on us to operate a safe, diverse, dependable, and cost-effective mix of energy centers today and well into the future. We are mindful that reliability and affordability are both important for customers. That is why we continue to operate with financial discipline and work to optimize our business processes in part through deployment of new tools and technology. In addition, during the first quarter, we helped connect customers with more than $40 million in energy assistance and weatherization resources through Ameren Corporation programs and federal, state, and local partnerships. Turning to page seven. Looking ahead, we see the opportunity for strong growth, with businesses making significant long-term commitments to locate and expand in our region. Our long-term earnings per share expectations outlined in February were based upon a compounded annual sales growth assumption of 6.2% from 2026 through 2030. We continue to expect that the 2.2 gigawatts of ESAs we signed in February represent upside to our sales and earnings forecast to the extent the sales from the ESAs ramp faster than our existing plan assumption of 1.2 gigawatts by 2030. As we have said, we expect to update our sales forecast for these agreements as other project milestones are achieved including the customer project announcements, groundbreaking, and construction progress. In addition, we are optimistic about converting a portion of our remaining 1.2 gigawatts of construction agreements to additional ESAs in the near term. We are excited to support these data center projects as their construction is expected to bring in thousands of jobs, and the projects are expected to generate millions of dollars in tax revenue for local communities. In addition, serving these customers will require acceleration of significant infrastructure investments on our part, supporting additional jobs and tax revenue, all paid for by the counterparties to our ESAs. As new large-load electric demand evolves, our focus remains on serving all customers reliably by carefully planning and executing grid upgrades and maintaining a balanced generation portfolio while ensuring costs to serve new large-load customers are appropriately allocated to and borne by them. Turning to page eight. We are well on our way to delivering the more than five gigawatts of new energy and capacity resources currently planned to go into service through 2030 as our team continues to execute on a robust generation plan. The 50-megawatt Bowling Green Energy Center was placed in service in March, and we recently began final commissioning activities on the second project, the 300-megawatt Split Rail Energy Center. These projects have the ability to deliver enough combined energy to power more than 63,000 homes. In addition, we continue to advance two 800-megawatt simple-cycle natural gas energy centers, Castle Bluff and Big Hollow, which are expected to begin serving customers in 2027 and 2028, respectively, along with 400 megawatts of battery storage at Big Hollow. For Castle Bluff, construction is underway, and we received the first of four gas turbines ahead of schedule. For Big Hollow, our contractors have begun mobilizing and preparing the site for construction, which is expected to begin this quarter. In the meantime, we continue to pursue approvals required for additional generation resources. In March, we reached a stipulation and agreement with intervenors for the CCN we are seeking for the Reform Energy Center, a 250-megawatt facility expected to be in service in 2028. This agreement is subject to Missouri PSC approval. Further, we expect to file additional CCN requests by the third quarter for approximately three gigawatts of new generation, primarily including the 2.1-gigawatt West Alton combined cycle facility as well as additional battery storage. At the same time, we continue to carefully analyze future sales expectations and assess the timing and mix of new generation resources in advance of our next Missouri IRP targeted for late September, which will provide an updated 20-year view of our generation strategy. Moving to page nine for a brief transmission update. We expect significant transmission investment will be needed over time to support new large-load customers and connect the new generation resources required to serve our territory reliably as regional demand grows. We expect these potential investments to be incorporated into our plans as opportunities further mature. At the same time, we remain focused on executing our awarded long-range transmission projects from the first two MISO tranches and on advancing competitive opportunities under tranche 2.1. In January, we submitted bids for two competitive projects based in Illinois, with MISO expected to select developers for the projects by mid-2026. We are also evaluating two additional competitive opportunities with bid submissions due by May. Turning to page 10, we have outlined the investment pipeline across our businesses over the next decade. These investments will support the safety, reliability, and resiliency of the energy grid while positioning our system to power the quality of life for all customers in our territory. This pipeline stands at more than $70 billion through 2035 and is expected to continue supporting strong growth opportunities for our customers, communities, and shareholders. Turning to page 11, we expect effective execution of our strategy to continue to drive strong total shareholder return. In February, we updated our five-year growth plan, which included our expectation to deliver annual earnings per share growth consistently near the upper end of our 6% to 8% compound annual earnings growth rate from 2026 through 2030. This earnings growth is primarily driven by strong compound annual rate base growth of 10.6%, reflecting strategic capital allocation across our constructive regulatory frameworks and conservative sales growth assumptions. I am excited by the milestones achieved year to date with new large-load customers and anticipated additional positive developments in 2026. Over the course of the year, as we get greater clarity on the timing and amount of these new customers’ service ramp-up, we will update our sales growth assumptions and incorporate them into our updated Missouri integrated resource plan as well as incorporate any additional transmission investment needed into our five-year plan. Last, I am confident in our team’s ability to effectively execute our investment plans and other elements of our strategy across all four of our business segments in a way that benefits our customers, shareholders, and communities. Again, thank you all for joining us today. I will now turn the call over to Lenny. Lenny Singh: Thanks, Marty. Good morning, everyone. Turning now to page 13 of our presentation. Yesterday, we reported first quarter 2026 earnings of $1.28 per share, compared to earnings of $1.07 per share for 2025. As Marty discussed, our ongoing infrastructure investments to strengthen the energy grid and expand generation resources continue to be the primary drivers of earnings growth across the company. Partially offsetting the benefits of these investments, Ameren Missouri’s first-quarter electric retail sales in 2026 were negatively impacted by warmer-than-normal winter temperatures in the current period compared to the colder-than-normal winter temperatures in 2025. Additional key drivers of the increase in earnings are highlighted by segment on this page. Moving to page 14 for select considerations for the remainder of the year. We remain confident in our 2026 earnings per share guidance range of $5.25 to $5.45 and continue to maintain disciplined cost management throughout the company. Recall that in 2025, we increased energy center and discretionary tree-trimming expenditures to enhance our customer experience, especially during severe weather events. We are continuing these reliability-focused efforts and would expect higher tree-trimming costs in 2026, particularly in the second quarter of this year as compared to 2025. As you think about quarterly results for the balance of the year, I encourage you to consider the supplemental earnings drivers outlined on this page. Turning to page 15, I will provide an update on Ameren Illinois and Ameren Missouri regulatory matters. In April, Ameren Illinois requested a $65 million revenue adjustment as part of the annual performance-based rate reconciliation under the electric distribution multiyear rate plan. This adjustment reflects 2025 actual costs, actual year-end rate base, and return on equity and common equity ratio established in the multiyear rate plan. An ICC decision is expected in December, with rates reflecting the approved reconciliation adjustment effective January 2027. In addition, over the course of the year, we will engage with stakeholders on our proposed electric distribution grid investment plan for the 2028 through 2031 period. Proposed investments in the plan are designed to further enhance the reliability and resiliency of the grid. We expect an ICC decision on the proposed investment plan by December, with an associated rate filing to follow in 2027. Finally, we expect to file our next Ameren Missouri electric rate review in mid-2026 to recover costs for significant infrastructure investments made to the grid to ensure the system remains reliable and resilient for all customers. Turning to page 16, where we provide a financing update. We continue to feel good about our financial position. In the first quarter, we successfully completed our planned debt issuances at Ameren Missouri and Ameren Parent. As we fund our robust infrastructure plan, we remain focused on maintaining a strong balance sheet and supporting our credit ratings. To that end, we continue to make progress against our expected equity issuances of approximately $4 billion from 2026 through 2030. To satisfy our 2026 equity needs, last May, we sold forward approximately $600 million of equity, representing approximately 6.4 million shares we expect to issue near the end of this year. For 2027 and beyond, so far in 2026, we have sold forward approximately $600 million of common stock under our at-the-market program. We will continue to be thoughtful about our approach to executing our equity plan. With respect to the balance sheet, last month, we held our annual ratings agency meetings with S&P and Moody’s. In April, S&P affirmed our BBB+ credit rating and stable outlook, and we expect Moody’s to issue their annual credit opinion updates in the coming weeks. As we have said before, we value our current ratings, and we remain committed to maintaining a strong balance sheet and strong credit metrics as we execute our growth plan. In summary, turning to page 17. We are making strong progress towards our strategic objectives in 2026, which we expect will continue to drive consistent, superior value for all our stakeholders. We are excited about the future. Our outlook remains supported by robust yet conservative sales assumptions, solid rate base growth, disciplined cost management, and a strong pipeline of customer value-driven investment opportunities. As a result, we continue to expect strong earnings and dividend growth supporting an attractive total shareholder return. That concludes our prepared remarks. We now invite your questions. Operator: We will now move to our question and answer session. If you have joined via the webinar, please use the raise hand icon, which can be found at the bottom of your webinar application. When you are called on, please unmute your line and ask your question. We will now pause a moment to assemble the queue. Okay, your first question comes from the line of Jeremy Bryan Tonet from JPMorgan. Please unmute and ask your question. Jeremy Bryan Tonet: Hi. Good morning. Martin J. Lyons: Good morning. Jeremy Bryan Tonet: Just want to start off here. I was wondering if we could talk a bit more about your conversations with large load and data centers here. Wondering if you are having conversations in D.C., potential interest beyond the 3.4 gigawatts in Missouri and 850 megawatts in Illinois. Just want to get a sense for those types of conversations, what that could look like over time. And then at the same time, how does community engagement stand as far as dealing with local stakeholders’ receptivity to this type of development? Martin J. Lyons: Yes, sure, Jeremy. This is Marty. Good to hear from you. I would say broadly, in both states, both in Missouri and Illinois, we have several gigawatts in each state of other projects with engineering studies underway. So in addition to those places where we have construction agreements, beyond that there are several gigawatts of interest in both states that have matured to the engineering study stage, and we will see whether those come to fruition or not. I would say some of the conversations that we are having are with hyperscalers that have already signed ESAs, specifically in Missouri, about expansion opportunities beyond what they have already signed up for. So some very encouraging conversations that speak to the long-term growth prospects associated with these data centers and hyperscalers. More specifically, if you look at what we have talked about this year that I think is most encouraging is, as you mentioned, we have in Missouri 3.4 gigawatts of construction agreements. In Illinois, we have 850 megawatts of construction agreements. Drilling down on Missouri, that 3.4 gigawatts of construction agreements—back in February, we moved 2.2 of that to energy services agreements, so ESAs that were signed. With respect to those, we are looking forward, hopefully in the second quarter, to some public announcements and groundbreaking and starting to get construction underway. That is that 2.2. Then as I said in my prepared remarks, of the remaining 1.2 of construction agreements, we are optimistic that in the very near term, we can see additional ESAs signed with respect to a portion of that 1.2 that is under construction agreement. So overall, my answer to your question, Jeremy: we are seeing good progress with respect to the ESAs we have signed. We are seeing good progress in Missouri with respect to converting some of those construction agreements to further ESAs. We are hopeful to have those completed in the near term, and we are optimistic here in the second quarter we are going to see some of those ESAs move to groundbreakings and beginning of construction activity. As I said at the outset, a fairly good pipeline of interest both in Missouri and Illinois that speaks to the long-term growth of data centers and sales across our two states. With respect to communities, I would say that broadly, our states remain supportive of the economic development associated with these data centers and ESAs. In certain communities, I think there are going to be concerns expressed, and other communities are going to be receptive to these data centers and to this growth. There are a number of places across the states of Missouri and Illinois, and in our service territories in particular, that are zoned for this kind of development and I think are appropriate for this kind of development, and so we are optimistic that we are going to see good growth specifically in Missouri but also in Illinois. Jeremy Bryan Tonet: Got it. That is helpful there. And then next question, at the risk of getting ahead of myself here, I believe you have defined ramp schedules where if you exceed that, that can lead to upside in the CapEx—a gig by ’29, 1.2 by 2030. Just wondering, taking everything that you just talked about there, your preliminary thoughts on line of sight to exceeding those ramp schedules, and when the potential for incremental capital coming into the plan might materialize. Martin J. Lyons: Yes, Jeremy, great question. You are right. What we laid out in our plans for sales growth is an assumption of about 1.2 gigawatts of growth by 2030, which would represent about a 6.2% sales CAGR in Missouri. Our generation plans that we are building out would provide for sales incremental to that. We had talked about the generation plans providing for up to an additional two gigawatts of sales by 2032, and by 2040 up to three and a half gigawatts. So again, some generation buildout to serve above that initial sales growth assumption. However, as I mentioned, we have signed 2.2 gigawatts of ESAs. We are very close to signing additional ESAs that would bump up that number, and to the extent that the growth in sales comes faster than what was assumed in our plan—so, again, if that 2.2 gigawatts or more exceeds the growth rate included in our plans out through 2030—it certainly represents upside. I would say it represents upside from the standpoint of sales and sales margins, but also causes us to think about our generation needs in the next five years and in the next ten years. Within the next five, are there things that we can accelerate—things like renewables or dispatchable resources like batteries or potentially fuel cells? And then even in the five to ten years, what do the sales growth look like associated with the ESAs we have signed? Also, as I mentioned a minute ago, we are having conversations with these hyperscalers, in particular even the ones that have signed these ESAs, about expansion possibilities—really looking at sales growth beyond the five years and the ten- and fifteen-year period and what additional generation might be needed to serve in those periods to the extent that we see sales growth beyond the assumptions included in our IRP we filed last year. That leads me up to later this year in September. We are required in Missouri to file an integrated resource plan, and we plan to do that in September. It is a comprehensive update. We will look at all the assumptions that go into that—first and foremost, sales: what we expect the sales growth to look like over a 20-year period, but certainly in the next five and ten in particular. We will take into account these ESAs that we have signed, the ramp rates we are seeing, the conversations that we are having with data center developers and hyperscalers, and the economic growth more broadly in our region beyond those data centers. We will be looking at the most reliable and affordable path forward in terms of generation resources to deploy to serve them, and we will roll that out in September. I think that will be a good milestone in terms of giving a marker for what we expect sales growth to be, what we expect the generation buildout to be, and that should also serve as an opportunity for us to give a good update on our third quarter call with respect to our investment plans, our rate base growth, and earnings expectations looking out over time. Jeremy Bryan Tonet: Got it. That makes sense. I will leave it there. Thank you. Operator: Your next question comes from the line of Richard Sunderland with Truist Securities. Please unmute your line and ask your question. Richard Sunderland: Good morning. Operator: Okay. Great. Thank you. Richard Sunderland: Picking up some of the points from the prior questions, curious if you could speak a bit more to the fuel cell opportunity you alluded to there and how you see that fitting in as a solution over the next few years? Martin J. Lyons: Again, Richard, I think I put the word “possibility” in there. What we are really looking at over the next five years is that it is obviously very difficult to get any additional gas-fired generation done in the next five or six years if you have not already started. We have two big projects going on that we have talked about, both Castle Bluff and Big Hollow, and another 2,100-megawatt combined cycle facility planned for 2031. What we are looking at—what I was trying to really say—is over the next five to six years, really looking at anything we can accelerate and bring in during that time period. The options appear to be things like renewables and batteries, which we have talked about and are deploying some of those. Of course, we will take a look at fuel cells—not a commitment to that, but something we are looking at as a possibility for dispatchable resources in this time period. Richard Sunderland: Understood. That is helpful. To take that topic but zoom out a bit, could you speak to the generation efforts overall from a supply chain perspective and a planning perspective as you think about that upcoming IRP filing and what you have an eye to into the 2030s? You spoke to the three gigawatts of CCNs to be filed in short order. Just curious what you are looking at even beyond that and if you have already taken steps there. Martin J. Lyons: Yes, Richard. I will start and then turn it over to Michael. First of all, with respect to that three gigawatts of new resources, there were some questions we got about whether that was previously planned. I will tell you that it was. If you look at the IRP from last February, which is on slide 22—it is back in the appendix—you will see that we had about five gigawatts of generation planned by 2030, and then, as I mentioned, that combined cycle facility, another 2,100 megawatts planned for 2031. To be clear, the three gigawatts that we laid out on slide eight, for which we are going to be seeking CCNs, are all consistent with that IRP we filed last year. The capital for those is consistent with the plans we rolled out in February. I will start there, but I will turn it over to Michael Main to address some of the other questions you had. Michael Main: Thanks, Marty. Good morning. A little more specifically with respect to generation, I think we sit in a good spot. There is obviously a great deal of activity going on. As Marty indicated, we feel good about the number of projects that we have under construction—these solar projects. From a gas perspective, we have spoken about this. We have a simple-cycle project coming online at the end of 2027, another one in 2028. We have those turbines under contract. In fact, we have taken delivery of our first turbine for the 2027 project. We have EPC contracts in place. Labor is mobilized and making really good progress on both of those simple cycles, along with about 400 megawatts of battery at that second site that comes online in 2028. With respect to longer term, the combined cycle—again, we feel good about where we sit today from a procurement of long lead-time material. We have executed the contract with Mitsubishi for that, and we have good line of sight on delivery of all that power island equipment in 2031—HRSGs, steam generators, etc. We feel good about those delivery timelines. We are working through the labor component piece of this. We have a consortium that we are putting in place with national construction companies. We are very fortunate to have a number of companies headquartered here in St. Louis that are going to be put together to build these plants, along with a global engineering design firm that will help design and engineer this for us. There is obviously a great deal of work that needs to go into building these combined cycles—it is a large construction project, 2,100 megawatts—but we feel good about where we sit today and the work ahead of us. Longer term, as Marty talked about, there are a number of scenarios that we are working through at the moment in terms of future demand and future generation needs. All of these conversations are ongoing with the various vendors, recognizing where we are from a supply chain perspective and making sure that we are taking the appropriate steps to continue to put us in a place that allows us to execute against this plan. So more to come as we work through it. I do not want to front-run the IRP, but all of that has been going on, Richard, for the better part of the past year. Richard Sunderland: Very helpful. Thanks for the time. Martin J. Lyons: Alright, Richard. Thank you. Operator: The next question comes from the line of Shariah Pourreza with Wells Fargo. Please unmute your line and ask your question. Analyst: Hi. This is actually Andrew on for Shar. On the topic of nuclear, the government has indicated some level of interest in the AP1000. There seems to be a consortium of regulated utilities that is forming and could consider new nuclear development as a group if cost overrun risk is taken on by a potential offtaker. Would you consider being part of this consortium, or maybe already are part of this consortium, given your experience with Callaway and the 1.5 gigawatts of new nuclear in your IRP? Martin J. Lyons: Welcome this morning. We are not a part of that consortium. As you know, we do own and operate the Callaway Energy Center here in Missouri, and if you look at that IRP that we laid out on slide 22, as we look to the longer term, we certainly think nuclear should be part of the long-term portfolio—not just Callaway, but additional nuclear resources in the long term. It is something that we are going to continue to study. The state of Missouri as well is working on an updated state energy plan, and we will be taking part in that. The state is also looking at what it would take to support new nuclear. We are going to participate in workshops associated with that, and we will see where that leads in terms of the long term—the type of technology that is deployed and the time frame on which to do it. I think we, like a lot of companies that are interested in nuclear, are certainly looking at the advancements of not only AP1000-type technology but small modular reactors and looking over time for price and schedule certainty that would allow you to move forward. Certainly, things like consortiums may very well be a good path forward in terms of being able to address some of the risks associated with price and schedule. We will continue to look at those types of opportunities and engage with the state and see where that leads over time. Thanks for the question. Analyst: Thank you. That is very helpful. Elsewhere in the country, we have seen customers with signed ESAs have trouble securing zoning for their data center sites. Do your customers have sites secured for the 2.2 gigawatts you have under ESA? And are there any other risks to the ramp under those ESAs that we should be considering? Martin J. Lyons: With respect to those 2.2, those sites have been secured, and as I said earlier, we are looking forward in the near term—hopefully in the second quarter—to see some groundbreaking ceremonies and construction get underway. With respect to those, we feel good about it. When you look beyond that, I talked about some of the construction agreements that we have or some of the sites that are going under engineering with engineering studies. Those are in a variety of areas and in various stages of getting approvals. But with respect to the projects where we have the ESAs, we feel very good about those. Analyst: Thank you. I will leave it there. Operator: Just a reminder, if you would like to ask a question, please select the raise hand icon that can be found at the bottom of your webinar application. Our next question comes from Carly Davenport. Looks like Carly lowered her hand. Our next question comes from—oh, Carly’s back. Our next question comes from Carly S. Davenport with Goldman Sachs. Carly, please unmute your line and ask your question. Carly S. Davenport: Hey. Good morning. Sorry about that. Thanks for taking the questions. Martin J. Lyons: No worries, Carly. Carly S. Davenport: Maybe just to start on the MISO transmission projects. Can you talk a little bit about the key considerations that you are evaluating on whether or not you will put forth a bid on the remaining two competitive projects as part of that process, and a sense of when you might expect to file those? Martin J. Lyons: Yes, sure, Carly. If you look at what we outlined on slide nine where we have some of the transmission projects, we outlined in the bottom table those competitive projects where we have had a joint bid submitted and then some of the projects that are under evaluation. As we look at different project opportunities like that, it is really looking at whether we think we can put forward a good competitive proposal that delivers the value that is expected to be delivered from those projects. We think we have strong capabilities in this area. We have strengths in planning, design, project management, construction, operations, and maintenance. We have delivered great value within our region, and we have won a few of these competitive projects over time. We will take a look at each one of those projects, and if we think we can be competitive and bring value, then we will submit a bid. I would also highlight, while we are on the topic of transmission, we have a robust investment plan over the five years, and we see that as having upside as well. I mentioned earlier some of the upside associated with these large loads as it relates to sales and the generation portfolio, but that exists in the transmission area as well. When we put together our capital plans each year, we have always been pretty disciplined about what we put in there—whether it is the CapEx or the rate base growth plans. We do not typically include projects until there is clarity on timing, scope, and the system and/or customer need associated with those. As we look at some of this growth—large loads and generators wanting to connect to our system—those represent upside opportunities for us in terms of incremental transmission investment. We are looking at both things. I add that because as we look ahead at growth opportunities in transmission, we are both looking at those investments that we typically make to interconnect customers and generators as well as these competitive projects—so a couple of areas of upside for us as we look at our capital plans going forward. Carly S. Davenport: Got it. Appreciate that. Super helpful. One other question from me on the ICC reconciliation process. I guess it is not atypical to have some divergence on the OPEB treatment, but what are your thoughts on the adjustments proposed related to the infrastructure investments? Do you see any scope for some movement on that side? Andrew Kirk: Hey, Carly. This is Andrew Kirk. Those adjustments are typical as part of the process. There is nothing unusual there, so you should assume that is just a typical part of the process—truing up rate base and related items as part of the 2025 reconciliation. Carly S. Davenport: Got it. Great. Thank you for the time. Operator: Thanks, Carly. Our next question comes from David Paz with Wolfe. Please unmute your line and ask your question. David Paz: Hello. Marty, you may have just answered part of this, but let me ask it more bluntly. Do you anticipate the remaining 1.2 gigawatts of construction agreements to begin ramping in your current period by 2030, or will the ramps begin post-2030? I am referring to the ones for which you expect potentially some outcome in the near term. Martin J. Lyons: Yes, David. I think that what you are asking about is: we have 3.4 gigawatts of construction agreements; 2.2 of that was announced in February, which leaves another 1.2 in construction agreements. As I said a couple of times, we do expect a subset of that to move to ESAs in the near term. The ramp rates in each one of these is confidential. You could see some movement in terms of sales associated with those during this five-year period. As you sign these ESAs, there is a period of construction to get the data center built before the sales start to kick in, but you could see some of that sales growth within the five-year period. David Paz: That is great. Relative to your current sales outlook and capital plan, would you view any generation spend in your five-year period to be additive to the $32 billion, or as you get incremental opportunities would you displace CapEx, just given any build constraints? Martin J. Lyons: We are always looking at the overall capital plan and the puts and takes, but I would expect that it would be added to the overall plan. Also, to the extent that those generation resources are being accelerated or built for the purpose of supplying the large load, obviously through Senate Bill 4 and the tariff that we have, those costs would be ultimately borne by those large loads. That is probably the best way to think about it. David Paz: That is great. Then just a clarification. I think in an earlier response you said you felt good about solar projects among other types of projects. What about the one gigawatt of wind in your plan by year-end 2030? I think at least in your IRP you have all the permits there, zoning. Any issues with that? What is the status? Martin J. Lyons: Yes, David. As you look at that portion of the IRP, we are still interested in wind as a resource. As we think about the renewable portion of our overall generation mix, it is good to have some diversity in there of solar and wind resources. But the timing of that relative to solar, I would say, is somewhat adjustable. We would love to see some more wind in our portfolio over time, but over the five-year period you could see, for example, solar displace that and the wind get pushed out a little bit. I would think about it that way: the timing does not have to be necessarily within the five-year period. We remain interested in wind, and you may see a substitution of solar for wind in that period. Operator: We have now reached the end of our question and answer session. I would now like to turn the call over to Martin J. Lyons for closing remarks. Martin J. Lyons: Thank you all for joining us today. Through robust and disciplined investment in our electric, natural gas, and transmission infrastructure this year, we are positioning Ameren Corporation to reliably serve our customers and growing communities now and in the future. We look forward to seeing many of you in the next few weeks. Thanks, and have a great day.
Operator: Thank you for your continued patience. Your meeting will begin shortly. Star zero, and a member of our team will be happy to help you. Hello, and welcome, everyone, joining today’s Q1 2026 SLR Investment Corp. earnings call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. Please note this call is being recorded. We are standing by if you should need any assistance. It is now my pleasure to turn the meeting over to Michael Gross, Chairman and Co-CEO. Please go ahead. Michael Gross: Thank you very much, and good morning. Welcome to SLR Investment Corp.’s earnings call for the quarter ended 03/31/2026. I am joined today by my long-term partner, Bruce Spohler, our Co-Chief Executive Officer, as well as our Chief Financial Officer, Shiraz Kajee, and members of the SLR Investment Corp. Investor Relations team. Shiraz, before we begin, would you please start off by covering the webcast forward-looking statements? Shiraz Kajee: Good morning, everyone. I would like to remind everyone that today’s call and webcast are being recorded. Please note that they are the property of SLR Investment Corp. and that any unauthorized broadcast in any form is strictly prohibited. This conference call is also being webcast from the Events Calendar in the Investors section on our website at srinvestorancorp.com. Audio replays of this call will be made available later today as disclosed in our May 5 earnings press release. I would also like to call your attention to the customary disclosures in our press release regarding forward-looking statements. Today’s conference call and webcast may include forward-looking statements and projections. These statements are not guarantees of our future performance or financial results and involve a number of risks and uncertainties. Past performance is not indicative of future results. Actual results may differ materially as a result of a number of factors, including those described from time to time in our filings with the SEC. We do not undertake to update any forward-looking statements unless required to do so by law. To obtain copies of our latest SEC filings, please visit our website or call us at (212) 993-1670. At this time, I would like to turn the call back over to our Chairman and Co-CEO, Michael Gross. Michael Gross: Thank you, Shiraz, and thank you to everyone for joining our earnings call this morning. Following a year of relative outperformance and strong portfolio credit quality metrics, we are pleased to report a solid start to 2026 for SLR Investment Corp. This is despite the confluence of events in the first quarter that created challenges for our industry. These include rising geopolitical uncertainty and elevated concerns about the disruptive impacts of artificial intelligence on the economy, and to a greater extent the private credit asset class. These dynamics have triggered a speculative and often negative global conversation about the industry unlike anything we have seen in our twenty years of operating SLR Capital Partners and decades of experience managing BDCs designed to match the ownership of illiquid private credit assets with permanent equity. While we expect an elevated focus on private credit and BDCs to persist through 2026, we think it is important to remind investors we have been positioning the portfolio for this moment of recalibration of risk in direct lending for a long time. We believe SLR Investment Corp.’s conservatism and focus on collateral-based specialty finance strategies should enable our portfolio to weather uncertain economic conditions while allowing our origination teams to be opportunistic in an improving investment climate. Additionally, we continue to embark on growth initiatives across our specialty finance investment strategies. We also believe that both institutional and private wealth investors are increasingly recognizing SLR Investment Corp.’s value proposition and place in a portfolio’s allocation of private credit that provides differentiated exposure. For the first quarter of 2026, we reported net investment income, or NII, of $0.33 per share and net income of $0.31 per share. NII was down sequentially primarily due to three factors: first, the lag impact on our floating rate loans from the Fed’s 50 basis points cut in the fourth quarter of 2025; second, a contraction of the comprehensive portfolio as deal activity slowed meaningfully in what is already a seasonally light quarter amid rising economic uncertainty; and lastly, a decline in fee income. As of March 31, the company’s net asset value per share was $18.16, down one-half of 1% sequentially but flat year-over-year. SLR Investment Corp.’s net income for the quarter equates to an approximate 7% annualized return on equity. While we recognize that the company’s net investment income ROE did decline sequentially, we continue to expect that our net income ROE, or total return, remained above the public and private BDC industry average in the first quarter and continued to compare favorably on both a one-year and three-year basis. During the first quarter, SLR Investment Corp. originated $242 million of new investments across the comprehensive portfolio and received repayments of $360 million for net repayments of $180 million, resulting in a quarter-end comprehensive portfolio of $3.2 billion. The primary driver of new originations continues to be our commercial finance strategies, which we believe offer more attractive risk-adjusted returns in today’s competitive private credit markets. As of 03/31/2026, approximately 85% of our portfolio investments were senior secured specialty finance loans, which remains the highest percentage on record and offers a risk profile that is highly differentiated from other BDC portfolios available to investors. We continue to believe that SLR Investment Corp.’s investment portfolio mix shift over the last couple of years to asset-based specialty strategies provides greater downside protection than cash flow loans through our strong credit agreements, actively managed borrowing bases, and underlying collateral support. We expect to continue to approach new investments in cash flow lending opportunistically, especially if signs of widening spreads and improved terms endure. For investors concerned about the uncertainty, technology obsolescence risk, and enterprise value destruction for the software industry from the burgeoning threat of artificial intelligence, we believe that SLR Investment Corp.’s portfolio, with its lack of software exposure, offers a safe haven for investors. Our direct industry exposure to the software industry remains at approximately 2% of our portfolio’s fair value as of 03/31/2026 and is one of the lowest amongst publicly traded BDCs. During the first quarter, we established an artificial intelligence investment committee responsible for assisting investment teams with evaluating both new opportunities as well as the existing portfolio as it relates to the risk of AI to both companies and industries. Despite our de minimis exposure to software, we believe that AI will have an impact either positively or negatively in nearly all industries and are assessing every portfolio company and new investment opportunity accordingly. Our underlying analysis includes evaluating the impact to business model, customer base, and competitive moat from AI as well as incorporating company- and sector-specific evaluation categories. We will apply this process during underwriting of new investments and will reevaluate all portfolio companies at least once per quarter. In addition, we are implementing AI in our specialty finance businesses to assist in analyzing borrowing bases and covenants, streamlining routine workflows, and improving legal document reviews. Overall, we are pleased with the composition, quality, and performance of our portfolio, a direct result of SLR Investment Corp.’s multi-strategy approach to private credit investing. At quarter end, 94.5% of our comprehensive investment portfolio was comprised of first lien senior secured loans. 100% of investments at cost were performing with zero investments on nonaccrual. Our watch list investments represented only 2.2%, which we note is unchanged from the first quarter in 2021. We believe these credit quality metrics compare favorably to peer public BDCs. At March 31, including available credit facility capacity, at SSLP and our specialty finance portfolio companies, we had over $900 million of capital available to deploy. Our liquidity profile puts us in a position to take advantage of either stable economic conditions or a softening of the economy. At this point, I will turn the call back over to Shiraz to take you through our first quarter financial highlights. Shiraz Kajee: Thank you, Michael. SLR Investment Corp.’s net asset value at March 31, 2026 was $990.8 million, or $18.16 per share, compared to $18.26 per share at 12/31/2025. At quarter end, SLR Investment Corp.’s on-balance sheet investment portfolio had a fair value of approximately $2.1 billion in 99 portfolio companies across 28 industries, compared to a fair value of $2.1 billion in 100 portfolio companies across 31 industries at December 31. SLR Investment Corp.’s investment portfolio continues to be funded by a combination of our multi-lender revolving credit facilities and the issuance of term debt in the unsecured debt markets to institutional investors. The company is investment grade rated by Fitch, Moody’s, and DBRS. More than 40% of the company’s debt capital is comprised of unsecured debt as of March 31. At March 31, the company had approximately $1.1 billion of debt outstanding with a net debt-to-equity ratio of 1.14x, within our target range of 0.9x to 1.25x. We have ample liquidity to fund our unfunded commitments and for future portfolio growth. Looking forward, the company has one debt maturity in 2026 with $75 million of unsecured notes maturing in December. We expect to continue to prudently access the debt capital markets and issue unsecured debt as and when needed. Subsequent to quarter end, the company increased its revolving capacity by $25 million with the addition of a new lender. Total revolving commitments now total $720 million, up from $695 million as of quarter end. Furthermore, in May, the Board authorized a one-year extension of our $50 million stock repurchase program. Moving to the P&L, for the three months ended March 31, gross investment income totaled $49.3 million versus $54.5 million for the three months ended December 31. Net expenses totaled $31.4 million for the three months ended March 31. This compares to $32.9 million for the three months ended December 31. Accordingly, the company’s net investment income for the three months ended March 31, 2026 totaled $17.9 million, or $0.33 per average share, compared with $21.6 million, or $0.40 per average share, for the prior quarter. Below the line, the company had net realized and unrealized losses of $0.7 million in the first quarter versus a net realized and unrealized gain of $3.5 million for the fourth quarter of 2025. As a result, the company had a net increase in net assets resulting from operations of $17.1 million for the three months ended 03/31/2026, compared to a net increase of $25.1 million for the three months ended 12/31/2025. On 05/05/2026, the Board declared a quarterly distribution of $0.31 per share, payable on 06/26/2026, to holders of record as of 06/12/2026. The Board also approved a voluntary and permanent change in the company’s advisory agreement with the investment adviser, SLR Capital Partners, reducing the performance-based incentive fee payable to 17.5% from 20%. This further aligns the adviser with our shareholders. With that, I will turn the call over to our Co-CEO, Bruce Spohler. Bruce Spohler: Thank you, Shiraz. As Michael shared, we believe that the private credit industry continues to exhibit signs of the middle stages of a credit cycle, characterized by rising defaults and growing credit dispersion in direct lending. With uncertainty percolating, today’s environment requires highly disciplined underwriting and a heightened focus on capital preservation. Our specialty finance strategies offer high returns in cash flow loans and greater downside protection through their underlying collateral support and tight documentation. We view these more favorable terms as a complexity premium earned through investing in structures that require significant expertise as well as infrastructure that many private credit firms do not have. Turning to the portfolio, at quarter end, the comprehensive investment portfolio consisted of approximately $3.2 billion with average exposure of $3.7 million measured at fair value; approximately 98% of the portfolio consisted of senior secured loans with 94.5% in first lien loans. The 3.2% of our portfolio held in second lien loans consists entirely of asset-based loans with borrowing bases and no second lien cash flow loans. At quarter end, our weighted average asset-level yield was 11.1%, down from 11.6% in the prior quarter. The sequential decline was primarily due to the lagged impact from the 50 basis points decline in base rates in the fourth quarter and reduced one-time income that had occurred in the fourth quarter. Overall, we believe our portfolio has been less impacted by changes in base rates and spread compression compared to the BDC peer group because of our lower allocation to cash flow loans. Based on our quantitative risk assessment scale, our portfolio continues to perform well. At quarter end, the weighted average investment risk rating was under two, based on our one-to-four risk rating scale, with one representing the least amount of risk. Just under 98% of our portfolio is rated two or higher. Importantly, 100% of the portfolio was performing with no investments on nonaccrual. While our credit quality remains strong, in light of market concerns of increasing defaults in private credit portfolios, we believe it is important to note that SLR Investment Corp. has a strong track record of successfully navigating workouts. When a portfolio company’s performance deteriorates, we work closely with our co-lenders, owners, and management teams to arrive at a value-maximizing path forward. In the event owners are no longer willing to support a portfolio company with additional equity, we are comfortable stepping into an ownership role if we believe that will be the path to drive the maximum return. We have a dedicated senior team that works closely with our investment teams when a situation first becomes noisy. They work hand-in-hand with our senior leadership team at SLR on all workouts. In addition, our asset-based lending teams are led by industry veterans with over thirty years of liquidation and workout experience, and they provide additional restructuring support when needed. Now let me touch on each of our four investment verticals. Starting with our Specialty Finance segments, as a reminder, we dynamically allocate to our strategies based on market and economic conditions, which allows us to source what we believe to be attractive investments across market cycles. Let me start with asset-based lending. Our direct corporate ABL business remains a highly fragmented industry and contains high barriers to entry through the complexity of underwriting, collateral monitoring, and active borrowing base management. This strategy requires significant investment in experienced human capital as well as infrastructure. Our priority remains first lien positions on liquid current account assets, which has historically minimized our downside risk exposure. At quarter end, our ABL portfolio totaled just under $1.4 billion across roughly 250 issuers, representing approximately 43% of our total portfolio. During the first quarter, we originated $77 million of new ABL investments and had repayments of $194 million. The weighted average asset-level yield on this portfolio was 12.3% compared to 12.6% in the prior quarter. Our ABL portfolio contraction in the first quarter was predominantly due to temporary paydowns of existing revolving credit facilities and our proactive management of borrower exposures, consistent with our hands-on ABL credit discipline, as opposed to repayments of loans that would have generated repayment fees. In our ABL business, a meaningful contributor to returns is derived from portfolio churn in the form of early repayment fees and the acceleration of upfront fees. We had close to 70% of this portfolio churn last year across our ABL businesses. Over time, we expect this churn to revert to its historical level, which we expect will drive incremental fee income. We are seeing increased activity across our ABL platform. In particular, we are seeing an uptick, post a quiet first quarter, from our sponsor finance clients who are increasingly seeking incremental liquidity through companies. We expect to produce net portfolio growth in our ABL strategy through the remainder of this year. Turning to ABL strategic initiatives, our adviser recently established a sourcing arrangement for ABL investments with a large U.S. commercial bank that spans many of our ABL strategies. This partnership expands our origination reach. We are optimistic that this initiative will enhance our investment sourcing funnel and support portfolio growth in specialty finance ABL investments. We are currently in discussions for other partnership opportunities similar to this. In addition, we are continuing to evaluate strategic transactions such as portfolio and ABL business acquisitions. We also continue to expand our ABL origination team. Now let me touch on Equipment Finance. At quarter end, the equipment finance portfolio totaled just under $1.1 billion, representing approximately a third of the total portfolio. It was highly diversified across roughly 580 borrowers. The credit profile of this portfolio was unchanged quarter over quarter. During Q1, we originated $122 million of new assets with the majority of these investments coming from our business that provides leases to investment grade corporate borrowers. We had repayments of approximately $126 million. The weighted average asset-level yield for this asset class was 10.2% compared to 10.9% in the prior quarter. We remain encouraged by current trends we are seeing in our equipment finance business. Our investment pipeline has expanded and we are seeing demand from our borrowers to extend leases on equipment rather than buy new equipment at higher tariff-adjusted prices. Now let me turn to Life Sciences. At quarter end, the portfolio had just over $180 million of senior secured investments, representing close to 6% of the total portfolio, which is down from a peak of 15%. Over the past couple of years, we have been reporting on the origination challenges in this strategy. The debt market for venture-backed private and public late-stage life science companies has seen an influx of capital and a corresponding degradation in credit discipline. Our life science finance team has been in this business for over twenty-five years. A zero loss track record has been predicated on underwriting and structuring standards that new entrants are often not adhering to. This trend has impacted our portfolio growth. For context, Life Sciences has historically accounted for an average of 22% of our quarterly gross comprehensive income since 2020. However, in the first quarter, it was only 13.5%. One-time life science fees have historically contributed an average of 3.5% to our gross investment income, whereas they represented approximately 1% during Q1. Similar to asset-based lending, churn is critical in our Life Science portfolio and has been a significant contributor to our earnings. The pipeline of new opportunities has picked up materially in 2026. To capitalize on the expected growing opportunity set in Life Sciences, our adviser has expanded the team through the hiring of three highly experienced professionals. We expect that these efforts to broaden our origination reach and product offering should generate strong portfolio growth over the coming quarters. We will eventually both increase portfolio churn as well as fee income. Finally, let me turn to cash flow lending. As a reminder, in cash flow lending, we position SLR Investment Corp. not as a generalist capital provider across all industries but rather as a specialized, industry-focused partner to private equity firms with portfolio companies in the upper mid-market. This is most evident in the healthcare sector. We intentionally curate our sponsor base, partnering exclusively with dedicated healthcare private equity firms with long-standing successful track records of investing in the healthcare industry. These sponsors prioritize knowledge over terms, recognizing that the healthcare industry’s ongoing regulatory and reimbursement evolution requires a lender with deep domain expertise. By leveraging SLR Investment Corp.’s three healthcare investment pillars—healthcare ABL, Life Sciences, and Healthcare Sponsor Finance—we evaluate sponsor-backed investments with a level of granularity that generalist lenders cannot replicate. Beyond our focus on healthcare, we selectively deploy capital into business and financial services which mirror these same defensive characteristics: target market leaders with high recurring revenue, sustainable business models, and low capital intensity. By focusing on companies that share the resilient non-cyclical profiles of our healthcare portfolio, we maintain rigorous underwriting standards while providing prudent diversification across our cash flow finance strategy. At quarter end, this portfolio was $480 million across 28 borrowers, including the senior secured loans in our SSLP. Approximately 2% of the portfolio is allocated to software investments. Weighted average EBITDA was approximately $110 million. 100% of our cash flow investments are in first lien investments, and the portfolio carried a weighted average LTV of 38%. Our borrower fundamentals are trending positively, with year-over-year growth in both EBITDA and revenue at our portfolio companies. Weighted average interest coverage on this portfolio was 2.2x at quarter end, up from 2.0x in the prior quarter. During Q1, we made investments of $43 million in first lien cash flow loans and had repayments of approximately $40 million. Only one of these 12 investments was to a new borrower. At quarter end, the weighted average cash flow yield was approximately 10% compared to 9.8% in the prior quarter. Now let me turn to our SSLP. During the quarter, we invested $9.8 million and had $3.4 million of repayments. Net leverage was just under 1x. In the first quarter, we earned income of $1.5 million, representing an annualized yield of roughly 12.25%, compared to 9.25% in the fourth quarter. At quarter end, we had approximately $54 million of undrawn debt capacity. We expect to grow this portfolio opportunistically over the remainder of 2026. Now let me turn the call back to Michael. Michael Gross: Thank you, Bruce. Over the last seven months, we think both the public and private markets have come to terms with private credit’s maturation as a core asset class with a corresponding recalibration of forward return expectations to reflect a tighter spread environment and a more normalized default loss experience. With less than 10 basis points of annual losses at SLR Investment Corp. since the company’s IPO sixteen years ago, resulting in an IRR above 9%, our North Star at SLR continues to be protecting capital, avoiding losses, and not chasing higher spreads at the expense of structural protections. We believe this approach provides our investors with absolute returns designed to consistently exceed the liquid corporate credit markets yet with lower volatility. It is with this view—that the private credit market has matured and correspondingly carries tighter illiquidity premiums—that our Board of Directors took action this quarter to adjust the second quarter dividend distribution to a level we view to be sufficiently covered from earnings while simultaneously preserving capital as we grow our earnings, and to adjust our performance-based incentive fees to 17.5% from 20%. These are actions that we do not take lightly as leaders and significant shareholders of SLR Investment Corp. since founding more than fifteen years ago. However, we believe that we have struck the right balance and are acting in the best long-term interests of shareholders. As a reminder, we have taken action previously at SLR Investment Corp. to adjust the dividend during transitioning investment climates to make way for growth. The SLR team owns over 8% of the company’s stock and has a significant percentage of their annual incentive compensation invested in that stock each year, including purchases that took place in the first quarter. The team’s investment alongside fellow institutional and private wealth investors should demonstrate our confidence in the company’s portfolio, stable capital structure, and earnings outlook. We have made significant investments and resources across the SLR platform over the last couple of years and year to date that should fuel growth in the investment portfolio that will support net investment income growth. Importantly, we have the available capital to be opportunistic in market dislocations and to evaluate strategic transactions. Thank you all again for your time today with a busy day of BDC earnings releases. Operator, will you please open up the line for questions? Operator: Thank you. And our first question today comes from Erik Edward Zwick with Lucid Capital Markets. Your line is now open. Erik Edward Zwick: Thanks. Good morning, everyone. I thought you made some interesting points in the prepared comments describing how lower churn in some of the portfolios has led to lower fees and how this is, hopefully, a more temporary, market-related impact, but that has driven down the investment income here in the most recent quarter. And I suspect that is what is driving action in the stock price today. But you also highlighted some initiatives you have taken to grow the specialty finance strategies and how those should help rebuild that income through additional churn. I am just curious to what degree—and I realize there is no definite time frame—how soon should we start to see the benefits of those initiatives that you have taken and outlined? Shiraz Kajee: Yes. I think that it will take a few quarters. If you step back for a moment, the churn commentary goes specifically to both our asset-based lending and life science portfolios. Historically, those assets have had a contractual duration of five or six years, but an actual duration of about two years. So it is a combination of bringing more of those assets into the portfolio, which we expect to do this year, and then letting those mature and start to repay over the next twelve to twenty-four months. That is a typical life cycle of that churn that will get back to a more normalized nonrecurring-yet-recurring fee income portion of our gross investment income. Additionally, the strategic initiatives include strategic sourcing arrangements—particularly on the asset-based lending side—additional origination team members on both the ABL and life science teams, and then, less predictable from a timing perspective, we continue to see some attractive opportunities in potential portfolio and team acquisitions in specialty finance, though those are a little less able to predict. Erik Edward Zwick: Thank you. I appreciate the color there. And then, just more importantly from my research and investigating, credit performance is ultimately one of the biggest predictors of long-term ROE and performance for BDCs, and you have outlined your very limited loss history and that the portfolio remains very clean from a nonaccrual perspective. Also, comparing your internal risk ratings from last quarter to this quarter, there has been an improvement there, but we are seeing kind of the opposite at other BDCs. So I wonder if you could just talk about the improvement that I noticed here in the most recent quarter from your internal risk rating perspective. Shiraz Kajee: Yes. I think, as you know, we do not judge it quarter to quarter. There are always some names coming in and names coming out underneath those risk ratings. What we like to point to is the watch list is about 2.2%. If you go back over the last five years, it has been a little higher, a little lower, but 2.2% is actually the average going back to 2020. So to your commentary, we are looking for more consistency across the credit performance, and that is what we are happy about and comfortable with. It is also an example of how we have talked for a long time that the specialty finance assets, the ABL assets, are much less volatile than cash flow–oriented loans. That is why the watch list is so low, and we expect it to stay that way. Erik Edward Zwick: Thank you for taking my questions this morning. Michael Gross: Thank you. Operator: Thank you. Our next question comes from Rick Shane with JPMorgan. Your line is now open. Rick Shane: Hey, guys. Thanks for taking my question. Look, the implied ROE on your new dividend based on current book is about 6.8%, which is roughly SOFR plus two. That seems like a relatively low margin given the return and risk profile of the company. And again, I realize great track record on credit, but this is a levered portfolio. There is inherently credit risk in it. How do we think about this going forward? Are you saying that the return profile for the company is likely to be altered—or for the industry is likely to be altered—long term because of some of the dynamics we are seeing in terms of the broader flows to private credit? Or how should we think about the dividend in the context of your long-term return objectives? Michael Gross: I think we set it at a level where we have confidence it is exceeding the near term. In the long term, as Bruce alluded to in his commentary, we have several levers and initiatives that give us comfort that over the medium to long term, we should see our earnings move back toward the $0.40 level that we have experienced in the past and get to the higher ROE and ROI that we expect and have experienced. The other thing is our focus continues to be on total return. Obviously, that takes account of losses. We feel very good about where we are because of the credit quality, and that is something that is sustainable. Rick Shane: Got it. And when you think about those levers to get back to the $0.40 of core earnings, what is the path? Recasting the portfolio is a gradual process. Is the most immediate opportunity a modest degree of enhanced leverage? I am trying to figure out not only what the destination is but what the path looks like as well. Michael Gross: Fair question. We touched on this earlier in terms of timing. Potential portfolio acquisitions, particularly around the asset-based industry—which we have done in the past given the fragmented nature—have shown more opportunities. Those would be more difficult to predict, but more immediate should they come to pass as we bring portfolios in. The most recent, as you may recall, was in 2024 when we brought in the Webster factoring portfolio. Those are difficult to predict but are immediately accretive and also strategic in terms of expanding our ABL footprint either geographically or by industry. The other levers you heard generally revolve around expanding our sourcing across specialty finance, in particular ABL and life sciences. It is a combination of additional originators and strategic sourcing arrangements where we are creating partnerships with existing ABL players. As you know, we are incredibly conservative, so having a broader pipeline and expanded origination opportunity set allows us to bring more of these short-duration ABL and life science loans into the portfolio. We also know they will churn out fairly quickly with a roughly twenty-four-month average duration, so you will start to see those come into the portfolio this year and begin to exit as early as next year. That velocity in those two asset classes will contribute additional nonrecurring, recurring fee-based income. Rick Shane: Got it. And then, philosophically, you guys are conservative. Your credit results are evidence of conservatism. For some types of lenders—if you are a credit card lender—there is an efficient frontier; it is not a zero-defect business by definition. If your loss rates are too low, you are leaving too much opportunity on the table. I would argue that BDC lending is, in fact, a zero-defect business. One of your most thoughtful competitors years ago said to me, “There is no spread that makes up for a bad loan,” and that has always stuck with me. But I do wonder if even within a zero-defect construct, is there a concern that you are too far from that line of zero defect and that there is a little bit of widening you can do and still maintain a zero-defect objective? Bruce Spohler: That is a phenomenal point. The way we address our, let us call it, ultra-conservative approach to this requirement to be zero defect in private credit is by moving increasingly into these specialty finance strategies. The reason that we have zero defects is in large part because of the leadership of our Life Sciences and ABL teams. Secondarily, they come with collateral, tight documentation, and borrowing bases. There has been no degradation in the documentation in Life Sciences and ABL. The performance of these asset classes, in addition to the leadership of those teams over decades and multiple cycles, allows us to take on more risk in those strategies than we would as a team focused exclusively on cash flow lending because you have that downside protection of underlying collateral—be it cash and IP in Life Sciences and working capital assets in Asset-Based Lending. We are extremely cognizant of your point, and therefore it further aligns with our conservative culture to do more in these specialty finance, collateral-based strategies. Michael Gross: I would add that, in terms of where we are and where others are on the risk spectrum, the jury is still out. We have had a seventeen-year run without a real credit cycle. What we are seeing this quarter and last quarter is public and private BDCs with significant NAV degradation, with the storyline behind it being that it is temporary and mark-to-market. The jury is out on whether that is truly mark-to-market and recoverable. When you think of software exposure, that mark-to-market may be permanent and can actually become worse. We are very comfortable where we have been—on documentation and not pushing the envelope on traditional direct lending—because to your earlier point about spread, it is not just spread that you cannot make up for; it is bad documentation that prevents you from getting to the table early enough to protect your interests. In the past, are there deals that we passed on because we were too conservative and they worked out just fine? Yes. But had we applied that same mentality as a portfolio approach, we would be sitting on a lot of loans today that we would be really worried about. To the earlier comment about rebuilding NII, the good news is that given how low our watch list is and that we have no defaults, the team is not focused on restructurings. They are focused on growth and how to rebuild in a way that we can be profitable for the long term. Rick Shane: Guys, thank you very much. I appreciate it. I realize they are pretty hyper-philosophical type questions, and I appreciate the thoughtful answers. Michael Gross: Thanks, Rick. Appreciate the questions. Operator: Thank you. And as a reminder, it is star one if you would like to ask a question. We will go next to Robert Dodd with Raymond James. Your line is now open. Robert Dodd: Hi, guys. I have got a first question—the second question basically already asked—but I have got a slightly different way of looking at it. On the comprehensive portfolio, paybacks—right, you would always rather get your money back than lose it. It surprised me a little bit that it was so strong and the portfolio shrank so much relatively speaking in this quarter when there is this sense that the banks are not looking to go heavily risk-on right now. They are one of your primary competitors on ABL lending. It is a fragmented market. Was the real driver of that payoff simply seasonal? It seems like a market where I would have expected repayments on ABL or competitive takeaways to be more muted. You were very successful on getting a lot of capital back—that is a good thing and a bad thing. Any thoughts on what drove that dynamic? Bruce Spohler: Under the hood in asset-based lending, there are three primary sources of repayments. There is the traditional refinance to another ABL lender or maybe to a cash flow loan. Then there is what I would call temporary repayment because most ABL facilities have a large revolver with seasonal draws. In our $194 million of ABL repayments, some of that is seasonal repayments, and most of it was not a borrower exiting the platform and canceling their facility. The third dynamic—which we did not have in Q1 but to touch on your broader question—is that sometimes in asset-based lending when we feel the fundamental performance of the business is not going in a direction we are comfortable with, the beauty of ABL is that because we have strong documentation, we can start to turn up the pressure on that borrower and create alternative sources of liquidity. We can wind down our exposure with that borrowing base by increasing reserves and ineligibles such that our advance rates continue to contract in our favor. That will drive an exit or repayment, not necessarily because we got refinanced or there was a temporary paydown, but because we have applied some pressure and encouraged them to refinance us with somebody else. That is also a dynamic our Life Sciences team has used selectively from time to time. A key element of our specialty finance strategies is that you have the ability to wind down exposure and take down advance rates given how tight the documentation is and the underlying collateral support. Specifically to your question in Q1, it was really temporary repayments of facilities rather than a true refinancing or an agreed-upon exit. Robert Dodd: Got it, got it. Thank you. And then the second one—it is basically related to Rick’s question. I agree that zero defect is the goal. But when you look at the portfolio, have you been, with the in-house teams, so strict in pipeline construction that the result is you have really high-quality assets but maybe not enough “good” assets in the flow? So when a great asset repays, you do not have a flow of acceptable, probably zero-defect but maybe not “great,” to moderate the size of the portfolio more? Is expanding distribution—like signing a deal with a bank to see more ABL deals—part of moderating the flow? Bruce Spohler: When you are saying yes to about 5% of the opportunity flow, the way to expand funded investments is to expand the funnel so that 5% becomes a much bigger absolute number. The quality of deals we generally see from ABL banks is higher quality—it might not be their quality because they are measured based on the borrower’s risk rating, rather than the collateral—whereas we can look at the collateral and say, “That is phenomenal collateral.” As Michael touched on with the AI initiative, there are a number of businesses that we lend to that may be impacted by AI. If we have collateral, some of those companies may not survive, but we will likely liquidate ourselves out and be fine. To your specific question, there is no such thing as a “great” private credit deal; you are taking on the ability to potentially lose money. Everything we do is looking for “good.” The more deal flow we have with underlying collateral that checks the SLR box for “good,” the better. Expanding that pipeline by getting more from ABL banks also increases the level of the operating performance of those borrowers. It is really the combination of a much larger pipeline and high-quality collateral—both in ABL and Life Sciences—that we believe, if things go sideways (and we always assume they will), we are going to be fine because of the additional collateral support beyond just traditional ownership support in a borrower. Robert Dodd: Got it. Thank you. Operator: Thank you. And our next question comes from Finian O’Shea with Wells Fargo. Your line is now open. Finian O'Shea: Hey, everyone. Good morning. Thanks for having me on. Can you hit on the fee change, the break to 17.5% on the incentive fee—appreciating that. How did you and the Board come to that number? Michael Gross: It was not a long discussion. It was initiated by us, not the Board. We looked around at what others were doing and thought it was the right thing to do. Finian O'Shea: Okay, that is helpful. And then did the concept of the hurdle rate come up, given the story now is growing earnings—which is tough for a BDC to do—you have been working at that for a long time; it is not the easiest thing to deliver on. Do you think a higher hurdle rate would motivate or align the team better to achieve higher earnings? Michael Gross: No, actually a lower hurdle would do that in terms of incentive fees, but that was not something we were going to consider. The team, frankly, has never focused on our hurdle rate. That is not their job; that is not how they are motivated or compensated. The hurdle rate we have had since inception goes up and down with rates—it is the right place to be. Finian O'Shea: All for me. Thanks so much. Operator: Thank you. At this time, there are no further questions in queue. I will now turn the meeting back to our presenters for any additional or closing remarks. Michael Gross: No further comments other than to thank you all for your participation today. We recognize it is a very busy period of time and there is a lot going on within the private credit space, both in the public and private BDCs, and as always, the entire team is available for any questions that you may have to follow up with. Thank you. Operator: Thank you. This brings us to the end of today’s meeting. We appreciate your time and participation. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the BlueLinx Holdings Inc. First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode, and today’s call is being recorded. We will begin with opening remarks and introductions. At this time, I would like to turn the conference over to your host, Investor Relations Officer, Thomas C. Morabito. Please go ahead. Thomas C. Morabito: Thank you, Operator, and welcome to the BlueLinx Holdings Inc. first quarter 2026 earnings call. Joining me on today’s call are Shyam K. Reddy, our Chief Executive Officer, and Christopher Kelly Wall, our Chief Financial Officer and Treasurer. At the end of today’s prepared remarks, we will take questions. Our first quarter news release and Form 10-Q were issued yesterday after the close of the market, along with our webcast presentation, and these items are available in the Investors section of our website. We encourage you to follow along with the detailed information on the slides during our discussion. Today’s discussion contains forward-looking statements. Actual results may differ significantly from those forward-looking statements due to various risks and uncertainties, including the risks described in our most recent SEC filings. Today’s presentation includes certain non-GAAP and adjusted financial measures that we believe provide helpful context for investors evaluating our business. Reconciliations to the closest GAAP financial measure can be found in the appendix of our presentation. Now I will turn it over to Shyam. Shyam K. Reddy: Thanks, Tom. Good morning, everyone. We are off to a good start in 2026, as our first quarter results reflect our ability to compete effectively and deliver positive performance despite market headwinds, unforeseen cost inflation, and competitive pricing pressure. Our disciplined approach to executing our channel and product strategies enabled us to manage margins and to continue growing volumes across multiple product categories and key customer channels. During the first quarter, revenues increased 3% year-over-year, driven primarily by Distero specialty sales and higher volumes in our key specialty product categories, which helped offset ongoing pricing pressure in specialty and structural products and margin pressure in specialty products. Specialty and structural gross margins were 18.1% and 10.9%, respectively, reflecting the strength of our customer value proposition and effective inventory management. Our specialty product strategy continues to deliver results, with engineered wood, siding, millwork, industrial, outdoor living products, and other specialty products representing 70% of net sales and approximately 80% of gross profit in the quarter. While overall market conditions remain soft, our deliberate alignment of key supplier branded product expansion with strategic channel growth initiatives is enabling us to drive better commercial outcomes and allocate working capital more effectively. Last week’s announcement of Westlake Royal’s TrueExterior siding and trim products in 12 BlueLinx Holdings Inc. markets, including six of the country’s top 50 MSAs, reinforces our commitment to this alignment. As you can see, our commercial strategic focus and our customer value proposition are accelerating our product and geographic expansion efforts with key vendors. We continue to see positive momentum across our commercial growth vectors: the multifamily channel, builder pull-through initiatives, and national accounts business, all of which are key elements of our channel strategy. These efforts are helping us drive incremental volumes, convert projects and customers to key brands we carry, and strengthen our position as a preferred growth partner for suppliers. While multifamily sales typically involve longer inventory cycles and lower gross margins due to direct sales and competitive pricing, this channel remains an important source of demand and a critical component of our long-term growth strategy to support total housing starts at scale. Operationally, our results also reflect disciplined inventory management. Our ability to quickly adjust inventory levels to market conditions demonstrates the strength of our commercial execution and operating discipline. As market conditions improve, we expect these institutional capabilities to support stronger cash flow generation. From a strategic accelerant perspective, we continue to make meaningful progress in our AI and digital transformation initiatives, with particular focus on enhancing our master data platform and optimizing our Oracle Transportation Management system. We also remain committed to supporting the advanced digital platforms of our largest customers and leveraging AI-driven solutions to improve productivity and efficiency across the organization as we continue to explore and develop AI and digital tools for commercial sales, operational excellence, and e-commerce. Finally, our financial position remains strong, with $659 million in available liquidity at the end of the quarter, providing us with the flexibility to reinvest in the business, pursue growth opportunities, and continue navigating a challenging market environment. Overall, we believe our disciplined execution, resilient operating model, and focused strategy position us well as we move through 2026. We also returned capital to shareholders by repurchasing $3 million of shares in Q1, and the total current availability under our share repurchase authorization is nearly $56 million as of quarter end. This demonstrates our commitment to returning capital to our shareholders and our continued confidence in the company’s long-term growth strategy. Now for a few more highlights on our first quarter results. We generated net sales of $731 million and adjusted EBITDA of $23.5 million for a 3.2% adjusted EBITDA margin, a significant improvement on a year-over-year basis. Distero contributed nearly $21 million of net sales and over $2 million in adjusted EBITDA. Adjusted net income was $1.7 million, or $0.21 per share. Specialty product net sales increased nearly 7% year-over-year due to solid volumes across the board, with Distero’s product portfolio and our engineered wood products and siding leading the way. Unfortunately, price deflation and margin compression in several categories offset the benefit of our net sales and our volume increases in the business. Although structural product revenues decreased nearly 5% year-over-year, due largely to price declines in lumber and panels, we were able to offset the impact by driving higher lumber volumes and gross margins. As a result, we delivered higher structural gross profit on a year-over-year basis. Our strategic sales and product expansion efforts led to higher volumes and increased net sales at solid margins. Eighteen percent volume growth in multifamily and over 3% volume growth with key national accounts demonstrated another quarter of key channel growth tied to disciplined execution of our strategy. Our builder pull-through programs tied to partnerships with strategic customers led to key channel and specialty product growth. Our differentiated value proposition led to geographic and product expansion with key suppliers, with meaningful year-over-year growth across multiple product lines that align with our channel growth strategy. For example, our EWP and siding volumes and sales were both up low single digits on a year-over-year basis despite consistently declining housing starts. As I mentioned a minute ago, the addition of Westlake Royal’s TrueExterior siding and trim products significantly adds to our specialty product assortment, while demonstrating another example of geographic and branded SKU expansion with a key supplier. We also delivered solid gross margin performance despite difficult market conditions, cost inflation, and a competitive pricing environment, with specialty products at 18.1% and structural products at 10.9%. Our focus on the product and channel strategy, fueled by our operational and business excellence initiatives such as effective pricing, value-add services, strong customer service, branded product expansion gains, and disciplined inventory management, all helped drive this performance. The macroeconomic backdrop for building products distribution continues to depress demand for projects tied to new builds and repair and remodel activity. Historically low levels of consumer confidence and persistently high inflation, economic uncertainty, and geopolitical volatility are also suppressing the cyclical housing tailwind from materializing, which I expect to continue through 2026. These soft market conditions have led to lower volumes in certain traditional customer channels and highly competitive market pricing. At the same time, however, the K-shaped economy continues to provide opportunities in certain parts of the country across all customer channels, another reason why our scale and geographic footprint helps smooth out our overall performance. In any event, we have overcome market challenges by increasing volumes and maintaining solid margins via intentional growth tied to our channel and our product strategies. We are also actively managing our cost structure, passing along cost increases, optimizing inventory, and prioritizing high-margin categories to optimize performance in an otherwise challenging market that we do not expect to abate anytime soon. Overall, we are off to a good start in 2026, as demonstrated by our solid financial performance for the quarter. We will continue to execute our strategy through the current cycle, which will position us for better-than-market growth when the housing recovery occurs. To wrap up, I want to thank all of our associates for their commitment to our customers, our suppliers, each other, and the communities we all serve. Now I will turn it over to Kelly, who will provide more details on our financial results and our capital structure. Christopher Kelly Wall: Thanks, Shyam. Good morning, everyone. Let us first go through the consolidated highlights for the quarter. Overall, both Specialty Products and Structural Products delivered solid volumes and gross margins in what continues to be a challenging macro environment. Net sales for the quarter were $731 million, up over 3% year-over-year. Total gross profit was $116 million, and gross margin was 15.9%, up from 15.7% in the prior-year period. SG&A was $96 million, up $2 million from last year’s first quarter. This increase was mainly due to the addition of Distero, offset by $1.9 million of business interruption insurance received in the quarter. Given the difficult demand environment and continued pressure on wages and other operating costs, we remain focused on rigorous expense management and on identifying opportunities to further improve efficiency. Net loss for the quarter was $1.5 million, or $0.18 per share, primarily due to higher net interest expense and higher depreciation and amortization. Adjusted net income was $1.7 million, or $0.21 per share. Our effective income tax rate for the quarter was not meaningful given the level of our pretax income and the impact of several small discrete items. Adjusted EBITDA was $23.5 million, up approximately 20% from the prior year due to increased sales, including Distero, improved overall gross margins, and disciplined expense management. While we are very pleased with the year-over-year increase in adjusted EBITDA in the first quarter, we do not expect similar performance over the balance of 2026, reflecting ongoing demand pressures in a still soft housing environment. These pressures include affordability constraints and elevated mortgage rates, muted consumer confidence, ongoing political uncertainty and interest rate volatility dampening the typical spring selling season, continued cost inflation, and the challenges associated with passing those costs on in a soft market. Turning now to the first quarter results for Specialty Products. Net sales for Specialty Products were $512 million in the first quarter, up nearly 7% year-over-year. This increase was driven by Distero sales and higher volumes in most product categories, partially offset by year-over-year pricing pressure in nearly all categories. Gross profit from Specialty Product sales was $93 million, up over 3% year-over-year. Specialty gross margin was 18.1%, down from last year’s 18.7%. Excluding a $2.4 million duty-related benefit in 2025, gross margin was down 10 basis points from last year. Sequentially, specialty gross margins were flat when compared to 2025. For the second quarter of the current year, we expect Specialty Product gross margin to be in the range of 17.5% to 18.5%, with daily sales volumes higher than 2026 due to normal seasonal patterns, and lower than 2025. Now moving on to Structural Products. Net sales were $219 million for Structural in the first quarter, down nearly 5% compared to the prior-year period. This decrease was primarily due to lower pricing for both lumber and panels when compared to last year, offsetting the higher lumber volumes we generated. Gross profit from Structural Products was $24 million, an increase of 12% year-over-year. Structural gross margin was 10.9%, up from 9.3% in the same period last year. Sequentially, structural gross margin increased 90 basis points. This increase was primarily driven by higher lumber and panel market pricing, with lumber and panel prices 16% to 4% higher versus the fourth quarter. We expect Q2 gross margin for Structural Products to be in the range of 9.5% to 10.5%, which has been positively impacted by sequentially higher lumber and panel prices from 2025 through early Q2 of the current year. We also expect daily sales volumes to be higher than 2026 due to normal seasonal patterns and slightly lower than 2025. Turning now to our balance sheet. Our liquidity continues to be very strong. At the end of the quarter, cash and cash equivalents were $319 million, a decrease of $67 million from Q4, largely due to the seasonal changes in working capital. When considering our cash on hand and undrawn revolver capacity of $340 million, available liquidity was approximately $659 million at the end of the quarter. Total debt, excluding our real property financing leases, was $377 million, and net debt was $58 million. Our net leverage ratio was 0.7 times trailing four-quarter adjusted EBITDA, and we have no material outstanding debt maturities until 2029. Additionally, given the strength of our balance sheet and continued strong liquidity, we remain well positioned to support our strategic initiatives. These strategic initiatives include continued growth with our largest customers and in the multifamily channel, with this focus also benefiting our traditional dealer customers; demand pull-through efforts to drive strategic product sales that benefit our customers; continued specialty product expansion with key suppliers; our business and digital transformation efforts; and other organic and inorganic growth initiatives. Now moving on to working capital and free cash flow. During the first quarter, we had negative operating cash flow of $57 million and free cash flow of negative $60 million, primarily due to the seasonal changes in working capital ahead of the spring building season. Now to capital allocation. During the quarter, we incurred $2.6 million of CapEx, primarily related to investments in our facilities, technology, and fleet. For 2026, we plan to manage our CapEx in a manner that reflects current market conditions and allows us to maintain a strong balance sheet. Our remaining capital investments will focus on facility maintenance and improvements, further replacement of trucks and trailers, and the technology improvements that support our business and digital transformation. During the first quarter, we repurchased $3 million of shares. From the end of the quarter through April 21, we have repurchased additional shares, bringing the total dollar amount purchased year-to-date to $5 million. As of today, we have a total of $54 million remaining under our share repurchase authorizations. Our guiding principles for capital allocation remain consistent with prior quarters. We intend to maintain a strong balance sheet which enables us to invest in our business through economic cycles, expand our geographic footprint, and pursue a disciplined inorganic growth strategy demonstrated by our acquisition of Distero, and opportunistically return capital to shareholders through share repurchases. We also plan to maintain a long-term net leverage ratio of two times or less. Overall, we are pleased with our solid first quarter 2026 results, particularly in light of current market conditions, but remain more muted in our expectations for the remainder of 2026 given that the housing environment remains soft. We will now open the call for questions. Operator: At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. Your first question comes from the line of Jeffrey Patrick Stevenson with Loop Capital. Please go ahead. Zack Pacheco: Good morning. This is Zack Pacheco on for Jeff. Thanks for taking my question. First, how much restocking ahead of the spring selling season contributed to the strong Specialty Products volume growth during the quarter in categories such as EWP? Shyam K. Reddy: Good morning, Zack. When you say restocking, are you talking about on the part of our customers? I would not necessarily characterize it as some unusual restocking or even historical restocking. Our EWP growth is tied to very specific product and channel efforts that we are driving in key segments. For example, our builder pull-through programs that are being aligned with strategic dealer customers are driving EWP growth in some markets, and we have wrapped around creative pricing and rebate programs to differentiate ourselves from our competitors. Even in a soft market, we are able to grab share. If you look over the last five years and even over last year to this year, single-family housing starts continue to decline, and repair and remodel activity continues to be either volatile or soft or projected to continue to be soft over time. So it really has more to do with very specific actions we are taking to gain share or otherwise grab a greater share of the existing wallet, even if the overall market is shrinking due to soft market conditions. As part of our channel strategy, we are also focused on larger customers so we can grow faster at scale. We have been expanding stocking programs with certain key partners. So there is a twofold answer to your prior question. Zack Pacheco: Thank you. And then secondly, any color on the impact of UFP’s acquisition of MoistureShield on the business and the opportunity to grow and expand with the Deckorators line of products? Shyam K. Reddy: Honestly, that is a great positive story for us. Deckorators is viewed as the number three largest outdoor living or decking products supplier. It is a very well-known branded product carried throughout the country. Between it and MoistureShield, we have expanded the branded assortment within our portfolio that is viewed as a top-tier brand, so it fits squarely within our specialty mix-shift strategy in terms of growing one of our key five specialty product categories. Analyst: Thank you. Operator: Your next question comes from the line of The Benchmark Company. Please go ahead. Analyst: Thank you. Good morning, everyone. I was wondering if you could discuss what favorable changes happened in the gross margin profile since your guide back in February. For specialty, I think you were looking for 17% to 18% margins. In March, you probably had to deal with some transportation and diesel-related inflationary pressures, and yet you were able to come in above that range. Can you talk about what the positive factors were, and was there any incremental price-cost pressure in March that you were able to overcome with other factors? Christopher Kelly Wall: The biggest driver of our margin improvement in the quarter was on the structural side. We finished the quarter at a 10.9% structural margin, up 160 basis points from last year, and we benefited significantly through the quarter with a rising commodity pricing environment for both lumber and panels, mostly on the lumber side. If you go back to the end of Q4, that increase in commodity pricing continued into April and then flattened out a bit and came back some during the last week or so. In a rising commodity pricing environment, we are able to expand margins by virtue of market pricing being higher than the inventory levels we are carrying. That was a large driver of the margin improvement on the structural side, and we were not anticipating that prolonged and consistent increase to the extent we experienced. On the specialty side, it is continued efforts to serve our customers and price in the value-added services that we have been providing across all categories. We saw price increases quarter to quarter in all categories except for one, and the one that did not see price increases was less than a 1% decline. We are very focused on continuing to not only match products that our customers need but also services that allow us to drive margin, combined with an increased focus on making sure that we are pricing effectively given the availability of products in the market. Shyam K. Reddy: We are very pleased with the Distero acquisition, which supports our specialty mix-shift strategy. It is a 100% specialty wood distributor that services high-end homes across the country. We have been able to leverage Distero’s strengths to support our specialty mix-shift and provide not only strong EBITDA contribution but meaningful net sales at stable, higher margins despite softness in the market. Pricing has stabilized within our ranges, and we have done a good job managing those margins, but we continue to face margin pressure within specialty products due to competitive pricing in certain categories. Given our value-add services and go-to-market strategy, we are mitigating those risks. In addition, our institutionalized inventory management system allows us access to competitively priced wood, which can enhance margins in a rising price environment. Analyst: You mentioned that pricing was stabilizing, but you still have a competitive environment in some categories. Which specific product categories within specialty are more stable now than they were in January or February, and which ones are still seeing sequential competitive pressures? Shyam K. Reddy: EWP continues to be competitive. Fortunately, it has an inherently higher margin profile, but it is very competitive in terms of winning projects. We are making it up with good volume with key strategic customers while managing through pricing competitiveness given our value-add services. Siding continues to be pressured as well on the fiber cement side. As we drive multifamily growth, that tends to have a lower margin profile, especially given a portion of it being direct business. We still believe operating at scale to solve for total housing starts as opposed to just single-family starts is important to our long-term growth thesis. Analyst: Historically, the first quarter is usually the low watermark for the year for revenue and margins. Is there any reason why this year that would not hold true? Christopher Kelly Wall: Typically, that is what you would see. One thing that is different at the start of this year is the performance from a margin perspective for structural, which is a big driver that could cause Q1 to look a little different than it has in the past. We said we expect the remaining three quarters to continue to be pressured by a weaker end market than what we anticipated on our prior call. Typically, we would see higher earnings in Q2 and Q3 and then lower again in Q4. Q1 is probably a bit higher than what we would normally expect, but as we go through the course of this year, I expect it to return to a more typical pattern. Shyam K. Reddy: Even if you look at Q1 selling activity and listings, despite there being demand for housing, inventory levels continue to rise with very tepid buying activity on the existing sales front. You see the numbers for single-family housing starts, permits, and multifamily. We are outperforming the market on multifamily, but the margin profile is different. Seasonal patterns typically hold true, and I do not think that changes. Based on what we are seeing heading into this spring and summer selling season, conditions do not seem any different than last year. There is nothing to suggest that what we saw in Q1 should be extrapolated. Our performance reflects consistent execution of our strategy. Analyst: Are there any categories within specialty where you are seeing price increases from manufacturers that are difficult to pass on to your customers? Shyam K. Reddy: We have been hit with supplier increases from more than 40 vendors, often with multiple increases that we need to push through. From a two-step distribution standpoint, supplier increases are typically accepted, with notification periods that allow us to notify customers. In many cases, suppliers announce increases to the market as well. Depending on customer arrangements, it may take more time to pass those through, but that can be done in collaboration with suppliers to minimize the impact to BlueLinx Holdings Inc. Analyst: Got it. Thanks, guys. Good luck. Operator: Your last question comes from the line of Kurt Willem Yinger with D.A. Davidson. Please go ahead. Kurt Willem Yinger: Thanks, and congrats on the strong quarter. I wanted to go back to the TrueExterior announcement with a two-parter. First, is there any way to size what the contribution from that expansion might look like as you get product on the ground and sell through over the next several quarters? And second, with that move, are there any associated changes to existing siding vendor relationships? Is this displacing someone else or expanding into new markets for Westlake? Shyam K. Reddy: It is not often you can work with a key vendor to roll out 12 markets all at once, especially covering as many top 50 MSAs as we are. That reflects strong confidence on the part of Westlake Royal in our channel growth strategy. This is a brand-new rollout of a brand-new product across multiple markets, so I cannot provide a specific revenue contribution outlook today. We are focused on proving and demonstrating our value proposition in rolling out new product lines in multiple markets consistently to help our suppliers grow at scale like we want to grow at scale. We executed a big load-in of product across multiple markets very quickly, which I would posit is highly unusual for two-step distribution but consistent with our value proposition. Over the coming months, our plan is to accelerate sales activity of those product lines with the inventory we put on the ground. As it relates to other categories, we view TrueExterior as complementary. Siding and trim are strategic growth categories for us across multifamily and single-family channels. We are selling multiple lines with multiple vendors and are pleased with the bundling opportunities and value proposition we can provide customers, especially those where we have dedicated scale-focused efforts. It is an exciting launch for us. Kurt Willem Yinger: Appreciate the color. On the outlook for daily sales volumes being a little bit lower in Q2, first, does that include Distero? And second, have you seen any meaningful change in customer order patterns as you worked through April relative to normal seasonality? Christopher Kelly Wall: Our view on volumes being slightly lower than last year does include the impact of Distero. It is driven by end-market demand for building activity that we expect to take place this year versus last year, which continues to be down, and the general views have worsened through the last several weeks. As it relates to competitive dynamics, they remain intense, which is a continuation of what we saw last year after many channel partners ran inventories down at year-end. Shyam K. Reddy: It will be highly competitive depending on the market. Weather impacted business in the East early in the year, but the East has solid housing-related activity, especially on the pro contractor R&R side. Other states that were strong during the pandemic, like Texas and Florida, are tougher, but we are seeing stabilization and opportunities for growth that we are taking advantage of with our channel and product focus. We use our competitive value proposition to mitigate the adverse impacts of the highly competitive environment, and as our results demonstrate, we feel like we are doing that well. Distero has also helped shift our specialty mix and drive good EBITDA contribution at solid margins. Kurt Willem Yinger: Lastly, on capital allocation, how are you thinking about share repurchases relative to inorganic growth opportunities, particularly given where the stock is trading and the traction on strategic initiatives? Has the relative attractiveness changed versus generating smart inorganic growth? Christopher Kelly Wall: We continue to take the same approach to capital allocation. We are committed to investing in initiatives that are delivering results. M&A continues to be a focus, and we will remain disciplined as it relates to valuation and the assets we pursue, with a strategy intended to grow our geographic presence in markets we are not currently in, as well as continuing to drive growth in our specialty products similar to what we did with Distero. We are expecting free cash flow to be consistent with, if not a little bit lower than, last year, even with the strong quarter we had in Q1. If we do not have opportunities to invest that cash in areas that drive business growth and earnings going forward, then we would look to buy back shares similar to what we did in the prior quarter. Operator: That concludes our Q&A. I will now turn the call back over to Thomas C. Morabito for closing remarks. Thomas C. Morabito: Thanks, Operator. Thank you again for joining us today, and we look forward to speaking with you in August as we share our second quarter 2026 results. Operator: Ladies and gentlemen, that does conclude today’s call. Thank you all for joining, and you may now disconnect. Everyone, have a great day.
Operator: Good day, and welcome to the One Stop Systems Fourth Quarter 2025 Conference Call and Webcast. [Operator Instructions]. As a reminder, this call is being recorded. As part of the discussion today, the representatives from OSS will be making certain forward-looking statements regarding the company's future financial and operating results, including those relating to revenue growth as well as business plans, bookings, the company's multiyear strategy, business objectives and expectations. These statements are based on the company's current beliefs and expectations and should not be regarded as a representation by OSS that any of its plans or expectations will be achieved. Please be advised that these forward-looking statements are covered under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995, and that OSS desires to avail itself of the protection of the harbor for these statements. Please also be advised that actual results could differ materially from those stated or implied by the forward-looking statements due to certain risks and uncertainties, including those described in the company's most recent annual report on Form 10-K, subsequent quarterly reports on Form 10-Q, financial reports on Form 8-K and recent press releases. Please read these reports and other future filings that OSS will make with the SEC. OSS disclaims any duty to update or revise its forward-looking statements except as required by applicable law. It is now my pleasure to turn the conference over to OSS' President and CEO, Mr. Mike Knowles. Please go ahead, sir. Michael Knowles: Thank you, Julie. Good morning, everyone, and thank you for joining today's call. I'm pleased to report that 2025 positive momentum has carried into 2026, and we are off to a strong start with significant year-over-year growth in both revenue and profitability. These results reflect disciplined execution by our team and suggest accelerating demand for our enterprise class ruggedized compute platforms across both defense and commercial markets. Importantly, we believe these trends further validates OSS' position as a critical enabler of next-generation AI autonomy and sensor-driven applications at the edge, markets that we expect to drive sustained long-term growth for years to come. Before we review the specifics of the first quarter, I want to remind everyone on today's call that our first quarter results reflect the opportunistic sale of our wholly owned subsidiary, Bressner, in December of 2025, and proceeds of $22.4 million, subject to final closing working capital balances. As a result, Bressner historical financial results are now reported as discontinued operations. and the results we are discussing today reflect the performance of the remaining core OSS business. The sale of Bressner was a strategic transaction that we believe unlocks value for shareholders simplified our operating structure, strengthened our balance sheet and sharpened our focus on higher margin, higher growth opportunities within our core business. We believe our first quarter performance is already demonstrating the benefits of this transition and reinforcing the earning power of our go-forward strategy. Today, OSS is a pure-play provider of ruggedized AI compute platforms for edge applications. As a result, we entered 2026 as a more focused and scalable company, fully aligned around delivering market-leading enterprise-class compute solutions to both defense and commercial markets. And I'm very pleased with our strong start to the year. Looking at our operational performance in the first quarter, we delivered strong results with revenue increasing 55% year-over-year to $8.1 million, reflecting growth across both our defense and commercial businesses. Highlights in the defense market include increased shipments to support the PH aircraft, a long-range multi-mission maritime control aircraft used for antisubmarine warfare, surveillance and reconnaissance operations. In addition, we benefited from increased activity related to the design, development and delivery of prototype compute systems for next-generation enhanced vision systems for U.S. Army combat vehicles. These programs highlight our role supporting mission-critical applications and our ability to scale alongside large multiyear defense platforms. On the commercial side, we experienced increase in demand from a medical imaging OEM, including shipments of our liquid-cooled server platforms reflecting the growing adoption of our solutions in high-performance data-intensive environment. Taken together, these drivers demonstrate both production level demand and early-stage program engagement, which we believe will position us well for continued growth. As our sales grow, we are seeing increased market awareness and stronger customer engagement with a growing number of organizations turning to OSS for enterprise-class deployable compute solutions. During the quarter, we generated nearly $15 million in new bookings that we expect to deliver in 2026 and 2027. I am pleased to report that this was one of the strongest quarters in our history and resulted in a book-to-bill ratio of 1.8 supporting our goal to maintain a trailing 12-month book-to-bill ratio above 1.2. Bookings during the quarter were driven by several key program wins across both defense and commercial markets. First, we announced aggregate new awards of $10.5 million from the U.S. Navy and a leading U.S.-based prime defense contractor in support of the P-8 Poseidon Reconnaissance aircraft, 7.5 million of which was booked during the first quarter with the remainder falling in last year's fourth quarter. With these latest wins, OSS has secured more than $65 million in total contracted revenue associated with this mission-critical aircraft to date, including over $23 million awarded since the beginning of 2025. Second, we received a new $1.1 million initial order from a top-tier commercial aerospace prime contractor to support next-generation in-flight entertainment system, which is expected to be delivered by the fourth quarter of 2026. We believe this platform has the potential to generate more than $6.5 million in total revenue over the next 5 years. Third, we secured a new engagement with a commercial robotics customer manufacturing autonomous construction and mining equipment. We expect this program to generate approximately $2 million in orders in 2026 with a 5-year opportunity in the range of an aggregate $10 million to $15 million. Importantly, we displaced an incumbent solution to win this business we believe, highlighting on the strength of our technology. More recently, in April 2026, we announced a new relationship with a company building a network of autonomous energy nodes for emerging alternative energy powered data centers. While the initial order was valued at over $500,000, we expect this customer to scale to an aggregate $10 million opportunity over the next 5 years. We believe this opportunity to reflect how our solutions are increasingly being deployed in next-generation data center architectures where power efficiency, scalability and enterprise-class compute are critical to supporting AI and data-intensive workloads. Recent program wins reflect both expansion within existing platforms and new customer additions, underscoring the breadth and durability of demand we are seeing across our markets. We are also seeing a clear shift in the size and composition of our bookings. Orders are becoming larger, more programmatic and increasingly tied to multiyear deployments across a broader set of customers. In fact, our first quarter bookings of $15 million nearly equal the total bookings we generated for the full year of 2023. In addition, our average order size has increased nearly 3x since 2023. And over the past 12 months, we have added a growing number of new programs and projects further strengthening our long-term growth profile. Supporting the momentum we are seeing in both sales and bookings is the continued expansion of our pipeline of opportunities. Three years ago, we believed our pipeline last structure consistency and alignment with our long-term strategy. Since then, we have made a deliberate effort to build a more strategic and disciplined pipeline one that is closely aligned with our commercial and defense go-to-market strategy, our technology road map and applications that we could believe can scale across both markets. I'm pleased with the progress we have made and more companies across our core defense and commercial end markets are pursuing the company's rugged enterprise-class compute solutions. As a result, we believe our pipeline has expanded significantly from roughly $1 billion previously. These opportunities are primarily concentrated in North America. However, we are starting to see more international opportunities to emerge. This has the potential to further increase the size and diversity of our pipeline materially over time. We believe that underlying this growth are strong and durable market dynamics. Demand for enterprise class compute is accelerating as AI, machine learning and sensor fusion applications increasingly move from data center to the edge. This shift is driving a new generation of mission-critical applications across both defense and commercial market areas, where OSS is well positioned given our expertise in ruggedized compute platforms. Alongside the growth in our pipeline, we are continuing to invest in advancing our technology platform to support the next generation of AI-enabled systems operating at the edge. R&D remains a critical component of our strategy and we are increasingly working alongside customers on customer-funded development programs that allow us to design and deploy purpose-built compute architectures for emerging applications. These engagements are a key driver of our long-term growth. We believe they position OSS early in the life cycle of next-generation platforms, deepen our relationships with key customers and create a clear pathway to the future production programs as these technologies move from development to deployment. We are seeing growing traction within U.S. Army Labs defense research organizations and large defense primes as they reassess current requirements and plan for future compute architectures and OSS is becoming increasingly embedded as a trusted provider of enterprise-class compute solutions supporting next-generation war-fighting capabilities. These efforts span a range of applications, including advanced vision systems, sensor and data processing, autonomy and AI-enabled situational awareness. While these development programs typically take multiple years to mature, we are encouraged by our expanding role within the Department of War ecosystem, and we believe these engagements position OSS to participate in a growing number of future production programs. Many of the programs we discussed earlier today began as development efforts, where we worked alongside customers to design highly specialized compute solutions for demanding applications. As those systems mature and transition into production platforms, we believe they can create multiyear revenue opportunities for OSS customer-funded development increased 145% year-over-year in the first quarter, and we expect additional growth through 2026, supported by new defense and commercial development efforts. At the same time, we continue to advance our core technology road map. During the fourth quarter of 2025, we led the way in our market with the introduction of our next-generation PCIe Gen 6 product portfolio that is designed to address the rapidly increasing bandwidth and data processing requirements associated with artificial intelligence, machine learning and sensor-driven workloads. PCI Gen 6 significantly expands data throughput capabilities and will play an important role in enabling the next generation of AI accelerators and GPUs, high-speed storage systems and advanced compute architectures required for AI applications at the edge. We continue to believe these technology investments position OSS well to support the growing demand for high-performance compute infrastructure as AI-enabled systems continue to expand across both defense and commercial platforms. We believe that OSS is well positioned for long-term growth, and we are encouraged by the strong start to 2026. As we move through the year, we are focused on helping provide the compute storage needs of our customers, supporting our customers' development efforts and converting our pipeline to sales. We also continue to closely manage several operational factors, including supply chain dynamics. In particular, we are seeing longer lead times for certain pump components, including memory, which may impact the timing of certain shipments throughout the year. As a result, we are maintaining our guidance for 2026 and we expect revenue growth in the range of 20% to 25%, supported by our growing pipeline of platform opportunities, increasing customer engagement, higher customer-funded development activities and the continued transition of development programs into production deployments. We expect gross margins of approximately 40%, reflecting product mix and an increasing contribution to customer-funded development programs, which is an important component of our strategy to advance new technologies alongside our customers. At the same time, we expect to generate positive EBITDA and adjusted EBITDA while continuing to invest in key areas of the business, including sales expansion and customer support resources that support our growing pipeline and deepen relationships with strategic customers. With a strong balance sheet, expanding customer relationships and a growing pipeline of opportunities driven by the adoption of AI-enabled systems, we believe OSS is well positioned to continue building momentum and delivering long-term value for our shareholders. We also believe our strengthened balance sheet provides the flexibility to make strategic investments in our business and pursue selective strategic acquisitions that could complement our technology platform, expand our customer base and enhance our capabilities over time. Finally, I want to thank our entire team for their dedication, innovation and relentless focus on delivering results for our customers and shareholders. So with this overview, I'd like to now turn the call over to Dan. Daniel Gabel: Thank you, Mike, and good morning to everyone on today's call. Financial performance in Q1 exceeded our expectations, reflecting both strong customer demand and disciplined operational execution. Q1 results reflect a number of key accomplishments: First, we achieved strong top line growth of 55%; second, we achieved robust bookings of nearly $15 million for the first quarter; third, gross margin of 51.6% remained above our expectations, reflecting favorable mix and pricing, operational improvement and showcasing the strong value that we provide to our customers. Third, higher sales, strong gross margins and disciplined expense management, produced positive adjusted EBITDA in the first quarter. And finally, strong collections and working capital management drove a record amount of free cash flow from continuing operations. We believe that the company has never been in a stronger position. And with a strong cash position, a solid backlog and a robust pipeline, we believe we're on track to achieve our 2026 guidance and to execute on our growth and profitability objectives. Now for a quick overview of Q1 2026 financial performance. For the first quarter, we reported total revenue of $8.1 million compared to $5.2 million last year. The 55% year-over-year increase in total revenue was primarily due to higher sales to defense prime customers of data storage products to support the PA aircraft, higher sales to a medical imaging OEM of liquid-cooled server products and sales to defense prime customer related to the design, development and delivery of prototype compute systems for an enhanced vision system for combat vehicles. Gross margin in the first quarter was a first quarter record of 51.6% compared to 45.5% in the prior year quarter. The 6.1 percentage point increase from the prior year was primarily due to a more profitable mix of products shipped this year, engineering efficiencies in customer-funded development programs and improved manufacturing absorption due to higher production volume. We continue to expect some level of variability in gross margins quarter-to-quarter based on absorption, product mix and program life cycle. On a sustained basis, we continue to target margins in the mid-30s to mid-40s. We expect that second quarter gross margins will normalize into this range. Total first quarter operating expenses increased 2.5% to 4.8 million. This increase was predominantly attributable to higher general and administrative expenses, partially offset by lower marketing and selling and R&D expenses. For the first quarter, the company reported a GAAP net loss from continuing operations of $0.4 million or $0.01 per diluted share compared to a net loss from continuing operations of $2.3 million or $0.11 per share in the prior year quarter. The company reported non-GAAP net income. Net income from continuing operations of $0.3 million or $0.01 per diluted share compared to non-GAAP net loss from continuing operations of $1.7 million or $0.08 per share in the prior year quarter. Adjusted EBITDA from continuing operations, a non-GAAP metric, was $0.2 million. compared to an adjusted EBITDA loss from continuing operations of $1.6 million in the prior year first quarter. Turning to the balance sheet. Cash flow from continuing operating activities was a record for a 3-month period as we saw a robust quarter of collection and previously managed inventory levels. Net cash provided by continuing operations for the 3 months ended March 31, 2026, was $4 million. Compared to net cash used in continuing operations of $1.5 million in the prior year period. As of March 31, 2026, OSS had total cash, cash equivalents and short-term investments of $34.4 million, restricted cash of $2.2 million and no debt outstanding. Working capital was $44.7 million as of March 31, 2026, compared to $45.3 million at December 31, 2025. As I mentioned, we're reaffirming our guidance for the full year, including revenue growth in the range of 20% to 25%, gross margin of approximately 40% and positive EBITDA. We believe our strong performance in Q1 supports our planned ramp in the second half of the year. We're seeing strong demand and our first quarter performance establishes strong operational momentum. At this time, we are maintaining our guidance as we continue to navigate a dynamic supply chain environment. As we enter the second quarter, we remain focused on disciplined execution, including managing our supply chain to convert customer demand into revenue, profit and cash. We also remain focused on continuing to drive growth by investing in our technology pursuing M&A opportunities and securing new platforms that may provide a sustained multiyear revenue stream. As always, we look forward to updating you on our success. This completes our prepared remarks. Julie, please open the call for questions. Operator: [Operator Instructions]. Your first question comes from Scott Searle from ROTH Capital. Scott Searle: Congrats on the quarter and the outlook. Maybe just for starters, Mike, Dan, could you give us a little bit of an idea of the mix of business in the quarter between defense and commercial? And then maybe to dig in a little bit on the supply chain front, it sounds like there are some headwinds. I'm wondering if you could dig in a little bit more detail, give us some color in terms of where does memory fit in the bank? Is it a cost issue from a bond standpoint in gross margins or just general availability as you look out into the second half of this year? And is that the primary constraint. And Mike as well, ongoing military activities, I think there have been some concerns that potentially it's a distraction in terms of the ability to progress existing opportunities. Based on your comments, it doesn't sound like that's been the case as you started to move forward on a couple of different fronts and expand that pipeline. I'm wondering if you could just expand on that a little bit. And then I had a follow-up. Michael Knowles: Great. I'll let Dan start with the mix, and then I'll jump in with the supply chain and the ongoing defense activities. Daniel Gabel: Yes. Thanks, Mike. So starting on the mix. So in Q1, we saw growth across multiple areas. So customer-funded development was up. Production was also up. From -- in production, we did see a higher mix of some of our more mature production program. and those tend to carry higher margins. So that's part of what you're seeing. But on the bookings front, we also announced some new wins, including on the commercial side that are expected to be scaled over time as we go through the year and into future years. I'll comment briefly on supply chain before I turn it over to Mike. So what we're seeing there primarily memory extended lead times for other components, including CPU, but certainly, the critical path for many of our deliveries run through that memory supply chain. Lead times are longer than what we saw last year. Pricing has certainly moved up. I think there's still some volatility. But relative to 3 months ago, I think that volatility has moderated, sort of plateaued at a higher level. From a pricing perspective, in general, we don't aim to absorb those price increases. We take them along to our customers. And it's certainly a market-wide dynamic not unique to OSS. So generally, we've been successful in doing that. But every bid has its own customer and competitive dynamics, and so we evaluate those bids individually. Michael Knowles: Yes. No, great. Dan, summary on the supply chain. Scott, I would just add that it really -- the biggest long-tail impact has really been on the memory. And a moderate portion of the bond. We've been able to manage the rest of the build and material in our products, whether standard or purpose-built with supply chain quite well. So it's really just in those components. And we've got a number of risk mitigation actions we've been working to help mitigate the risk of those delivering time frames. So we will assess and continue to work that as it goes through. And as Dan mentioned, we've been able to pass the price on. So financially, we've been able to manage that impact. And now we'll just be working the -- continue to work the timing impact across our systems, and it really is just one component. Unfortunately, it's a fairly standard performance in server memory. On the change in the defense environment with the ongoing operations in the Middle East and in and around Iran. Given that the budget for 2026 on the defense side was already passed and people are executing against obligations. We really haven't seen an impact on bookings or planned orders for the year. We've built into the planet and anticipated, there may be some slight delays in award timing. And that is just based on the fact that there is an increased overall movement to move standard logistics and material that's needed in support of the forces over in the Middle East that has to get contracted and put out. So there's a time factor. But to date, so far, we've not seen a big impact on timing or elements of programs or plans that were already budgeted or planned for 2026. In these kinds of experiences we've also seen that these per track, there generally starts to be indications back from the conflict on what are the technology applications that could be used to better facilitate execution of the battle plans in the area and to become more efficient in the very specific battle or environment that's being bought. And we generally being in the lab in some of the places we're positioned. We are looking for that to hopefully turn to opportunity for us into this year and next year as we have the opportunity to leverage high-performance computing, commercial-based solutions to readily support any of those applications, which generally will come in around software or sensors capabilities. And to go with that, you'll need the right level of compute and low latency, which is where we sit. So we monitor those and to the lab, and we'll keep an eye for them. But oftentimes, it starts to create opportunity for specific solutions that would enable the current conflict operation execution. Scott Searle: Very helpful. And if I could to just follow up on the opportunity, the unfactored opportunity pipeline. I think you indicated that it's up significantly from the prior number you guys have talked about it being $1 billion. And it sounds like there are growing size opportunities within that. I'm wondering if you could expand on that a little bit. And as it relates to some of the near-term opportunities, particularly the advanced vision systems for military vehicles, kind of a time line for that to convert maybe into production? And then as we look to I think the long-term targets you guys have talked about for growth of 20% to 30%. Given all the activity that's going on in the pipeline, given how you're starting to convert some of that into orders, do we see an inflection in '27 towards the higher end of that long-term target range? Daniel Gabel: Yes. I think -- so Steve, talking about the pipeline, yes, we continue to monitor that. That's our source of identification of opportunities is that we have spoken before, we rate those on probabilities of go that they'll be funded awarded and happen and probably a win probably that we win, and that helps identify orders of priority in terms of where we'll be addressing opportunities. So we continue to see elements moving into the pipeline. I'm probably most encouraged that we're seeing a diversity across that pipeline that would include a multitude of new customers, new opportunities, all at moderate values compared to when we started the pipeline 3 years ago. As I noted in my comments, just the growing number of booking size and multiyear programs. The other thing I would say that's starting to appear in that pipeline is we're seeing probably an increased number of potential transitional or transformational opportunities that we have factored down appropriately, but it's creating more opportunities for us to find potential transformational organic growth out of things that we're doing. And that's leading us to have that as we move through the factored element of that is what's continuing to strengthen our positive feeling about the ability to grow at that 20% to 30% range. But as I mentioned, there are those transformational opportunities and some long programs of record that where we do see those come to fruition would represent substantially greater growth and what we're seeing in the probability weighting factors today. Some of those, as we had mentioned in the past, are in and around Army programs. The current elements we had talked about in the past with the 360-degree situation awareness system. That architecture solution still remains under test and evaluation by the U.S. Army. They will make decisions as appropriate and timing and priority for them. This is the joy of working in the defense department, sometimes these things can happen fast. Sometimes they can be protracted. Sometimes they can come in multiple phases. The benefit we stand is that we have a solution that is present under test available and is the only solution that can provide the capabilities that were written to the requirements that we delivered again. That architecture has now expanded into multiple additional sensor-based processing applications where the demand for the high-performance compute and sensors processing and the demand for low latency to move that data has become a requirement across a couple of other capabilities. We mentioned one in our press release about the enhanced vision system. And we continue to work some additional opportunities for that compute infrastructure is starting to form the basis for sensor distribution at extremely low latency. So we continue to prosecute those. We're seeing them across opportunities across the other services where we could find these potential larger transformational programs of record, but no distinct timing on any of those quite yet. Operator: Your next question comes from Eric Martinuzzi from Lake Street. Eric Martinuzzi: Yes. I wanted to ask sort of a guidance philosophy question. It sounds like if there were not the supply chain issues, there's a chance you could have actually bumped up your outlook for 2026. Am I reading that the right way? Michael Knowles: Yes, I think that's right, Eric. We're definitely seeing strength on the demand side. You can see that in our bookings. As we look towards guidance, we're remaining cautious as we navigate this dynamic supply chain environment. The other thing I'd add, our guidance was back half weighted for the year. I think the strong performance in Q1 helps to moderate that ramp. It certainly increases our confidence in the guidance. But we have seen and we're continuing to see extended and variable lead times for components, including memory. So the timing of revenue conversion remains our biggest risk for the year. It's a risk that our guidance takes into account. We'll continue to drive that supply chain, and I think we'll have increasing visibility into that as we move through Q2. Eric Martinuzzi: And is there -- the booking success you had in Q1, was any of that kind of, I don't know, Q2 or Q3 or pull forward? Or was it just normal course? Daniel Gabel: Yes, I think it was a combination. I think there was probably some pull forward that we saw. And I think there were also some new wins that we have factored and maybe the initial awards weren't used, but those will grow over the time. So overall, I think Q1 bookings were a very positive story for us. Michael Knowles: Yes, I'd agree. But exactly what Dan said, across the border, it was a good bookings quarter for us. Operator: Your next question comes from Brian Kinstlinger from Alliance Global Partners. Kevin Pimental: This is Kevin for Brian. First, can you provide updates on both the autonomous robotics for construction and mining as well as the aerospace programs for passenger cabin systems? When do you expect each might move into production from LRIP? Michael Knowles: Thanks, Brian (sic) [ Kevin ]. So on the robotics front, we've successfully completed prototype and early prototype build and delivery test and validation in the environment and we'll be transitioning that program to production here in 2026. So we'll start to see news on that coming in the coming months and quarters as that program starts to transition into production. The commercial aerospace now has actually transitioned into production. Deliveries have started this year, 2026, and will continue through this year, and then we'll look to 2027. Kevin Pimental: And then, are there any -- can you provide any updates on the liquid cooling system for medical imaging where a tech refresh is pending? How will a tech refresh impact this production program? Michael Knowles: Yes. Yes. Well said on production forecast for the year with the medical imaging company, the liquid-cooled server. So we have that laid. We saw a ramp in production demand from last year. So we're positive about the momentum of that program is where it's going. And we do continue to explore the opportunity where we can in our systems in our configurations while they're based on a lot of commercial open system architectures. The ability for tech refresh and upgrade being able to put in even additional more computer lower latency can help with the overall performance of systems. So we always continue much like with this customer of all our customers to engage in the opportunity where and if needed, to be able to provide quick updates in compute and latency to further enhance the performance of those systems. Kevin Pimental: Great. And then lastly, could you provide an update on the autonomous maritime application has testing been completed? And do you still expect production orders this year? Michael Knowles: Yes. On the Autonomous Maritime, systems delivered under test and evaluation in discussions with the customer, we would expect to see production orders this year. Given that the production orders are received early enough, we should be able to generate revenue on that this year. Operator: And there are no further questions at this time. Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you.
Operator: Good morning and welcome to the Healthpeak Properties, Inc. First Quarter 2026 Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Andrew Johns, Senior Vice President of Investor Relations. Please go ahead. Andrew Johns: Welcome. Today's conference call contains certain forward-looking statements. Although we believe expectations reflected in any forward-looking statements are based on reasonable assumptions, these statements are subject to risks and uncertainties that may cause actual results to differ materially from our expectations. A discussion of risks and risk factors is included in our press release and detailed in our filings with the SEC. We do not undertake a duty to update any forward-looking statements. Certain non-GAAP financial measures will be discussed on this call. In an exhibit to the 8-K we furnished to the SEC yesterday, we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements. The exhibit is also available on our website at healthpeak.com. I'll now turn the call over to our President, Chief Executive Officer, Scott Brinker. Scott Brinker: Thanks, Aj and welcome to Healthpeak's first quarter earnings call. Grateful for our team who delivered a first quarter with excellence in execution, one of our WE CARE core values. In early January, we completed the once-in-a-decade buying opportunity at the Gateway campus in South San Francisco for a small fraction of replacement cost. We're already driving leasing momentum at the campus with 62,000 square feet of signed leases and letters of intent. We also have 113,000 square feet of active proposals and tours at the campus. In March, we completed the IPO of our senior housing business in a unique and creative transaction. The $240 million of current year FFO from that portfolio is now being valued at a multiple that's roughly 20 turns higher than Healthpeak. That differential highlights the growth potential in Janus Living but also the incredible opportunity in Healthpeak at the current stock price. Despite selling about 18% of the business in the IPO, our exposure to senior housing is essentially unchanged from December 31 because we closed more than $700 million of acquisitions on our balance sheet prior to the IPO. The timing of the acquisitions was very intentional to capture the multiple arbitrage for our shareholders. Janus Living already has the cost of capital to do accretive acquisitions. As the 82% owner of the company, those acquisitions will benefit Healthpeak earnings. As an example, we expect the IPO proceeds to be accretive to Healthpeak by roughly $0.04 per share once fully invested and stabilized. The value of our best-in-class outpatient platform is being rewarded in the private market by world-class institutions. In March, we closed a joint venture recap with Blackstone on a fully occupied outpatient portfolio at a 6.1% cash cap rate. The transaction raised $170 million in proceeds and we now have a template for future recaps and acquisitions with Blackstone. We're progressing additional transactions that would generate proceeds of $700 million or more at cap rates about 200 basis points inside what's implied in our current stock price. We bought back $100 million of stock in April at a 10-plus percent FFO yield. The buyback was accretive and allowed us to increase our 2026 earnings guidance. Our stock price is clearly mispriced versus intrinsic value, so we'll continue to evaluate leverage-neutral stock buybacks to drive earnings and value accretion. We also paid more than $200 million in dividends to shareholders in the first quarter, which equates to an outrageously high 7.5% annualized dividend yield, especially in light of the solid payout ratio. Turning to operating results. The strong fundamentals in Outpatient Medical that we spoke to with the merger announcement 3 years ago continue to be validated. Since closing the merger, we signed more than 10 million square feet of renewals at cash re-leasing spreads of positive 5.8%. Last quarter, the spreads were positive 5.4% and once again, with very modest TIs. Half of our renewals were done in-house, saving $5 million in leasing commissions last quarter alone. Our leasing costs continue to be substantially below the peer group, resulting in strong net effective rents, which drives superior cash flow and ultimately earnings growth. We've been successfully getting 3% escalators in the outpatient business on both new leases and renewals for about 5 years now. Over those 5 years, our same-store NOI growth has averaged positive 3.5%, which is 30% higher than the previous 5-year average. So definitely an improvement in that business. We're advancing a number of strategic and highly pre-leased outpatient developments with our health system partners but not yet far enough along to announce publicly. In Senior Housing, our 1Q results were phenomenal across the board. Entry fees set an all-time high for the first quarter, incredible work by our team and operating partners and we'll provide all the details on the Janus Living call. Turning to life science. M&A activity, biopharma stock prices and capital raising are all trending positively. In fact, April was the most active month for biotech equity issuance since early 2021. Healthpeak total occupancy in life science increased sequentially and we still expect our year-end 2026 total occupancy to increase versus the prior year. Our leasing pipeline is broad-based from venture-backed biotech to large-cap pharma. Traditional wet lab accounts for the vast majority of the pipeline but we do have flexibility. Our robust well-located buildings allow us to capture alternative users when it makes economic sense. To summarize, senior housing performance was outstanding and we created enormous value with the IPO. Our outpatient portfolio and platform is being rewarded and richly valued in the private market and our lab business has massive upside as the pendulum starts to swing in our favor. I'll turn it to Kelvin to review our first quarter results and our improved 2026 outlook. Kelvin Moses: Thank you, Scott. We started the year strong and continue to execute our stated plans to position each business to deliver long-term earnings growth. We are very pleased with the success of the Janus Living IPO, which strengthens our investment management capabilities and expands our reach to a broader base of investors. We are translating this momentum into our operating platform by adding key talent in asset management, investor relations and acquisitions, advancing our technology initiatives and delivering our platform to our senior housing operating partners to achieve excellence in execution across the portfolio. We continue to attract interest from institutional capital across the enterprise, including our recently announced outpatient medical joint venture with Blackstone. These partnerships further validate our platform, relationships and capital allocation philosophy as investors look at Healthpeak as a platform aligned for growth. Turning to the results for the first quarter. We reported FFO as adjusted of $0.45 per share and net debt-to-EBITDA of 5.4x. In Outpatient Medical, fundamentals continue to show strength and our team is translating this into leasing opportunities with key relationships. During the quarter, we executed nearly 1.1 million square feet of leases, including several large renewals with leading health system partners, including Baylor Scott & White, Norton Health and HCA. Across our leasing activity, we achieved 5.4% cash re-leasing spreads on renewals, 79% tenant retention and ended the quarter at 91% total occupancy. Average annual escalators were 3%, consistent with what we have achieved on average since the Physicians merger. And leasing costs this quarter were modest at just 10% of annual rents, producing strong cash return. A good example of this execution is the Baylor cancer center in Dallas, where we completed 10-year lease renewals across the entire 458,000 square foot campus during the last 2 quarters. Leasing costs were minimal at just over $1 per square foot per year, reflecting strong second-generation returns that drive earnings growth. And most importantly, this outcome was achieved through direct negotiations with Baylor and McKesson, leveraging decades-long relationships and in-house operating platform that can deliver tangible outcomes for our clients. Finally, we ended the first quarter with a very active leasing pipeline, including 318,000 square feet of leases executed since April and approximately 700,000 square feet under LOI. Turning to Lab. During the first quarter, we executed 141,000 square feet of leases, 92% of which was new leasing. We also have approximately 355,000 square feet under LOI, of which approximately 80% was new leasing and approximately 75% on currently vacant space. We saw a range of deal sizes in those commitments, including 4 deals greater than 50,000 square feet and South San Francisco continues to see the strongest active demand of each of our markets. We ended the quarter with total occupancy up to 77.7%. And for the balance of the year, we expect to continue to capture occupancy from the benefit of new leasing commencements, which will support occupancy growth of at least 100 basis points versus year-end 2025. And finally, Senior Housing. We will continue to provide a brief update on senior housing with detailed commentary on the Janus Living earnings call to follow. For the quarter, Janus Living delivered total revenue growth of 35% and adjusted EBITDA growth of 42%. Healthpeak's ownership totaled 81.6% of the outstanding shares of Janus Living, which represents roughly a $5.7 billion market value. Shifting to the balance sheet and guidance. In January, we repaid $103 million of secured mortgages on 2 of our senior housing properties. And in March, we closed on a new senior unsecured delayed draw term loan totaling $400 million, which remains undrawn. We will have through December 2026 to draw down the term loan. And ending with guidance. Following the IPO, Janus Living is consolidated into Healthpeak's financial statements with a deduction to earnings for the noncontrolling minority interest. We now incur incremental public company costs and temporary earnings drag from the cash proceeds on the balance sheet. These impacts are expected to be offset by the senior housing portfolio outperformance and deployment of $750 million of cash into acquisitions through year-end. As a result, we expect the IPO to be earnings neutral to Healthpeak in 2026 and it will be accretive in 2027 and beyond as the capital deployment into acquisitions flows through to Healthpeak's earnings. In April, we repurchased $100 million of our stock at an implied FFO yield of over 10%. The repurchase is accretive to earnings and supports raising our FFO as adjusted guidance to a range of $1.71 to $1.75 per share. With that, operator, please open the line for Q&A. Operator: [Operator Instructions] Your first question comes from Nick Yulico with Scotiabank. Scott Brinker: Nick, are you there? I'm going to say your perfect record's intact, you're always first, but I'm not sure. Operator, I'm not sure, maybe he's having a connection problem. Let's go to the next question. Operator: Perfect. Your next question will be from Farrell Granath with Bank of America. Farrell Granath: This is Farrell. My question is on your life science portfolio. And when thinking about the commentary, it's seemingly much more positive in how you're thinking about your pipeline and increased interest. And I'm curious how that maybe has influenced or even changed your thinking and timing on opportunistic life science investments going forward? If that has actually moved up the time line or if there is a line of sight of when you think that would be a strategic use of capital? Scott Brinker: Well, the one we acquired in late December, early January, Gateway, is doing really well. So that's a positive. That was a unique opportunity. It's our biggest market. We have a dominant footprint there. I think the best team and the best footprint. We dominated there for years and I think that will be even more true with this purchase. And it had a lot of yield in addition to upside. So that was a unique opportunity. I'm glad we did it. We're already getting the benefit of that. I think that will fall into '27 and beyond as well. So congrats to Scott and the team. We're looking at some other things in our core markets but our threshold is pretty high for using capital. Obviously, we did the buybacks in April. That was a very accretive use of capital. We have a number of transactions underway. Our sources and uses this year was $1 billion of recaps and sales and $1 billion of acquisitions. We've essentially done the $1 billion of acquisitions and buybacks and we have a number of transactions underway. So we need to make sure we get that done before we would consider anything opportunistic in life science. But there's no shortage of opportunity. There's -- that is for sure. I mean, a lot of these private buyers are just totally upside down. At this point, we're mostly having conversations with lenders. So there is opportunity but we're going to be really careful and disciplined about which markets, which buildings and obviously, pricing valuation. Operator: Your next question is from Seth Bergey with Citi. Seth Bergey: Just given kind of the pipeline and the leasing activity you've been able to accomplish, how does the kind of Gateway acquisition kind of compare to your initial underwriting expectations? And just given kind of the positive comments on the pipeline, is there anything kind of changing in terms of the lease economics that you're discussing with life science tenants? Scott Brinker: Well, we didn't put much lease-up into our Gateway underwriting in year 1. So I'd say we're already ahead of schedule. Certainly, the pipeline is strong and I would have guessed and the rents that we're signing are at or above underwriting. So that's all positive. I don't think there's much contribution to 2026. But definitely, as we look into '27, '28, the upside from that portfolio should start to materialize in our earnings. So the momentum is definitely positive in the Bay Area. I mean San Francisco had a red x on it in real estate 5 years ago, now it's the hottest market in the country and we're certainly getting some benefit of that. Operator: Your next question is from Austin Wurschmidt with KeyBanc Capital Markets. Austin Wurschmidt: Kelvin, I believe you said that you expect lab occupancy to increase 100 basis points by the end of the year, year-on-year. Can you just walk through some of the components that's driving that between commencements and known move-outs? And does the team have any visibility into any known move-outs in 2027 at this point? Kelvin Moses: Yes. Thanks for the question, Austin. We have about 400,000 square feet of expirations in 2026. And behind that, we have just over 0.5 million square feet of commencements that will fully offset those expirations. So we expect net absorption into year-end. We're sitting here in May. So still ample amount of time for the team to try to convert some of our pipeline into occupancy in the fourth quarter as well that may trickle into 2027 but certainly still a window here to try to capture some incremental occupancy by year-end. There is about 50,000 square feet that we expect to exit the portfolio in the second and third quarter. So we do know about the potential vacate of 2 tenants in particular, midyear. But generally speaking, our focus is on total occupancy, driving net absorption throughout the year and seeing occupancy grow and subsequently produce earnings growth. So we're on track for that and the pipeline is certainly giving us promise that we'll be able to achieve net absorption this year. Operator: Your next question is from Ronald Kamdem with Morgan Stanley. Ronald Kamdem: Just wanted to stay on the life science portfolio for a second. I think you talked a little bit about sort of San Francisco and the activity there. Maybe commentary on some of the other markets. And if I could just ask about the 2027 expirations again, in terms of known vacates, just any sort of early color there because it would seem like there's a potential that same-store could be up next year if occupancy is rising this year. So I think we're all just trying to figure that out. Scott Brinker: Quickly on '27, it's still early. But as we look through that list and the conversations we're having, I think the renewal rate will be a lot higher in '27 than it has been in '26. So I don't know, plus or minus 50% or better but it's still early. So we'll update throughout the year as we get more clarity. But the leasing pipeline, the signed but not occupied leases is all positive. So we do feel like the trajectory on occupancy is definitely positive. And if we look at M&A and capital raising, that's extremely positive. It feels like that's always a leading indicator to the pipeline, which obviously leads into the actual leasing. So definitely, the trajectory is as good as it's been in a number of years, which feels good and we're well positioned. We've got the right team and footprint and the credibility and capital as a landlord to win deals. So definitely feeling a lot better about the momentum in that business. In San Diego and then I'll ask Scott Bohn to comment on Boston but we've got activity on virtually every vacancy in the portfolio. It doesn't mean we'll sign all those leases but there's activity. We brought in Denis Sullivan 6 months ago, former CIO and CFO of BioMed. He's just doing a fantastic job. So we've really got a great team on the ground to drive that activity as well. Scott, do you want to comment on Boston? Scott Bohn: Yes. Sure. Boston, I mean, Boston is still working through the biggest supply-demand imbalance of the 3 markets. But you really have to dig into what is competitive to our portfolio and how our portfolio is performing specifically. If you look at West Cambridge where the bulk of our opportunity is, from a space perspective, we've had some great success, a great win with the lease we executed with a large cap pharma in the quarter. There's also been some nice absorption in and around our portfolio in West Cambridge. So we're really happy with what's going on in that particular submarket in Greater Boston. And Claire and team are doing a great job out there capturing the demand that is available. If you look back 6 months versus today, it's markedly different feel in that market from a demand perspective. Operator: Your next question is from Rich Anderson with Cantor Fitzgerald. Richard Anderson: Nice quarter, nice set up here. It reminds me of the paired share REIT structure but I know it's not that. So don't get me wrong but very, very unique indeed. So congratulations. I wanted to talk about life science leasing a little bit more detail. Kelvin and Scott, you mentioned up 100 basis points at least by the end of this year versus 2025. I'm wondering if -- what do you think about how that will look? Will that be, I'm guessing not a straight linear line from today till the end of the year but more like an EKG? And I'm just curious how the pace of occupancy will go from here? Do you think you have a step down next quarter or step up? Like I just want to sort of prepare people for what it could look like even if the end game is up 100 basis points. Kelvin Moses: Yes. Thanks for that, Rich. I'll start. This is Kelvin. I think most importantly, we ended the year at 77% total occupancy. We ended the quarter at 77.7% total occupancy. So already making progress towards the 100 basis point goal of total occupancy improvement this year. Very difficult to give you precision around the quarter-over-quarter cadence of occupancy but just really want to focus you on year-end, given we have net absorption embedded in our portfolio with the execution that Scott and team were able to get completed starting last year that are flowing into this year. The 2 million square foot pipeline is probably worth giving a little bit more context on because there are opportunities to get new prospective tenants into more move-in-ready space. And if we are successful, that could lead to incremental occupancy capture in the fourth quarter, again, into 2027. So no perfect cadence that we can give you from an occupancy standpoint but total occupancy captured by year-end is our focus and the entire organization is working towards that goal. Operator: Your next question is from Michael Goldsmith with UBS. Michael Goldsmith: Just on the guidance, you raised the full year outlook by $0.01. Same-store NOI guidance is flat. Now we expect interest expense to be $20 million higher and G&A to be $5 million higher. So can you just walk through kind of what's driving the $0.01 raise? Is it the first quarter beat? Or maybe said another way, if you annualize your first quarter core FFO of $0.45, you get to a number well higher than your guidance. So can you just kind of walk us through the model and how we should be thinking about the cadence of earnings through the balance of the year? Kelvin Moses: Yes. No, thank you for asking the question. This is Kelvin again. But I'll give a little bit of context as it's important to get this right. But the Janus Living IPO has certainly proven to be extremely successful for Healthpeak. I think first, the outperformance in the senior housing business fully offsets the impact of the transaction, making the IPO neutral to Healthpeak's earnings in 2026. And then the second point would be, as Scott mentioned in his prepared remarks, we anticipate capturing about $0.04 of accretion on a run rate basis as the cash on balance sheet is deployed and the senior housing acquisitions stabilize and contribute to earnings. So some of that benefit will start to come into 2026, offsetting the IPO dilution and we could generate plus or minus $0.03 of earnings in 2027. So really important to highlight the earnings contribution from Janus Living. Through the first quarter, we mentioned earlier that we've already invested $1 billion of capital, $714 million in senior housing and we are making progress towards our capital recycling target of $1 billion. So $270 million of proceeds already received. I think we made the right decision to invest the $714 million in senior housing acquisitions in Q1 on balance sheet prior to the IPO and contributing those assets to Janus Living to own the largest share in the platform. And going forward, that will result in earnings growth, as I mentioned before. But I think the first quarter is a little bit elevated because of those on-balance sheet acquisitions that we made in Q1 but we do anticipate that the subsequent quarters will come down. And if you look at our kind of run rate average based on the midpoint of our guidance, that's about $0.43 per share of FFO, plus or minus $0.01 each quarter. But as we get proceeds back from our recapitalizations and seller financing repayment, that will have an impact on the earnings trajectory in the back half of the year. So a number of moving parts, wanted to make sure we walked through that. But we are certainly pleased with the opportunity to raise guidance $0.01 here and the success of the Janus Living IPO. Scott Brinker: And Michael, just one addition, the debt, $650 million of senior notes that we -- we'll have to refinance in June. Those are like 3.5%. So that's an additional headwind in the second half of the year versus the first half, just the final piece of that puzzle. Operator: Your next question is from Michael Carroll with RBC Capital Markets. Michael Carroll: Just wanted to see if you guys can provide additional color on the life science setup? I know that the pipeline appears solid and is growing. But how has tenant activity changed? I mean are they making decisions any quicker than before? I think the focus for them previously was really on the prebuilt space but have any larger customers willing to make longer-dated decisions on some of the space that maybe requires longer build-outs yet? Scott Brinker: I'll give a few comments on the background -- backdrop and I'll let Scott comment on specific activity. But if you think about the real drivers of supply and demand, M&A, capital raising, new supply, all those things are moving in our favor in a very dramatic way. It's just the downturn is so severe that it's taking some time to climb out of it. It's a long pendulum for this particular cycle but it is swinging in our favor. I mean all of those things really do move the needle on supply and demand over time and that's what drives the business. It's as simple as that. And we're out competing in the marketplace. There's a few really strong competitors, obviously. But those 2 or 3 groups are capturing the vast, vast majority of the tenant demand. And I think that, that will continue. And in fact, it's an opportunity for us. A lot of the new supply is going to alternative use. We're simply just not leasable in this marketplace. So the backdrop is clearly moving in a positive direction from both supply and demand standpoint. Scott, do you want to comment on the... Scott Bohn: Sure. Michael, I mean there are some larger tenants in the market who would be more apt to take more of a shell type space. But broadly speaking, the bulk of the pipeline and activity is still looking for maybe more move-in ready space or space that takes more minimal TI. Part of that is kind of the speed to getting into space, kind of shortening that decision window post funding. But also that type of transaction is less risky for the tenant, right? If you're going into a new build of a shell space where it's a full build-out, even if it's a turnkey TI, there's still inherent risk to the tenant. It's just a more complex build for them. So if they have the option today to go into a space that's a very nice second generation space that's well built out, that fits what they need with minor modifications, they're opting to do that. And so I think one thing that is an advantage to our portfolio that we talk about all the time is having a wide variety of spaces at different price points to accommodate all of the demand within the market. We look at the tenant list, the broker sheets and really try to focus on having an option for every tenant on there versus just focusing on a selected group of tenants who are looking for Class A trophy space. Operator: Your next question is from Juan Sanabria with BMO. Robin Haneland: This is Robin Haneland sitting in for Juan. I was just curious on the Blackstone JV. What's the opportunity set to grow here going forward? Would you be more interested in additional recaps or acquisitions? Scott Brinker: Yes, it could be both. It's a great group to partner with, obviously, extremely knowledgeable, enormous balance sheet with different pockets of capital to do different things. And we've got a great platform for them to participate in what we think is a really compelling business, with stable but growing cash flows and great relationships and footprint to really drive activity. And we would co-invest but as a minority share, we did a 20% interest in this recap, probably fair to say anywhere between 10% and 20% going forward. And we could do recaps and/or acquisitions and we're already looking at a number of things with them. Operator: Your next question is from Michael Stroyeck with Green Street. Michael Stroyeck: Can you provide some thoughts on lab re-leasing spreads? Obviously, there's still plenty of vacancy at the market level, likely will be for some time and your biggest peer is guiding to some pretty ugly re-leasing spreads. So I guess are you concerned that there could still be downward pressure on rents over the near term? Scott Bohn: Sure. This is Scott. I mean, I think overall lab rents in our portfolio around $60 a foot, right? And I think that you're going to have some rents that are above that, some rents that are below that. But overall, I think we're generally in line with that. But I think we focus on the total all-in economic package versus the face rent. I think in -- the better read overall, in my opinion, is what we're seeing in demand in the pipeline and those all-in economics that we're capturing across deals over time, they're going to drive both occupancy and earnings. Operator: Your next question is from Wes Golladay with Baird. Wesley Golladay: You seem to be getting a little bit of traction on the permitting at the mixed-use Alewife project. Can you give us an update on what's going on there and a time line for that project? Has that changed at all? Kelvin Moses: Yes. No, happy to give an update. In fact, a week ago, we received our preliminary planning Board initial approval. It's not the final approval for the entitlements but certainly a step towards that objective. It's been a long process, as you know, working through the entitlement effort there but a very rewarding project that we now have Hines partnering with us on the multifamily opportunity. The mixed-use project is plus or minus 5 million square feet, half of which will be multifamily residential that Hines will be leading. So we have the opportunity to complete entitlements this year towards Q4 of 2026 and could see a groundbreaking of a residential building by Hines at some point in 2027 or 12 to 18 months after receiving entitlements. So working towards that objective and certainly making great progress with the city of Cambridge. Operator: Your next question is from Vikram Malhotra with Mizuho. Vikram Malhotra: I guess just maybe, Scott, if I can step back, you're calling for the bottom, you're saying there's more activity. A bunch of your peers are still seeing occupancy falling and maybe pointing out much more challenging, I guess, conditions. So maybe if you could dig in a bit more sort of what are some of the differences, maybe geography, maybe product type and maybe it's the tenant type as well. I'm just sort of trying to square kind of how divergent the trajectory and commentaries have been from your peers on that side. Scott Brinker: Yes, Vikram, even when the sector was going bananas in 2020 and 2021, I mean we stayed really disciplined. In terms of what we bought or what we developed, we shut off capital allocation way before anybody else, public or private. It turned out to be the right decision and now we're buying when nobody else can. It's actually a pretty good opportunity. We're already getting great results from that capital allocation decision with the Gateway purchase and potentially more to come. But we've always had a philosophy of concentration as a way to reduce risk. I know that sounds odd, use of diversification to reduce risk. But in life science, it's really the opposite. Concentration in dominating local markets is really the way to go. Creating flexibility and pathways to growth for tenants, really dominating the broker networks just given our footprint. We've got a great team in all 3 markets. So I think all of that plays a factor. We do like having multiple price points, right? It's not all A+ even though maybe you'd like to be in that office, not everybody wants to or can afford it. So we like to have multiple options at different price points and suite sizes as long as it's in the right submarket. That philosophy, I think, has paid off in terms of how we're approaching the market. But we're not in a lot of these kind of secondary, tertiary markets. I won't name them. But we've really -- you could -- our entire footprint is in 5 submarkets in the entire country. I mean, you could probably tour it in 1 day if you could -- if you could figure out the travel to Boston, which is a long flight. Otherwise, I mean, you literally can see the entire portfolio in 1 day, it's so concentrated. But that's proven to be the right decision. So I think it's all of those things together that are driving our view of the outlook maybe versus some others but I can't obviously speak for them. Operator: Your next question is from Jim Kammert with Evercore. James Kammert: Is it reasonable to assume that the vacancy in the lab portfolio has, on average, basically the same NOI per square foot contribution or rent per square foot as the occupied portfolio? Just trying to think about that latent earnings potential as it leases up over time. Kelvin Moses: Yes. Maybe I'll start. Over the last 12 months, we've been able to achieve 5% cash re-leasing spreads on average. This quarter, we did 3.5%. Scott had just mentioned our portfolio average rent per square foot is around $60 triple net. Each market is different. Each lease in each space is different. So we're able to exceed those in-place rates but we also might have some leases that come in a little bit lighter. So what I would suggest is, looking back at our cash re-leasing spreads, which we continue to get in excess of our existing kind of in-place leases, that should contribute to earnings growth over time. Most importantly, it's a total occupancy story. As we gain occupancy, these are spaces that are currently not producing income and there's even a drag associated with those spaces. The occupancy capture is really going to drive earnings. So I think that should be the focus. That's how we look at the earnings opportunity and we have 2.5 million square feet of opportunity in the lab portfolio to really drive earnings growth. Operator: Your next question is from Mike Mueller with JPMorgan. Michael Mueller: I apologize for trying to squeak a second one in here but it's a clarification. On the supplemental development and redevelopment page, what does active versus total mean in the capacity and percent lease columns? And then the real question was, with the seemingly better view on lab occupancy, why didn't you update that same-store outlook? Scott Brinker: Yes, active redev in development, I mean, a lot of these projects are substantial. So as we lease certain floors or portions of the building and deliver them and the tenant starts to pay rents, we take those particular suites or floors out of the active development pipeline. They're obviously no longer under active development. So that's the differential or explanation between active versus total, Mike. Kelvin, do you want to take the other? Kelvin Moses: Yes. And Mike, for your second question, I think over the course of the year, we'll have an opportunity to reevaluate same-store amongst all of the segments. This quarter, the focus was certainly on the senior housing outperformance in the first quarter that really drove the guidance modification for the senior housing segment. But as we make progress over the course of the year, we'll certainly evaluate the updates that will have a total same-store impact. So for this quarter, we thought it was appropriate to provide the update on senior housing. Scott Brinker: I want to add, ordinarily, we don't even update the segments, which I think is appropriate here. We felt like we didn't have a choice because Janus Living is now providing its own guidance, obviously, on same-store and it's substantially higher than the original healthy guidance. So we didn't -- we really didn't have a choice but to update the segments. But we really focus on the total portfolio. Same-store is really a terrible metric. They ignore so many things. So it's not how we run our business. Frankly, we'd prefer to just ignore it entirely. Operator: Your next question is from Omotayo Okusanya with Deutsche Bank. Omotayo Okusanya: Yes. Solid execution. So congratulations, both DOC and Janus. Post the quarter, there's kind of significant leasing activity both on the MOB and Lab side. Again, curious if we just kind of conceptualize what's happening in terms of that kind of people activity. And also, if you could just talk a little bit about kind of economics, whether it's kind of changed materially in any way versus leasing activity in 1Q and realizing that there may also be some mix changes as well in regards to the April activity versus the 1Q activity? Scott Brinker: 1Q is just always slow, Tayo. You can go back as many years as you want. It's just always the lowest quarter of the year but the pipeline in both businesses is tremendous. We expect occupancy to grow in both outpatient and life science through year-end. So the trajectory in both businesses is very positive. I wouldn't focus too much on quarter-to-quarter. It's just 1Q is always light on both leasing, execution as well as capital -- CapEx and this year was no different. Omotayo Okusanya: Can you talk a little about economics? Scott Brinker: Economics, well, yes, look, I'll do one at a time. In outpatient, they continue to be really strong. I mean we're getting 5%, 6% re-leasing spreads on several million square feet of renewals every year. We're pushing 3% escalators almost across the board with very, very modest leasing costs, which is a critical distinction in terms of TI and LC. I mean it's very modest. So the net effectives are really strong in that business. Mark and team have really built a nice pipeline. And we're optimistic about the trajectory in that business. As we were 3 years ago when we announced the merger, it's actually exceeded our high expectations. So that's all good. And in life science, obviously, I think Scott has given you a lot of color on, the pipeline is building. It's broad-based from biotech to pharma and wet lab and everything in between with continued strong leasing economics. And again, the total focus is not just the face rate but TIs and LCs and all the concessions that come with it. So positive momentum on pipeline and leasing economics in both of the segments, Tayo. Operator: Your last question is from Farrell Granath with Bank of America. Farrell Granath: Just coming back in with a secondary question. Just digging in a little bit more on the life science occupancy. I was wondering if you could bridge between the offsetting of the vacancies with your new leasing potential dispositions and also your redevelopment that you saw? What were the benefiting factors from those 3 buckets? Kelvin Moses: Yes. Farrell, this is Kelvin. I think for the quarter, we saw total occupancy uplift from net absorption. And over the course of the year, as I described earlier on the call, we have the potential of continuing that trajectory to end -- to year-end with total occupancy ahead of where we ended 2025. We sold a 100% leased campus through a contractual purchase option in the first quarter in Salt Lake. So it obviously had an impact on occupancy. We articulated that, I think, on the last quarter call. We don't have the intention of additional dispositions in the lab portfolio right now. But as we get more leasing traction on our development and redevelopment, that will obviously benefit total occupancy. And then we have the same-store operating portfolio that we are focused on driving total occupancy capture there as well. So making progress in all categories but no intention of disposing of life science assets right now. Operator: There are no further questions at this time. The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
Operator: Greetings, and welcome to The ONE Group Hospitality, Inc. First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please signal an operator. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Nicole Thaung. Please go ahead. Nicole Thaung: Thank you, operator, and hello, everyone. Before we begin our formal remarks, let me remind you that part of our discussion today will include forward-looking statements. These forward-looking statements are not guarantees of future performance, and you should not place undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Please also note that these forward-looking statements reflect our opinion only as of the date of this call. We undertake no obligation to revise or publicly release any revisions of these forward-looking statements considering new information or future events. We refer you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. During today's call, we will discuss certain non-GAAP financial measures, which we believe can be useful in evaluating our performance. However, the presentation of these measures or other information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. For reconciliations of these measures, such as adjusted EBITDA, restaurant operating profit, comparable sales, annual adjusted operating income, and total food and beverage sales at company-owned, managed, licensed, and franchised units to GAAP measures, along with a discussion of why we consider these measures useful, please see our earnings release issued today. With that, I would like to turn the call over to Emanuel Hilario. Emanuel Hilario: Thank you, Nicole, and good afternoon, everyone. I appreciate you joining us today. I want to start where I always do by thanking our teammates. Every day, our teams across every brand and market show up focused on creating memorable experiences for our guests. These days, consistency is more important than ever and I appreciate all that they do in executing with excellence and upholding the Vibe Dining experience that defines our brands. Today, I will begin with an overview of our first quarter performance, and then I will walk you through our progress with respect to our strategic priorities before turning it over to Nicole for the financial details. We are excited about our continued momentum. Our operational performance is resulting in strong financial results. Total GAAP revenues grew year over year and comparable sales are sequentially better than the previous quarter. Owned restaurant cost of sales improved to 19.4% from 20.8% in the prior-year quarter. Operating income increased 30%, adjusted EBITDA increased 12.1%, and capital expenditures, net of tenant improvement allowances, reduced 23% year over year as we prioritize capital efficient growth and free cash flow generation. Total GAAP revenues for the first quarter were $[inaudible], an increase from $211 million in the same quarter last year. First quarter consolidated comparable sales were relatively flat at negative 0.3%, representing a continuation of the positive momentum we experienced exiting the fourth quarter. For clarity, consolidated comparable sales are reported on the same number of days year over year. Looking at each brand, U.S. STK total comparable sales reported another positive quarter at 1.4%. Benihana comparable sales were flat, reflecting stable demand for the brand, and our growth concept comparable sales, while down 4.9%, represented the strongest quarterly performance since early 2023, and growth transactions were positive for the quarter. Each segment continues to improve from the previous quarter. What is most notable, particularly in a period of elevated inflation, is the strength of our margin performance, a direct result of the hard work we have been doing across our supply chain, including, most importantly, beef sourcing. Restaurant operating profit increased 11% to $40 million, while restaurant operating profit margins expanded 100 basis points to 19%. The margin improvement was driven by a 140 basis point reduction in food and beverage costs, reflecting menu optimization, integration synergies, and supply chain efficiencies. We also achieved a 40 basis point improvement in restaurant operating expenses as a percentage of restaurant revenues. STK delivered particularly strong results with restaurant operating profit margins expanding 280 basis points to 21%, while Benihana margins improved 130 basis points to 21%. Adjusted EBITDA grew 12% to $29 million. The improvement was driven by cost management discipline, our contracted beef pricing, continued Benihana integration synergies, and the benefit of portfolio optimization actions. The key point I want to make is that these results are execution driven. We are not dependent on macroeconomic recovery or shifts in consumer sentiment, but would certainly welcome them. Over the past eighteen months, we have implemented a series of strategic initiatives—operational improvements at Benihana, the barbell strategy at STK, portfolio optimization across the growth concepts, and rigorous cost management. It is those initiatives that are driving our performance. Now, let me update you on our four strategic priorities. Priority one, accelerating comparable sales through execution. Our first strategic priority is accelerating comparable sales through disciplined execution. I want to highlight that Valentine’s Day 2026 was a record-breaking day for our portfolio. Easter was also strong across our brands, with sales up high single digits compared to last year. These results are a testament to both the operational capabilities we have built and the strength of our brands as a celebration destination. As we look ahead, we are gearing up for what we expect to be a strong Mother’s Day and graduation season. Both occasions are critically important to us and our teams are focused on delivering exceptional guest experiences during these high-volume periods. Through the first five weeks of the second quarter, the company has positive comparable sales and transactions. Momentum has continued through all of our brands with STK and Benihana so far delivering positive comparable sales, and the growth concepts sequentially improving. We have made operational improvements to position the brands for a strong spring and summer and are seeing encouraging trends as happy hour has been a real driver and is working well, while lunch traffic is also returning. Our Friends with Benefits loyalty program continues to gain momentum. Since launching last year, we added over 8,000 new organic members into the program per week. Newly enrolled guests continue to show strong repeat participation and we are seeing loyalty members spend more per visit compared to non-loyalty guests. We will be actively targeting our Friends with Benefits members for Mother’s Day and graduation celebrations, leveraging personalized outreach to drive traffic during these occasions. We continue to focus on growing membership, driving organic sign-ups, and increasing engagement within the program to strengthen brand connection and repeat visits. We are driving growth through seasonal innovation, launching new food and beverage menus four times a year across all brands. This keeps our offerings fresh, differentiates us from competitors, and generates strong engagement on social media. We are expanding our off-premises business with a focus on core operations. Highlights include burgers and sides, which continue to drive strong takeout and delivery volume across all brands, and Benihana and RA Sushi’s fried rice burritos for takeout and delivery, which have performed well. Priority two, capital efficient growth with disciplined expansion. We currently have two company-owned STK restaurants and one company-owned Benihana restaurant under construction: an STK in Phoenix, Arizona, a relocation of STK Downtown in New York City, and a Benihana in Seattle, Washington. We intend to open six to ten new venues in 2026 as we prioritize locations requiring $1.5 million or less in net capital investment to open. Capital expenditures, net of TI allowances, were 22% lower at $10 million in the first quarter compared to the year-ago period. Of this amount, $6.5 million was related to new construction with the remainder supporting existing restaurants. This reduction reflects our disciplined approach to capital allocation as we focus on high-return, capital efficient growth. On the franchise side, our 10-unit California Benihana and Benihana Express development agreement continues to progress, and our commitment for a franchised Benihana and a licensed Benihana Express in the Fort Keys remains on track. The Benihana Express format continues to generate strong franchise interest as it delivers the Benihana food experience without the teppanyaki tables, making it more labor efficient and more appealing from a cost-of-entry perspective for potential franchisees. In January, we completed the relocation of our Kona Grill in San Antonio, Texas to a smaller footprint location. And in February, we converted a franchised Benihana in Monterey, California to a company-owned restaurant to accommodate a long-term franchise partner who wished to retire. Both are tracking in line with our expectations. Priority three, portfolio optimization to improve returns. We have made significant progress improving the quality and returns of our portfolio. As we discussed last quarter, we are converting growth locations to higher-performing STKs and Benihanas. In 2025, we exited six RA Sushi and Kona Grill locations. And in January 2026, we exited one additional RA Sushi location that did not fit our conversion criteria. The remaining growth locations are healthy, profitable restaurants in quality real estate and we expect them to generate approximately $10 million in restaurant-level EBITDA and over $100 million in revenue. Five growth locations closed on 01/05/2026 for conversion to either Benihana or STK, with construction in progress and all five expected to reopen by the end of 2026. Each conversion is expected to cost between $1 million and $1.5 million and to be EBITDA accretive. As a reminder, our first conversion, the RA Sushi to STK in Scottsdale, Arizona, is currently operating at a run rate of approximately $7 million in annual sales, delivering an increase of over $4 million in sales and a return on investment of approximately four times. This validates our conversion strategy and gives us confidence in the pipeline. As we have said before, we will continue to evaluate the portfolio as leases expire. We have approximately one to two growth leases that come up each year as part of the natural end-of-cycle process, and we will make decisions on a case-by-case basis. Priority four, maintaining balance sheet strength and flexibility. Our fourth priority for 2026 is conserving cash and optimizing the balance sheet. We are significantly reducing discretionary capital expenditures, targeting company-owned development to projects requiring on average $1.5 million or less in build-out costs. We are also working through our existing lease pipeline rather than adding new commitments. This discipline gives us flexibility in an uncertain environment and positions us to invest selectively in the highest-return opportunities. We finished the quarter with $6.6 million in cash, cash equivalents and restricted cash. We have $33.7 million available under our revolving credit facility. Under current conditions, our term loan does not have a financial covenant. Cash flow from operations was a strong $22 million compared to $9 million in the prior-year quarter. This improvement was primarily attributable to increased net income and collections on holiday credit card receivables. We also reduced our debt with $2 million in repayments under the credit agreement and $7 million in repayments on the revolving facility, bringing our revolving facility balance to zero. As we discussed on our previous call, we expect to generate free cash flow in 2026. Debt reduction and creating shareholder value remain a top priority. Before I turn it over to Nicole for the financial details, I want to reiterate the items that I have outlined today are fundamentally execution driven and within our direct control. We are focused on strategic initiatives that position us to deliver results regardless of broader economic trends. With that, I will turn the call over to Nicole. Nicole Thaung: Thank you, Manny. As a reminder, beginning this year, we are reporting financial information on a quarterly basis using four thirteen-week quarters, with the addition of a fifty-third week when necessary. For 2026, our fiscal calendar began on 12/29/2025, and our first quarter contained 91 days. Consolidated comparable sales are reported on the same number of days year over year. Let me start by discussing our first quarter financials in greater detail, before introducing our outlook for 2026 and reiterating our fiscal 2026 guidance with the exception of an update to our expected effective tax rate. Total consolidated GAAP revenues were $212.8 million, increasing 0.8% from $211.1 million for the same quarter last year. Growth was driven by two primary factors: the fiscal calendar shift that moved New Year’s Eve into fiscal 2026, which added approximately $8.3 million to our top line, as well as contributions from new openings and conversions completed in the second half of 2025. These gains were partially offset by the closure of underperforming growth locations as part of our portfolio optimization strategy, which reduced revenues by approximately $1.8 million. Included in total revenues were our company-owned restaurants’ net revenues of $209.3 million, which increased 0.9% from $207.4 million for the prior-year quarter. The increase was primarily due to the change in the fiscal year calendar, which resulted in a shift of New Year’s Eve into fiscal year 2026 and the sales generated by eight new restaurants. These gains were partially offset by a decrease in revenue from the growth restaurants closed and a 0.3% decrease in comparable restaurant sales. Management, license, franchise and incentive fee revenues decreased slightly to $3.5 million from $3.7 million in the prior-year quarter. The decrease is primarily attributable to the exit of a management agreement in Scottsdale, Arizona, in 2025. As Manny noted, we converted a former RA Sushi to a company-owned STK in that market. Now turning to expenses. We continue to implement targeted cost management initiatives. Last year, we made strategic adjustments to our beef tenderloin sourcing and have contracted pricing through September 2026, eliminating our exposure to significant U.S. base price fluctuations and providing significant cost certainty. We also optimized our labor structure across the business last year by improving scheduling management, and we are still realizing synergies from the Benihana acquisition. Company-owned restaurant cost of sales as a percentage of company-owned restaurant net revenue improved 140 basis points to 19.4% from 20.8%. This improvement was primarily due to menu optimization, integration synergies, supply chain initiatives, increased menu pricing, and more efficient cost of sales associated with New Year’s Eve and our record-breaking Valentine’s Day. Company-owned restaurant operating expenses as a percentage of company-owned restaurant net revenue improved 40 basis points to 61.7% from 62.1%. This reflects improvement in labor costs. Restaurant operating profit, excluding growth concepts restaurants closed, was $39.9 million, or 19.1% of owned restaurant net revenue, improving by 100 basis points from 18.1% in the prior-year quarter. On a total reported basis, general and administrative costs increased $1.9 million to $15 million from $13.1 million in the prior-year quarter, driven by inflation on salaries and bonus, higher audit-related fees, investments in information technology, specifically AI-related technologies, and increased marketing expenses. When adjusting for stock-based compensation of $1.1 million, adjusted general and administrative expenses were $13.9 million compared to $11.5 million in 2025. As a percentage of revenues, adjusting for stock-based compensation, adjusted general and administrative costs were 6.0% compared to 5.4% in the prior year. Depreciation and amortization expense was $10.4 million compared to $9.8 million in the prior-year quarter. The increase is attributed to new restaurants opened during fiscal year 2025. Lease termination and restaurant closure expenses were $2 million for this quarter, primarily as a result of the growth portfolio optimization, which included $0.5 million in non-cash expenses related to closed restaurants. Preopening expenses were approximately $1.5 million, primarily related to preopening rent for restaurants under development, including $0.5 million in non-cash rent and payroll costs for Kona Grill Landmark, opened in January 2026. Preopening expenses decreased by $0.2 million compared to the prior-year period. Transition and integration were $0.5 million, down significantly from $3.7 million in the prior-year quarter, as we are nearing completion of the integration of the Benihana and RA Sushi acquisition. Operating income was $13.9 million compared to operating income of $10.7 million in 2025, an increase of $3.2 million primarily due to improved restaurant operating profit and the reduction in transition and integration costs. For a reconciliation, please refer to our press release issued earlier today. Interest expense was $9.7 million compared to $9.8 million in the prior-year quarter. Our weighted average interest rate was 10.2% compared to 10.9% in the prior-year quarter. Provision for income taxes was $1.2 million compared to $0.3 million in the prior-year quarter, as a result of an increase in pre-tax book income. Net income attributable to The ONE Group Hospitality, Inc. was $3.2 million compared to net income of $1 million in 2025. Net loss available to common stockholders was $6.2 million, or $0.20 net loss per share, compared to $6 million in 2025, or $0.21 net loss per share. Adjusted EBITDA attributable to The ONE Group Hospitality, Inc. was $28.8 million compared to $25.7 million in the prior-year quarter, an increase of 12.1%. We finished the quarter with $6.6 million in cash and cash equivalents and restricted cash and cash equivalents. We have $33.7 million available under our revolving credit facility, subject to certain conditions. And as Manny said, as of quarter end, we had no borrowings outstanding on our revolving facility, nor does our term loan currently require a financial covenant. Now I would like to provide some forward-looking commentary regarding our business. This commentary is subject to risks and uncertainties associated with forward-looking statements as discussed in our SEC filings. We remind our investors that the actual number and timing of new restaurants for any given period is subject to factors outside of the company's control, including macroeconomic conditions, weather, and factors under the control of landlords, contractors, licensees, and regulatory and licensing authorities. Based on the information available now and the expectations as of today, we are issuing the following financial targets for 2026. Beginning with the top line, we project total GAAP revenues of between $[inaudible] and $[inaudible], which reflects our anticipation of consolidated comparable sales of 1% to 2%. Management, license, franchise and incentive fee revenue are expected to be approximately $3 million to $4 million. Total company-owned operating expenses as a percentage of company-owned restaurant net revenue between 81%–82%. Total G&A, excluding stock-based compensation, between $13 million and $14 million. Adjusted EBITDA of between $24 million and $26 million. And finally, restaurant preopening expenses of between $1 million and $2 million. Based on the information available to us now and our expectations as of today, we are reiterating the following financial targets for fiscal year 2026, with the exception of increasing the range of the effective tax rate. We project total GAAP revenues of between $840 million and $850 million, which reflects our anticipation of consolidated comparable sales of 1% to 3%. Management, license, franchise and incentive fee revenues are expected to be between $14 million and $15 million. Total company-owned operating expenses as a percentage of company-owned net revenue of approximately 82% to 83%. Total G&A, excluding stock-based compensation, of approximately $53 million. Adjusted EBITDA of between $100 million and $110 million. Restaurant preopening expense of between $5 million and $6 million. An effective income tax rate of approximately 10% to 20%. Total capital expenditures, net of allowances received from landlords, of between $38 million and $42 million. And finally, we plan to open six to ten new venues. With that, I will now turn the call back to Manny. Emanuel Hilario: Thank you, Nicole. Before we open up for questions, I want to emphasize how excited we are about our business. Although the current environment remains challenging, our future looks bright. With our proven ability to execute, strengthened portfolio and expanded franchise capabilities, we are well positioned to capture significant opportunities ahead of us. We thank you for your continued support and look forward to sharing our progress in the quarters ahead. And as always, a special thanks to all teammates all over the globe that live our mission every day—creating great guest memories by operating the best restaurants in every market by delivering exceptional and unforgettable guest experiences to every guest every time. Nicole and I look forward to your questions. Operator, Operator: Thank you. We will now open the call for questions. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star and then one. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. The first question we have is from Joe Gomez of Noble Capital Markets. Please go ahead. Joseph Gomes: Good afternoon, Manny and Nicole. Thank you for taking my questions. I just want to start. You know, the revenues were a little below what the guide was for the first quarter, and the comps were a little off from where the guide was. Maybe give us a little more color there, Manny, on what transpired during the quarter to cause that slight miss? Emanuel Hilario: Hi, Joe. Hey, Joe. Yeah. I mean, I think the only thing that was less than we expected in the quarter was the volume at our STKs in malls. Really the first year where we have had two restaurants fully operating in the first quarter in the mall. I think that the first quarter is a little different from the other quarters for those restaurants. So I would say just the seasonality of our mall STKs was a little bit different than what we expected. But other than that, I think that the quarter was solid. I think the only other noise in the quarter was just spring break this year seemed to have a lot of different changes in terms of how people took their holidays, and then I think just Easter being much earlier, it is just a little bit of a different cadence of sales in the year. But overall, I thought the business was very strong in all our brands. Joseph Gomes: I think also last quarter, you talked about the conversions—you were hoping to have them all done by mid-July, and now it sounds like at the end of the year. Anything there? Is it just extended construction cycles or just being a little more conservative in the conversion opportunity? Emanuel Hilario: No. I just think it is the pacing and resources to reopen them properly. I mean, they are reloads and, if you will, conversion sites, but you still have to go through the full training cycle. So I think the timing of all these restaurants is really based on how we feel about the right pace of opening the units without being negatively impactful to operations. It is really just timing, pace, making sure that you are moving your opening teams to the right places at the right time. So it is just an internal judgment relative to when we want to open the restaurants. Joseph Gomes: Okay, great. And then last one for me, I will jump back in queue. Anything new on the franchising front or some more of the nontraditional venues? You had some success that you reported in the past couple of quarters, but just wondering if there is new in the pipeline there. Emanuel Hilario: Yeah. I think franchising—still lots of interest. We are actively talking to people all the time. We have amped up our resources behind getting new deals. So I think that it is progressing really well, and interest is very high. I am very pleased with the progress, and I feel very positive about the outlook relative to franchising, particularly for Benihana. Joseph Gomes: Great. Thank you. I will get back in queue. Emanuel Hilario: Thank you, sir. Operator: The next question we have is from Anthony Lebiedzinski of Sidoti & Co. Please go ahead. Anthony Lebiedzinski: Good afternoon, everyone, and thank you for taking the question. So Manny, just wondering if you guys saw any notable regional differences in terms of your same-store sales performance in the quarter? Emanuel Hilario: Yeah. I mean, I think for us, if there was one market that stood out a little bit differently, it was Texas. We did see a little bit of different trends in Texas. But other than that, everything was relatively very similar. So that is probably the only market, and if I had to drill down a little bit more, I think Dallas per se was one of the markets where we saw a little bit more softness in the business. But other than that, as our results show, coming into the second quarter, we have a lot of momentum and sales are positive for the company in sales and transactions. So in this environment, I believe that to be a really strong testament to the initiatives and all the activities that we are doing in building traffic and sales. Anthony Lebiedzinski: Mhmm. So as it relates to Texas, was there any change in the competitive landscape, or was it something else that drove some of the softness there, you think? Emanuel Hilario: I think in Dallas specifically, it is just a very competitive market, and there is always a lot of competition coming into that market. So at least from our perspective in that market, there are a lot of people playing in that market. It is an attractive market, it is a large market, and everybody wants to have a restaurant in Dallas. So I think it is just a matter of what competitors are doing in the marketplace. Anthony Lebiedzinski: Mhmm. Understood. Okay. And then in terms of the commentary about the second quarter same-store sales, which are tracking positive, can you give us a sense as to traffic versus ticket? What is the kind of breakdown approximately? Emanuel Hilario: We are up in traffic. So it is a good lead-in, and I think that to me, that is the most important part of that mix of sales—that our initiatives, particularly around value and our continuous messaging around happy hour and some of the great price points we have at lunch and at dinner, are starting to really resonate, and our marketing is starting to really make lots of progress in communicating those value points. So I feel very good about that. And then Benihana, we also launched our power lunch offering, which is a starting at $15.95 forty-five-minute guarantee. Lunch is starting to also gain traction. So I feel really good about all the initiatives, and we are starting to see progress made on building traffic. Anthony Lebiedzinski: Got it. Okay. And the last question for me. Nicole, you mentioned that there were some Benihana cost synergies realized in the quarter. Can you expand on that? And are there any other synergies that you think may be realized this year as it relates to the Benihana acquisition? Nicole Thaung: Yeah. I think one of the biggest synergies we are still realizing is beef contracts—you know, combining the different brands that are both very heavily reliant on beef products. We are able to secure a pretty decent contract. So that is something that we will continue to see through the coming months. We are also seeing some of our other contracts that we placed over the last year or so in terms of linens and other operating supplies that we are still realizing synergies on as well. Anthony Lebiedzinski: Got it. Okay. Well, thank you very much, and best of luck. Emanuel Hilario: Thank you, sir. Thank you. Operator: The next question we have is from Mark Smith of Lake Street Capital. Please go ahead. Analyst: Hi, guys. You have got Alex Turnick on the line for Mark Smith today. Thanks for taking my questions. Just, you know, first one for me. Looking at capital allocation priorities, you made good progress on the balance sheet—with the revolver now paid down to zero, free cash flow generation improving. As leverage comes down further, how are you guys thinking about balancing debt reduction, conversion investments, and potentially becoming more active on share repurchases? Emanuel Hilario: I think as you saw in the quarter, our focus has been that, because we did pay the revolver as well as term loan, and so that will continue to be a priority—to really focus on debt and really balancing that with a growth portfolio of restaurants that is really cost effective. So that is really, in the short term, our primary objective. Of course, capital allocation and shareholder value creation is always a priority of our board. So we always are actively looking at anything and everything that makes sense in terms of creating value for the shareholders. Analyst: Okay. And last one for me, just switching over to the restaurants. Benihana Express seems to be getting a lot of traction from a franchise interest standpoint. Maybe just talk about how you view that long-term opportunity for that format relative to the traditional Benihana concept, and what you think franchisees are finding most attractive about the model today? Emanuel Hilario: Yeah. Good question. The franchise interest is around the product itself—the fact that we have fantastic fried rice products and protein offerings going with it. So there is excitement about the product offering. There is also excitement about the price point positioning of that product, because it being a Benihana product, it is a premium in market. They do like that. Then of course, franchising economics are paramount. Within the Benihana Express, we get the best of Benihana in great COGS, and then we also get a very beneficial labor equation, meaning that we do not have to service at the table, at the teppanyaki table. So there is a relatively predictable and strong labor on that. And then, obviously, the fact that these footprints are small—occupancy is also very effective. And the smaller footprint allows for a lot more flexibility in terms of what real estate is available for that brand. And the cost of development is also very affordable relative to building other full-size stores. So once you add all those up, the franchisees are very interested in pursuing that. Analyst: That is very helpful. Thank you for taking my questions. Emanuel Hilario: Thank you. Operator: The next question we have is from James Sanderson of Northcoast Research. Please go ahead. James Sanderson: Hey, thanks for the questions. I wanted to go back to your update on same-store sales and traffic and build on that. Any feedback on what your bookings are looking like for Mother’s Day and graduation events relative to where you were, say, one year ago? Emanuel Hilario: I mean, without getting to precise numbers, I would say that traffic is positive coming into the quarter. And I think in general, our bookings—because we do manage that very closely—are very solid, so I feel very good about the forward look on the books. James Sanderson: Excellent. Shifting over to your store margin guidance, I noticed that relative to the first half of the year, you are probably expecting some modest margin compression. Can you walk through how margin is going to progress over the year? Emanuel Hilario: I mean, for us, it is always the third quarter, right? First, second, and fourth quarters are always very good margins. And our third quarter is our lowest-volume quarter, and so we do always get that shift in margin in the third quarter just because of seasonality. Other than that, everything in the margin, as Nicole reported during her update, is strong. We have great momentum in COGS. As a matter of fact, our cost of goods is the lowest we have ever reported as a company, and I think the margin overall outlook for the year is very solid. James Sanderson: And then speaking to margin a little bit more, you mentioned you have got beef visibility until September. Any thoughts on what you are looking at for locking in those prices as we get to the holiday quarter? Emanuel Hilario: I mean, we are in active dialogue about what we do with beef. I do not have a crystal ball, so I wish I could give you an exact fourth-quarter look on beef. Our view on beef is it is still a tough market right now, and so there is a lot to manage there. Our focus for now is looking at alternative cuts and promotional windows to try to take advantage of other cuts that might be lower cost than maybe a filet or something else. So it is really more about PMIX management, and starting to really plan out for Q4 promotional windows that are not so reliant on filets, because that takes pressure off the cost line. James Sanderson: Very good. And I think you also reported your weighted average interest rate was down. Could you walk us through what is driving that and what your outlook for the rest of the year is? Emanuel Hilario: I think that the Fed rates came down a bit, which impacts overall rates. So I think that is the big part of it. And again, our focus right now is—as much as we have free cash flow—to bring debt down, and that is our number one objective as we go forward: to really balance growth and be effective on growth, and still have free cash flow to service debt so we can bring that principal down. James Sanderson: Alright. Last question for me. Any feedback on what your off-premises mix was in the first quarter and how that was broken up between third-party delivery and pickup? Emanuel Hilario: As I reported in previous quarters, very low double digits is our percentage of mix in delivery and takeout. The majority of our mix right now is still reliant on delivery—it is more delivery than pickup at the restaurants—and, as you might imagine, our focus right now is building up that pickup at the store because that is more P&L effective, and we think that there are also big opportunities on that. James Sanderson: Very good. I will pass it on. Thank you very much. Emanuel Hilario: Thank you, sir. Operator: The next question we have is from Roger Lipton of Lipton Financial Services. Please go ahead. Roger Lipton: Yes. Hi, Manny. Hi, Nicole. Thanks for taking my question. A great number of my potential questions have been answered. I did want to just explore a little bit more the store-level margin, which it looks like you could have been in a position to bring down the operating expenses, bring up your margin a little bit in terms of your full-year guidance—doing, beating the first quarter by, I guess, 150 to 160 basis points over the mid-80, the 19.1% instead of 17.5%, the midpoint of your previous guidance. And in the second quarter, you are 81% to 82% instead of 82% to 83% in terms of expense totals. So it looks like maybe you have got a little room for the full year to improve upon that 82% to 83%. Emanuel Hilario: Thanks, Roger, and good to hear from you. I think our view on this, as I answered the previous question, is our third quarter is really a big factor, and I just want to make sure that we have numbers that we are super comfortable with. I am very happy with our first quarter results, and I think that we are making tremendous progress in the second quarter and forward. But I always want to make sure that we are realistic about the environment. It is still a challenging environment. Lots of noise with gas prices, and as you know, gas prices over time can impact your supply chain. So again, I am not saying that we believe that is ultimately going to happen, but we are just being cautious about how we go about guiding for the rest of the year on the margin. Roger Lipton: Okay. That is fair. It went over so quickly—the new economics on that Scottsdale conversion. You are saying increasing the ROI by four times. Could you just run by those numbers one more time quickly? Emanuel Hilario: That is a good question. So just for clarity, that restaurant was doing about $3 million to $4 million in revenues. It is now north of $7 million. So we grew revenues there by about $4 million, we think, year over year on an annual basis. We spent about $1 million getting that $4 million in sales. So it is really four times return on sales on the investment we put in the site. The ROI will also be very good because that $4 million increase in revenues will drive a significant amount of incremental EBITDA. So our ROI on that conversion will be very, very high. Roger Lipton: Got it. Okay. Well, I am glad you clarified that. Thank you so much. Emanuel Hilario: Thank you, Roger. Operator: Ladies and gentlemen, we have reached the end of the question and answer session, and I would like to turn the conference call back to Manny Hilario for closing remarks. Emanuel Hilario: Thank you, everyone. I appreciate everyone taking time to be with us here today. As I said earlier, we are very excited about the future for the company. And as I always tell everyone, nothing of this would be possible without the incredible contributions from all our teammates who live our mission every day. So I want to thank them all once again, and I look forward to running into all of you in our restaurants. Everybody have a great summer. Back to you, operator. Operator: Thank you. This concludes today’s conference. Thank you for joining us. You may now disconnect your lines.
Operator: Thank you for joining us, welcome to Q1 2026 Hecla Mining Company Earnings Conference 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, please press star 1 again. I will now hand the conference over to Mike Parkin, Vice President of Strategy and Investor Relations. Please go ahead. Mike Parkin: Thank you, Hillary. Good morning, and thank you for joining us for Hecla Mining Company's first quarter 2026 results conference call. I am Mike Parkin, Vice President of Strategy and Investor Relations. Our earnings release that was issued yesterday along with today's presentation are both available on our website. On the call today with us is Robert L. Krcmarov, President and Chief Executive Officer; Russell D. Lawlar, Senior Vice President and Chief Financial Officer; Carlos Aguiar, Senior Vice President and Chief Operations Officer; Kurt D. Allen, Vice President, Exploration; Matthew Blattman, Vice President, Technical Services; as well as other members of our management team. At the conclusion of our prepared remarks, we will also be available for questions. Turning to slide two, cautionary statements. Any forward-looking statements made today by the management team come under the Private Securities Litigation Reform Act and involve risks as shown on slide two, in our earnings release, and in our 10-Q filing with the SEC. These and other risks could cause results to differ from those projected in the forward-looking statements. Non-GAAP measures cited in this call and related slides are reconciled in both the slides and the news release. We have also published our 2025 sustainability report earlier this week, which is available on our website. Please note, as we discuss financial figures and projections throughout this presentation and in the earnings release we are referring to our continuing operations unless otherwise noted. This reflects the sale of the Casa Berardi operation that closed at the end of March. I will now pass the call over to Robert. Thank you, and good morning, everyone. Robert L. Krcmarov: Before I get into the quarter, I want to take a moment to acknowledge where we stand as a company now because I think the context matters. Eighteen months ago when I joined Hecla Mining Company, this company carried nearly $550 million of net debt. Today, we carry no long-term debt, none. That transformation and what it unlocks for shareholders is really what this call is about. So turning to slide three. Hecla Mining Company enters 2026 in the strongest financial and strategic position in the company's recent history. As North America's premium silver producer, we have six core attributes that really distinguish us from our peer group: a silver legacy stretching back to 1891; operations exclusively in the United States and Canada; peer-leading silver exposure in both revenue and reserves; a reserve life roughly double that of our peer group; a deep and advancing project pipeline; and a cost structure that positions us as the lowest cost producer in our peer group. These will help to support our premium valuation and make us a premier destination for silver investors. Turning to slide four. The Casa Berardi sale in March was a deliberate, well-timed decision. We harvested the cash flows to that point, secured substantial value including a 9.9% equity stake in Orezone and the deferred cash consideration, and we freed ourselves to do what we should be doing: directing our capital and management's attention towards our silver growth platform. And then on April 9, about four weeks ago, we redeemed our final $263 million of senior notes. So Hecla Mining Company is now free of long-term debt, for the first time in many years. We have a fully undrawn $225 million revolving credit facility and a cash balance that is building on strong operating performance in the silver market. What excites me is what comes next. Across the portfolio, from the Greens Creek pyrite concentrate circuit and tailings reprocessing project to the Midas restart opportunity in Nevada, we have a set of organic value creation opportunities that are compelling because of what they share in common. Each is screening to have lower capital intensity than a conventional mine development, though that assessment remains subject to ongoing evaluation, particularly for the early stage projects. That means the potential for robust returns on invested capital and real per share value creation. We believe in this value, and we are working hard to unlock it. Beyond these near to medium-term opportunities, I am very excited about our 2026 exploration program, representing a near doubling of exploration investment from 2025, which could be the thing that reshapes the long-term picture of this company. Turning to slide five. The numbers this quarter speak for themselves, and I am proud of what this team has delivered. Revenue from continuing operations exceeded $410 million, up 13% from the prior quarter and double what we generated in Q1 2025. Record adjusted EBITDA of $265 million and record consolidated free cash flow of $144 million with every single mine free cash flow positive, every one. We produced 3.9 million ounces of silver, roughly 3% more than the prior quarter, cash costs at nearly negative $3 per ounce and all-in sustaining costs below $10 per ounce. At today's silver prices, those are exceptional margins. The quality of those margins reflects how the transformation of this business is showing up in the numbers. Turning to slide six. Slide six puts our production outlook in perspective. We are guiding to 15.1 million to 16.5 million ounces of silver in 2026, a strong operational baseline. What I want you to see is the trajectory beyond that. Our project pipeline supports a potential pathway to 20-plus million ounces annually, and that is driven by Keno Hill's gradual ramp to 440 tonnes per day and the potential restart of Midas in Nevada. And beyond that, a potential Keno Hill expansion and possibly more growth from the Aurora and other mines in Nevada as well as the Libby project in Montana. But before we get to Midas, there are two near-term opportunities associated with our flagship Greens Creek mine in Alaska that I am particularly excited about. I want to make sure that they get the proper airtime today. So Matthew Blattman, our Vice President, Technical Services, will give an overview on those, and then give you an update on the Midas restart project. Matthew, over to you. Thanks. Turning to slide seven. First, I will discuss the Greens Creek pyrite concentrate circuit. Matthew Blattman: We are evaluating the feasibility and economic potential of developing a pyrite concentrate circuit at the Greens Creek mill. If successful, this project would generate an additional marketable concentrate stream, boosting overall silver and gold recoveries from the mill while potentially reducing the mine's reclamation liability significantly. There is also additional upside through potential reserve expansion, as the inclusion of lower-grade silver in our sulfide blocks could grow the underground mineral reserves. The project is currently estimated to be low in capital intensity and could provide cash flow in about two years. We expect to provide another market update on this project in late 2026 or early 2027. Second, the Greens Creek tailings reprocessing project. We introduced this project to the market during our investor day this past January in New York. I want to be clear about where this sits today. We are still in the evaluation stage. We will make a development decision once the test work is done. What makes this project compelling is what is sitting in the dry stack facility at the site: an estimated 10.4 million tons containing an estimated 50 million ounces of silver and nearly 600,000 ounces of gold, along with several other critical minerals. At year-end 2025 prices, the gross metal value of what is in the facility was approximately $6.8 billion. I stress gross value because that is before recovery rates, processing costs, and the capital required to actually extract the metal. We have a third-party partner advancing phase-three metallurgical test work which we expect to complete around mid-2026. That test work, along with confirming a suitable processing facility, is what will determine whether and how we move forward with this work. Early results have been encouraging, and the indications are that this does not require the kind of capital you would need to build a new mine from scratch. We will have more to say on that once the test work is in hand. On top of the potential cash flow, reprocessing the tailings has the added benefit of potentially reducing the mine's long-term reclamation liability, turning what is currently a liability into a source of value. Finally, the Midas restart project in Nevada. As you know, Nevada is considered one of the best jurisdictions in the world for mining, and we have three highly compelling projects in the state that we are planning to advance this year through exploration and other work. Midas, the most advanced of the three, is a historically high-grade silver and gold operation we acquired as part of the Klondex transaction. It has fully permitted infrastructure that meaningfully reduces the capital required to bring the asset into a cash flow state. We are evaluating a hub-and-spoke operating model, where ore sources from multiple regional properties, including the nearby Hollister project, are transported to and processed through the existing 1,200-ton-per-day permitted mill. The site also has an adjacent permitted tailings facility with approximately 15 years of storage capacity. We have allocated $16 million to Nevada exploration in 2026, more than three times last year's investment. Kurt D. Allen will give you an update on the latest drilling results in a moment. Our goal is to establish a resource big enough to warrant investment and a restart. Let me be clear. With the grades we are hitting, the target is well below a million ounces of gold equivalent to get started. This targeted resource is expected to form the basis for a restart PEA. Now I will turn the call over to Carlos for the operations review. Carlos Aguiar: Thank you. Before I walk through the mines, I should mention that we have reiterated our production and cost guidance for the year. You can find that summary on slide 22. Turning to slide nine, starting with Greens Creek. In the first quarter, the mine produced 2.2 million ounces of silver and 13,000 ounces of gold. Total cost of sales came in at $82 million, with cash costs of nearly negative $12 per ounce and AISC of negative $8.39 per ounce, both after by-product credits. Those are best-in-class numbers, and they reflect the strong by-product revenue we are getting from gold, zinc, and lead. Cash flow from operations was $131 million and free cash flow was $126 million, a very strong quarter. One thing we are highlighting operationally: Greens Creek set a record for underground backfill placement this quarter, placing nearly 164,000 tons, which is 16% above the 2025 quarterly average. That is a meaningful achievement because it gives us more operational flexibility and better ground stability as we move through the rest of the year. Turning to slide 10. Lucky Friday produced 1.2 million ounces of silver in Q1. Total cost of sales was $49 million. Cash costs were $12.07 per ounce and AISC was $23.78 per ounce, both after by-product credits. Free cash flow was $49 million. On the operating side, truck haulage was up 10% over the prior quarter, although that was partially offset by an 11% decline in the mill grade. That is a fairly typical outcome given the grade variability you naturally see at Lucky Friday, and we do expect average silver grade to improve in the second quarter. On the surface cooling project, construction is 81% complete, and we are on track to finish by mid-year. This is an important long-term investment designed to expand cooling capacity over the mine's roughly 15-year reserve life so we can continue mining safely and productively at depth. Turning to slide 11. At Keno Hill, we produced nearly half a million ounces of silver in Q1, and free cash flow was $16.3 million. I want to point out that this marks four consecutive quarters of positive free cash flow at Keno Hill, demonstrating profitability at current throughput rates and silver price. Production in Q1 was impacted by two things: reduced power supply from Yukon Energy Corporation due to the extreme cold weather that carried over from Q4, and lower silver grades as we mined through a lower-grade zone of the Bermingham deposit. The good news is both of those headwinds are behind us. We expect mill rates to improve in Q2 as we mine into higher-grade areas, and the power constraints have been resolved. With that, I will hand it over to Russell for the finance update. Russell D. Lawlar: Thank you, Carlos. As we turn to slide 13, let me take you through our financial results. As Mike noted in the cautionary statements, what I am about to discuss is based on results from our continuing operations, meaning that the impact from our sold asset, Casa Berardi, is excluded from these figures. The first quarter was record-setting for a number of financial metrics. Revenue from continuing operations was more than $410 million, up 13% over the prior quarter and double the level from the first quarter of last year, reflecting continued operational execution and significantly higher realized silver and gold prices. As you can see on slide 13, 73% of our revenues came from silver, and all of that revenue came from either the United States or Canada. This fundamentally sets Hecla Mining Company apart from peers in both categories and provides significant value to our shareholders. What is more important, though, is the return on these revenues. As you can see from the graphs on the bottom of the slide, we realized a margin of 90% of the realized silver price during the quarter, which is truly phenomenal. This margin translated to substantial free cash flow from all our mines, which as expected was led by Greens Creek at nearly $126 million for the quarter. However, Lucky Friday was also impressive at almost $50 million, while Keno Hill generated $15 million even though it is still in the ramp-up stage. I will speak more about how we will allocate this capital in a couple of slides. Turning to the balance sheet, we ended the quarter with $588 million in cash and total debt of $266 million, resulting in a net cash position of $321 million. This is a significant strategic inflection point and a significant milestone. The chart on this slide in the upper right-hand corner illustrates just how dramatically this picture has improved in a fairly short period of time. As Robert mentioned, it is something that materially de-risks this company and adds substantial shareholder value. After quarter-end, we redeemed our remaining $63 million of senior notes, leaving Hecla Mining Company with no long-term debt for the first time in many years. We now carry a fully undrawn $225 million revolving credit facility with a $75 million accordion, representing the strongest balance sheet in the company's recent history. Turning to slide 14. I would like to turn our attention to what the entire suite of assets can do over time at different price decks. The chart you see on the slide has been updated for Q1 results and illustrates projected 2026 consolidated free cash flow across a range of silver and gold prices. At $100/oz silver and $5,500/oz gold, we project over $900 million of consolidated free cash flow for the full year. At price assumptions of about where we are today, $75 silver and $4,500 gold, we project over $700 million. This incredible cash generation capability provides substantial flexibility and strategic alternatives we will discuss on the next slide. Our capital allocation framework on slide 15 reflects a disciplined, priority-ordered approach. Safety and environmental excellence comes first. It is the foundation of our license to operate. Investment in these priorities is nonnegotiable. As we move to investing in sustaining and growth capex where we see target returns in the 10% to 15% range, these investments are the lifeblood of our company and provide future value for further investment. We will hear from Kurt in a minute on exploration. However, our potential to add shareholder value through the drill bit is exceptional. We have increased our investment this year as we de-risked our balance sheet, freed up cash flows, and would expect, with success, the potential to continue to increase these investments—investments in the future. I discussed the balance sheet strength and deleveraging and the value that this brings to our investors on the previous slide. However, we will continue to add cash to our balance sheet while maintaining high-quality investments in our business. Strategic investments are evaluated on a return on invested capital and per share accretion basis, but do not come around often, and thus, we need to maintain a strong balance sheet to be able to make these investments when those opportunities arise. Additionally, considering our best-in-class mines with long lives, low costs, in the best jurisdictions, we do not feel rushed to make any strategic investments. We will be in a position to do so when the time comes. And finally, shareholder returns round out the framework. With a debt-free balance sheet and record free cash flow, we are focused on securing a cash balance capable of funding our project pipeline and surfacing value for our shareholders. And as we do so, we will begin to consider capital return to our shareholders. We currently have a share repurchase plan which has been board-approved for 20 million shares. I want to put that in context for a moment because I think it speaks to something that distinguishes Hecla Mining Company from our peer group. Our peers have pursued growth aggressively through M&A over the past five years—deals that diluted their shareholders by more than 50% in some cases. Hecla Mining Company's share count has grown at a fraction of that rate, and the result on every per share metric that matters—silver production, reserves, revenue—we rank first among our peers. We are the only silver producer in our peer group to have grown silver production per share over that period. That is the discipline we intend to carry forward. So as we accumulate cash, and if we see dislocation in our value versus the underlying fundamentals, we will not hesitate to deploy capital through buybacks, as long as it meets our return on capital criteria. I will now turn the call over to Kurt for the exploration update. Kurt D. Allen: Thank you, Russell. Turning to slide 17. 2026 marks the transformational year for Hecla Mining Company's exploration program. We are investing $55 million in exploration and pre-development, which is an all-time record. We structured the programs across three priority areas, and I expect more and more activity across a number of sites as we move into the warmer months. At our producing assets, we are aiming to more than replace reserve depletion, and I am very excited about our Nevada growth projects, with drilling ongoing at Midas, starting up at Hollister in June, and at Aurora in July. The Aurora gold and silver project in western Nevada really has me most excited. It is earlier stage than Midas, but arguably carries the greatest long-term discovery potential. With historic grades averaging over two ounces per ton gold equivalent, and seven drill-ready targets now defined across the large land package, Aurora has the hallmarks of a district that has been underexplored rather than exhausted. Critically, Aurora has its own 600-ton-per-day permitted mill on-site, which means that if exploration delivers a compelling resource, the capital threshold to production is materially lower than a blank-sheet development. While I have been to Aurora multiple times, Robert has recently visited the project, and we are both very eager to see our initial drill targets tested. Turning to slide 18. Our drilling on the Center Offset Vein at Midas continues to build our understanding of this high-grade gold and silver system. Drill hole DMC-476 returned 0.21 oz/ton gold and 1.6 oz/ton silver over 2.3 feet, extending the known vertical extent of narrow high-grade mineralization along the Center Offset structure to more than 500 feet. We have now defined the strike length of this structure over 1,350 feet, and drilling will continue to step out to the southeast, where the structure remains open, as well as to the northwest. Two additional holes also intercepted parallel high-grade structures, reinforcing the prospectivity of this area. We will be providing regular Nevada exploration updates throughout 2026. I will now turn the call back to Robert for closing remarks. Robert L. Krcmarov: Thank you, Kurt. Let me start with the market, because it really sets the stage for everything else. Recently, the World Silver Survey was released, and it confirmed 2025 as the fifth consecutive year of supply deficit, with cumulative stock drawdowns now exceeding 700 million ounces since 2021. That is the kind of structural tightness that does not resolve overnight, and we are not seeing new mine supply coming online in any meaningful manner over the medium term. Prices have been volatile year to date—that is the nature of this market. The gold-to-silver ratio sits around 65 to 1 today, well above the trough that we saw in the last silver bull market, and history tells us that ratio compresses as silver outperforms. We do not know exactly when that is going to happen, but what I do know is that Hecla Mining Company—debt free, with record free cash flow, and the best silver exposure in the sector—is a really compelling way to be positioned for when it actually does. The six attributes on this slide—legacy, jurisdiction, silver focus, reserve life, project pipeline, cost structure—they are not just a list. They are the result of deliberate choices made by this team over the past eighteen months. I believe they represent a differentiated investment case that the market will increasingly recognize: debt free, record free cash flow, clear organic growth pathway at low capital intensity. We are just getting started, and I look forward to keeping you updated throughout the year. 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, please press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Heiko Felix Ihle from Wainwright. Heiko, your line is now open. Heiko Felix Ihle: Hey. Good morning, Robert and team. How are you? Robert L. Krcmarov: Good morning, Heiko. We are well. Heiko Felix Ihle: Given the current commodity price environment, are there any longer-term capital projects that you are now more inclined to undertake at any of your currently operational sites, say in 2027 and beyond? You have mentioned a bit about the pyrite concentrate circuits and the tailings reprocessing project, but are there other things that maybe are not yet built into analyst models on a three-year plan, maybe? Robert L. Krcmarov: Thanks for the question, Heiko. Not really. We have basically highlighted the projects that we are focused on in the next several years. Some of them are obviously shorter term, like the pyrite concentrate project, which was discussed. That is a very near-term opportunity, perhaps coming on in the next couple of years. Beyond that, nothing really longer term unless we have spectacular success at Aurora. Operator: Thank you very much for your question. Your next question comes from the line of Wayne Lam from TD. Your line is now open. Wayne Lam: Hey. Thanks. Morning, guys. Maybe just curious—at Keno Hill, can you remind us what the permits are that are outstanding there that are limiting you from ramping up throughput? And if I recall, was that just on the back-end capacity with the dry stack tailings? And just wondering, with the potential resolution of the Victoria Gold sales process recently announced, do you view that as maybe providing some visibility to permitting that would allow you to ramp up the mining rates there? Robert L. Krcmarov: Thanks for your question, Wayne. On Victoria Gold, it does not really affect us other than at some point, when they are ready, they are going to be competing for a little bit of permitting bandwidth. But I do not expect anything is going to happen there in a hurry. Some of the outstanding issues there—the leakage that is still happening that needs to be resolved; a robust relationship like the one we have with the First Nation in Na-Cho Nyäk Dun that we have built and maintained—that needs to be established, all that credibility. So I cannot see that really affecting us in the short term. On the permits question, I have Matthew Blattman, our VP working on permitting. I am going to defer to him because he has been very heavily involved with it and his team. Matthew. Matthew Blattman: Thanks, Robert. Keno Hill's permitting path involves two processes. First, we have to submit a project proposal to YESAB, which is the Yukon Environmental and Socio-economic Assessment Board. We expect to do that by year-end, then YESAB takes about twelve months to complete its review. After which we will submit two permit applications: the QML, which supports the mining license, and a water license amendment. Those amendments are really about removing some of the long-term constraints. Those constraints include constraints on waste rock, on tailings, and on water treatment as well as some other things like power and camp space. Our current estimate is that the amended permits could be received sometime around mid-2029, although, of course, there is variability around permitting. In the short term, between now and the time we receive those permits, there are a few constraints that continue to hold Keno Hill back. In the near term, we need approvals on our Phase Two West tailings from the regulators, which would allow us to expand the Phase Two tailings. Then after that, waste rock potentially becomes a limitation under both the QML and the water license. Receiving these long-term permits in mid-2029 is critical to our long-term success. We are running up against waste production limits and storage capacities in the near term, but we are actively engaged with the regulators to get some short-term relief until we receive those permit amendments. Wayne Lam: Okay. Thanks. So I guess you had previously outlined a very gradual phase ramp up there. So I guess there is no potential to kind of fast track the ramp up of development on, say, Bermingham or Flame & Moth or some of those infrastructure items so that when you get the permits, you would be in position to quickly accelerate to the 440-permitted rate or even 600 imminently? Robert L. Krcmarov: The 440 rate is going to be a gradual ramp up. Again, it is a sequence of permits. In the meantime, we need to manage the water. The more development you do, the more water you expose and the more water you need to treat. All these things are tied in. I cannot see that there is really a way to meaningfully accelerate this project. I would say there are some risks with permitting, but I would think of any potential curtailment as really a bridge problem—it is not an asset problem. The reserves do not change. Obviously, if there is a delay, that has time value of money impact on IRR, but we have a 16-year reserve life. We have very, very strong economics even at $30 silver. That does not go away. Our focus again is on that permitting work that keeps us running. And I would note what we talked about earlier in the call—$15.3 million in free cash flow at Keno Hill in Q1—and that is the trajectory that we are protecting. On the 600 tonnes per day and beyond, that is really future; that is going to require a whole new wave of capital investment and additional permitting. We are not focused on that. We are really focused on the here and now. Wayne Lam: Okay. Understood. Thanks. And then maybe just with the high-yield notes paid down—obviously the balance sheet is in pretty great shape. In a very different market, you guys had previously rolled back the silver-linked dividend component. But in the context of your peers now increasing capital returns and linking those returns to cash flows, is that something that we could see sometime soon with a similarly linked component given the cash generation projected ahead? Russell D. Lawlar: Thanks, Wayne. I can take that. Certainly, in our prepared remarks, I mentioned that we are looking at capital returns. But we do believe that investment in our business brings better returns than it does in terms of shareholder returns. However, we do have a strong balance sheet, like you said, and we have deployed significant cash to debt redemption as compared to, if you look at our peers, many of our peers have refinanced or kept the debt on their balance sheet. So we have a little bit of a different strategy there to try to return long-term shareholder value that way. But we will be discussing with our board how and what our return on capital strategy should be. I would say stay tuned to that. We will continue to discuss that with the market as time goes along. But we want to make sure that we adequately fund all of the growth opportunities that we have internally. That is really where the value is created in this business. Operator: Thank you for your time. Your next question comes from the line of Cosmos Chiu from CIBC. Your line is now open. Cosmos Chiu: Hi. Thanks, Robert and team. Maybe my first question is a follow-up. In the MD&A, you mentioned that the 440 tonnes per day at Keno Hill is a medium-term target. But what is medium term? It sounds like you might need the permits. So is medium term 2029—you are not going to be able to hit the 440 tonnes per day until you get those permits sometime in 2029. Am I reading that correctly? Robert L. Krcmarov: Yes. As Matthew pointed to, there are a couple of key permits that we really need to get by 2029. Until we get those, it remains a challenge between now and the time we get our permit amendments. That really unlocks the value. We are expecting that to be mid-2029. Cosmos Chiu: Understood. And then maybe at Greens Creek, and elsewhere as well, I saw that there was a bit of inventory buildup. There was inventory buildup last quarter. I think you are working through it. So, for example, silver and zinc is now kind of—sales equating to production—but precious metals, you are working it through, but it is still not completely worked through. Lucky Friday sales were lower than production in Q1. So holistically, what is causing the inventory buildup? When do you think you can work through some of that through sales in subsequent quarters, and how long is that going to take? Russell D. Lawlar: Thanks, Cosmos. I will take that. In terms of inventory and accounts receivable, keep in mind that at Greens Creek we have our own deepwater port that we control. That is actually a huge strategic asset to us. But what that means is our shipments go out generally once a month, and they are very lumpy. So depending on when the ship leaves the port, you may have inventory that is sitting at the port, or you may have AR that is sitting in your accounts receivable. We do have opportunities to advance the receipt of accounts receivable, but when we take a look at it, especially with the balance sheet that we have, it is really accretive to our investors for us just to wait and get those funds in the normal course of business. So that is what you have seen probably more in the past year than previously—we are making those decisions with a longer-term view because of the lack of debt and less leverage. I would suggest it is really a timing difference, and quarter to quarter it is going to be challenging to determine exactly when those ships will leave and when the AR might be collected. What I would say is that the accounts receivable that we had on our books as of the end of the quarter was mostly collected in the next thirty days. We also see, because we are concentrate producers, as the price of silver goes up, the pricing on shipments will be a future month, so we see the value of the accounts receivable go up as well. So that is part of what you are seeing in accounts receivable. As it relates to Lucky Friday, we generally ship on a weekly basis, and therefore it depends on when during the week the month falls, which determines what the AR or the inventory is. Cosmos Chiu: Great. Then in terms of Greens Creek, it sounds like there are interesting projects that you have in place, and it is good that you have announced the pyrite concentrate project as well. In terms of return on invested capital, what kind of hurdle rate are you looking at for some of these projects? And for the pyrite concentrate project, to the extent that you can share, any potential penalty elements in that concentrate and what is the market like right now for pyrite concentrate? Robert L. Krcmarov: In terms of return on invested capital, we have not isolated it for that particular project, but it would be very compelling given that it is a fairly low capex project. I am going to guess around $40 million to $50 million for a circuit as a starting point. So I would expect the return on that investment to be really quite compelling. Our corporate target is 12% to 15%, and this will easily fit in that. With regards to the pyrite concentrate market, my understanding is it is very strong, and that is why we are looking at it. This also potentially unlocks more reserves as well as contributes to revenue. Russell D. Lawlar: The only thing I would add, Cosmos, is that we have run these things internally, but we are very early in the process. I do not want to give a specific number that we would have to reel back because there is a lot of work left to do. In the work that we have done, looking at treatment charges and refining charges for both gold and silver and the payabilities, we are being conservative. Even with what I would hope are conservative, longer-term treatment and refining charges, it is still very compelling. That is about all the detail we have right now until we are able to do a bit more work and really put a holistic study around it. Robert L. Krcmarov: The other thing I forgot to mention is that it also reduces our reclamation liability. Multiple benefits here. We are very excited about this project and also the fact that it is low capital intensity and near term. Cosmos Chiu: If you do get the go-ahead for it sometime down the road, can these projects happen concurrently—the tailings recovery and the pyrite concentrate? Robert L. Krcmarov: Spot on, Cosmos. We are working on both streams. They are not going to land at the same time—the pyrite concentrate is obviously much shorter term. Just to remind you, for tailings reprocessing, our phase-three testing is underway at the moment. The samples have arrived in the laboratory. If we get success on that, we will update the market later on this year. The next stage would be progressively scaling up to a pilot plant potentially, and then scaling up beyond that. That is earlier stage and probably not going to deliver before the pyrite concentrate, but we are working on both of them at the same time. Cosmos Chiu: Great. Thanks, Robert, Russell, and team for answering all my questions. Operator: Your next question comes from the line of Alexander Terentiew from National Bank. Alexander, your line is now open. Alexander Terentiew: Good morning, and congrats again on another good quarter. I just want to follow up on Keno Hill. To get to the 440, you are talking about mid-2029 to get those permits. You previously talked about slowly ramping up over the next few years. Is that still the plan with that timing, or should we assume more steady state until then? Matthew Blattman: Hi, Alexander. I think we are looking at more steady state. Some of that will be dependent on ongoing discussions with the regulators, trying to provide short-term relief. But I think you can expect a steady state or, in some cases, slowing down a bit to make sure that we are maintaining capacity. Alexander Terentiew: Great, thanks. On capital returns, you noted you are going to have some discussions with your board on capital return strategy. You also mentioned you have a share buyback in place. Is this something that you plan to have as a program or be more opportunistic? How are you approaching that? Russell D. Lawlar: We need to discuss that with our board and ensure that we are all aligned on a holistic strategy. I would also suggest that any investments we do make from a shareholder return perspective still have to meet the return on investment criteria that we have outlined for investments we make in our business as well. We will be looking at it from that perspective. Alexander Terentiew: That makes sense. Last question, if I may. Greens Creek had another really good quarter here—beat my numbers at least based on grade. If you look at annual guidance, this was above 25%. Was that in line with expectations, those better grades? Do you see any planned downtimes or lower-grade phases that we could expect for the rest of the year? Is there room for the guidance to possibly even be improved a little if you are hitting better grades than expected? Carlos Aguiar: We are reiterating our grade and cost guidance for Greens Creek, and we are expecting similar grades for the remainder of the year. Alexander Terentiew: That is good to see. Thank you. That is it for me. Operator: Thank you for your questions. Your next question comes from the line of John Tumazos from John Tumazos Very Independent Research. Your line is now open. John Tumazos: Thank you for taking my question. How should we compare the new Midas mine to the old one that Dr. Ken Snyder and the team started up? Should we think of it as 500 tons a day, half an ounce gold, 10-to-1 silver? Might the tons be more? Robert L. Krcmarov: Thanks for your question, John. I would say it is almost certainly going to look different from the old Midas mine. Two things here. The starting resource at Sinsa, which I have flagged previously, is roughly between 180,000 to 200,000 ounces at very high grades. It is a narrower orebody. The extensions that Kurt and his team have found are again narrow and very high grade. The mill is rated at 1,200 tonnes per day, so that is what we have to play with. We are looking at potentially multiple ore sources from the Sinsa area. We are also relooking at any potential remnant mining at Midas itself. That is a study underway, and you will recall that Midas was closed at a significantly lower gold price than where we are today, so there are potentially some wins there. We have potentially multiple ore sources, and it is not going to look exactly like the previous Midas operation. The one thing that is constant is that there is a permitted limit of 1,200 tonnes per day for the mill. John Tumazos: Thank you. I am unfamiliar with Aurora. Could you tell us whether it is an open pit heap-leach target, what the range of grades might be, whether it has much silver in it, or whatever we know thus far about Aurora? Robert L. Krcmarov: Thanks for that. I am going to ask Kurt to chip in in a minute, but I have to say, as Kurt pointed out, I went out to Aurora about four weeks ago. I had heard Kurt talking very excitedly about Aurora in the past, and when I went out there, I get it. You walk around on the surface and there are historic open pits and historic undergrounds. There are veins with incredible intensity that just run for kilometers. And Kurt's favorite target has never had a single drill hole in it. Kurt? Kurt D. Allen: Our targets that we have defined are underground mineable targets. We are not focused on open pit mineralization there at this point. There has been open pit mining at Aurora in the past, but we are really focused on high-grade underground mineable targets. Really excited about this project. John Tumazos: Is it gold only, or is it gold and silver? Kurt D. Allen: It is gold and silver, probably a one-to-one ratio. For the most part, it is high-grade gold, but there is associated high-grade silver with that as well. John Tumazos: Thank you. If I could ask one more. Coeur and Pan American each made large silver acquisitions in Mexico. I know you are sticking to the U.S. and Canada. Now that your balance sheet is very strong, is it possible to consider an acquisition, and if so, would it be limited to the U.S. and Canada? Most of the silver targets are in Latin America or spread around the world. Robert L. Krcmarov: Good question. One of the things that really differentiates us, as I pointed out in the opening slide, is that we operate in safe jurisdictions. You have to go where the silver is, and given the scarcity of primary silver deposits, we would consider other jurisdictions, but again, that has to be in relatively safe jurisdictions. As a rule of thumb, anything in the top third of the Fraser Institute index we would do a proper analysis on. We would not accept it at face value and would understand those risks before we moved. So we would potentially go offshore, but in a safe jurisdiction. On M&A, we have outlined our organic growth projects. That is really what we are focused on. Obviously, we continue to look at opportunities—you never stop looking in this business—but we are not really interested in getting bigger for its own sake. Scale alone does not create value, and I think Russell discussed the dilution that comes with doing M&A. It is an easy trap to fall into and one we have consciously rejected. Again, what we are really focused on is long-term shareholder value creation on a per share basis, and that governs all the decisions that we make. We are going to be disciplined if and when we do M&A. It is really going to be about jurisdiction—safer jurisdictions—precious metals focused with a strong silver bias. Exceptional gold assets we will consider, but only if they are compelling cash generators that would really fund our overall silver strategy. Silver first. We would also have to see a clear competitive advantage for us in operating the asset, whether that is district consolidation, leveraging existing infrastructure, our technical capability, or exploration upside—whatever that is, we would need to see a competitive advantage—and financial returns, obviously, as Russell talked about. Right now, the M&A environment is pretty active. There is competitive pressure to move. We understand that, but we have seen what happens when companies acquire out of fear of missing out rather than conviction, and we are not going to do that. We are not acquisition-dependent for growth. Our internal pipeline is our main focus, but we will obviously be opportunistic. John Tumazos: Thank you and congratulations. Operator: This completes the time allocated for questions. If you have additional questions, please reach out to Mike Parkin via the Contact Us link on the website. I will now turn the call back to Robert L. Krcmarov, President and CEO, for closing remarks. Please go ahead. Robert L. Krcmarov: Thank you, Hillary, and thank you all for your time and your questions this morning. This team has worked hard to get Hecla Mining Company to this point—debt free, cash generative, and with the best silver exposure in the sector. The fundamentals are with us and we are just getting started. Have a great day, everyone. Thank you. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Welcome to Community Healthcare Trust Incorporated 2026 First Quarter Earnings Release Conference Call. On the call today, the company will discuss its 2026 first quarter financial results. It will also discuss progress made in various aspects of its business. Following the remarks, the phone lines will be opened for a question and answer session. The company's earnings release was distributed last evening and has also been posted on its website chct.reip. The company wants to emphasize that some of the information that may be discussed on this call will be based on information as of today, 05/06/2026, and may contain forward-looking statements that involve risks and uncertainty. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the company's disclosures regarding forward-looking statements in its earnings release as well as its risk factors and MD&A in its SEC filings. The company undertakes no obligation to update forward-looking statements whether as a result of new information, future developments, or otherwise, except as may be required by law. During this call, the company will discuss GAAP and non-GAAP financial measures. A reconciliation between the two is available in its earnings release, which is posted on its website. Call participants are advised that this conference call is being recorded for playback purposes. An archive of the call will be made available on the company's Investor Relations website for approximately 30 days. It is the property of the company. This call may not be recorded or otherwise reproduced or distributed without the company's prior written permission. Now I would like to turn the call over to David H. Dupuy, CEO of Community Healthcare Trust Incorporated. David H. Dupuy: Thank you very much. Good morning, everyone, and thank you for joining us today. For the 2026 first quarter conference call. On the call with me today is William G. Monroe, our Chief Financial Officer, Leanne Stack, our Chief Accounting Officer, and Mark Kearns, our Senior Vice President of Asset Management. Our earnings announcement and supplemental data report were released last night and furnished on Form 8-Ks along with our quarterly report on Form 10-Q. In addition, an updated investor presentation was posted to our website last night. During the first quarter, the behavioral hospital operator, a tenant in six of the company's properties, paid rent of approximately $300 thousand, an increase of $100 thousand over last quarter. On 07/17/2025, this tenant signed a letter of intent for the sale of the operations of all six of its hospitals to an experienced behavioral health care operator and is under exclusivity with that buyer. The buyer is finalizing legal and business due diligence and has entered the drafting phase of the definitive purchase documents, including new leases on the six hospitals owned by the company. We continue to maintain frequent, productive communication with the buyer's team to advance the closing process. While the transaction is progressing, we cannot provide specific timing or certainty that it will close. However, we remain committed to providing further updates as the process moves forward. We had a busy first quarter from both an operations and a capital recycling perspective and continue to be selective from an acquisition standpoint. Our occupancy decreased from 90.6% to 89.8% during the quarter due to lease terminations. However, our leasing team is very busy with renewals and new leasing activity and we expect leased occupancy to grow next quarter. Our weighted average lease term increased slightly from 7.0 to 7.1 years, and our asset management team continues to do a great job serving our tenants while focusing on property operating costs. We have three properties that are undergoing redevelopment or significant renovations with long-term tenants in place once the redevelopment or renovations are complete. The largest of these projects, a behavioral healthcare facility, received its certificate of occupancy in March. Due to health care licensure requirements, we expect this property to commence its lease and contribute NOI during 2026. During the first quarter, we acquired an inpatient rehabilitation facility after completion of construction for a purchase price of $28.5 million. We entered into a new lease with a lease expiration in 2044 and an anticipated annual return of approximately 9.3%. We also have signed definitive purchase and sale agreements for four properties to be acquired after completion and occupancy for an aggregate expected investment of $99 million. The expected return on these investments should range from 9.1% to 9.75%. We expect to close on two of these properties in 2026 and the remaining two in 2027. In February, we sold one building in Fort Myers, Florida and received net proceeds of approximately $5.2 million, resulting in a small loss on the property sale. We also received net proceeds of approximately $700 thousand from the disposition of a property in 2025. We did not issue any shares under our ATM last quarter. However, we continue to evaluate capital recycling opportunities and we would anticipate having sufficient capital from selected asset sales, coupled with our revolver availability, to fund near-term acquisitions. Going forward, we will evaluate the best uses of our capital, all while maintaining modest leverage levels. To wrap up, we declared our first quarter dividend and raised it to $0.48 per common share. This equates to an annualized dividend of $1.92 per share, and we are proud to have raised our dividend every quarter since our IPO. That takes care of the items I wanted to cover, so I will hand things off to Bill to discuss the numbers. William G. Monroe: Thank you, Dave. I will now provide more details on our first quarter financial performance. I am pleased to report total revenue grew from $30.1 million in 2025 to $31.5 million in 2026, representing 4.8% annual growth over the same period last year. On a quarter-over-quarter basis, total revenue grew 1.9%, primarily from higher rental income from our recent acquisitions and higher property operating expense recoveries, partially offset by recent capital recycling dispositions and net leasing activity. Moving to expenses, property operating expenses increased by approximately $360 thousand quarter over quarter to $6.4 million for 2026. This increase was a result of seasonally higher snow plow and utility expense at several properties that we typically see in January and February in particular. Total general and administrative expense was $5.1 million in 2026, which was approximately $330 thousand higher quarter over quarter, primarily as a result of higher noncash amortization of deferred compensation and our typical first-quarter adjustments due to the timing of annual employee salary increases, employer HSA and 401(k)s contributions, and employer tax payments. On a year-over-year basis, G&A did not increase from the same $5.1 million in the first quarter 2025. Interest expense decreased by $160 thousand quarter over quarter to $6.8 million in 2026 due to two fewer days in the first quarter and slightly lower floating rates on our revolving credit facility. I will note that we expect our second quarter interest expense to be higher, however, based on an additional day in the second quarter, a full quarter of our current revolver balance which includes net borrowings from our inpatient rehabilitation facility acquisition in February, and the expiration in late March of $75 million of interest rate hedges. Moving to funds from operations, FFO in 2026 was $13.4 million, a 5.8% increase year over year compared to the $12.7 million of FFO in 2025. On a diluted common share basis, FFO increased $0.02 year over year from $0.47 in 2025 to $0.49 in 2026, and remained the same quarter over quarter from the $0.49 of FFO in 2025. Adjusted funds from operations, or AFFO, which adjusts for straight-line rents and stock-based compensation, totaled $15.4 million in 2026, a 4.1% increase year over year compared to the $14.7 million of AFFO in 2025. AFFO on a diluted common share basis was $0.56 in 2026, which was $0.01 higher both year over year and quarter over quarter from the $0.55 of AFFO in 2025. That concludes our prepared remarks. Dorwin, we are now ready to begin the question and answer session. Operator: We will now open the call for questions. Please pick up your handset before pressing any keys. At this time, we will pause momentarily to assemble our roster. Our first question comes from Alexander Goldfarb with Piper Sandler. Please go ahead. Alexander Goldfarb: Thank you, and good morning down there. Dave, you made some promising comments about the Assurance hospital transfer. It sounds like things are progressing, sort of getting in late stages. Can you just give a little bit more color? Do you feel like we are getting close to the end, or is this sort of typical government work where you have to enjoy the process? And at this point, based on the shot clock, you are like, okay, we should be at the point of the shot clock where this should be coming to a conclusion. David H. Dupuy: Hey, Alex. Thanks for the question. We are feeling like we have definitely made some progress over the last quarter. Some of the roadblocks that we have seen, as you have alluded to, have related to getting some confirmation on some outstanding liabilities from a couple of the various governing bodies that pay. In particular, as it relates to Ohio Medicaid, firming up the amount that is owed. But we do feel like we are making good progress. The company is highly engaged, the buyer is highly engaged in the process, and we do feel like we are hopefully going to get final confirmation on timing and everything very shortly. As I said in the prepared remarks, we are currently trading documents and purchase agreements, and we would anticipate getting this in a good place, hopefully, in the next quarter. Alexander Goldfarb: Okay. That is certainly good to hear. Second question is, obviously, housing is all the rage these days, and MOB, I think your traditional property types, may not be as in vogue, at least when you look at the public stock prices. When you look in the market for acquisitions, is that the same that you see in the private market? Or is your acquisition pipeline coming down mainly relative to your cost of capital? I am also trying to understand what is going on in valuation land and if all the health care private capital is heading only to senior housing, and your traditional target class remains still very attractive, and therefore your decision to pull the pipeline down is more based on just your cost of capital versus everything once again getting bid up and therefore there is less product of interest to you. David H. Dupuy: No, it really has to do with the latter, Alex. We see a number of acquisitions. We continue to have investment committee every couple of weeks where we go through opportunities, and if we were in a different position and were not doing capital recycling and having to sequence those asset sales in order to acquire new assets—because we do not want to raise capital through our ATM—we would definitely see the types of properties and the types of opportunities that we would like to invest in. What we are doing in terms of focusing on capital recycling is using this as an opportunity to do two things. Obviously, we are using this as an opportunity to trim some of the properties that are in less attractive markets. A lot of these facilities that we sold, we sold five properties in 2025; we sold another one in 2026. We are using this as an opportunity to really prune the portfolio and improve the portfolio. It is not the most fun in terms of selling a property in order to buy properties, but that is what we are going to focus our time and efforts on. What we expect is in the second half of the year, as some of these redevelopment projects and other things that we have been working on come online, we would expect to start posting AFFO growth, and we hope that is recognized as a positive in the marketplace and puts us in a position to start doing what we have been doing historically as a company, which is not just growing the portfolio performance through leasing, but also growing the portfolio through acquisitions. Operator: Thanks, Alex. Our next question comes from Jim Kammert with Evercore. Please go ahead. Jim Kammert: Hi. Good morning. Thank you. The acquisition you noted was quoted at about a 9.3% yield, I believe. Is that a GAAP or a cash yield? And if GAAP, I am trying to understand what are the representative annual escalators on that long lease, and are they representative of the other four assets in the pipeline? David H. Dupuy: That is a cash yield, that 9.3% cap rate. Jim, you were not coming through very clearly. Are you asking what the escalators are on that property? Jim Kammert: Yes, sorry, Dave. Thank you. What are the escalators, and are they representative of the other four assets? David H. Dupuy: Yes. They are 2% escalators and would be consistent with the other ones that are in the pipeline. Jim Kammert: Great. That is all I had. Thank you. Operator: We have no further questions at this time. I would now like to turn the conference back over to management for closing comments. Over to you. David H. Dupuy: Great. Thanks, Dorwin, and thank you, everybody, for dialing in. We hope to see many of you at NAREIT coming up in June. Operator: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning. And welcome to the United Fire Group, Inc. 2026 First Quarter Conference Call. All participants will be in listen-only mode. After today's remarks, there will be an opportunity to ask questions. 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 Timothy Borst, Vice President of Investor [inaudible]. Please go ahead. Timothy Borst: Good morning, and thank you for joining this call. Yesterday afternoon, we issued a press release on our results. To find a copy of this document, please visit our website at ufginsurance.com. Press releases and slides are located under the Investors tab. Joining me today on the call are United Fire Group, Inc. president and chief executive officer, Kevin James Leidwinger; executive vice president and chief operating officer, Julie Anne Stephenson; and executive vice president and chief financial officer, Eric John Martin. Before I turn the call over to Kevin, a couple of reminders. First, please note that our presentation today may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current expectations, estimates, forecasts, and projections about the company, the industry in which we operate, and beliefs and assumptions made by management. The company cautions investors that any forward-looking statement includes risks and uncertainties and is not a guarantee of future performance. Any forward-looking statement made by us in this presentation is based only on information currently available to us and speaks only as of the date on which it is made. Forward-looking statements are based on management's current expectations, and the company assumes no obligation to update any forward-looking statements. The actual results may differ materially due to a variety of factors described in our press release and SEC filings, discussed specifically in our most recent annual report on Form 10-K. Also, please note that in our discussion today, we may use some non-GAAP financial measures. Reconciliations of these measures to the most comparable GAAP measures are also available in our press release and SEC filings. At this time, I will turn the call over to Mr. Kevin James Leidwinger, CEO of United Fire Group, Inc. Kevin James Leidwinger: Thank you, Tim. Good morning, everyone, and thank you for joining us today. United Fire Group, Inc. is off to a terrific start in 2026. We delivered another quarter of excellent results, reflecting our continued positive momentum from the transformative actions we have taken over the past few years to position the company for long-term success. In the first quarter, we achieved record net written premium, nearly a four-point improvement in the combined ratio, and a 15% increase in net investment income. These achievements contributed to a return on equity of approximately 13% and the highest first quarter earnings per share in seven years. In addition to our strong financial performance, I am also very pleased with our focus on growing the business in a disciplined manner, particularly in the face of a changing market. The coordinated strategic actions we have taken to deepen underwriting and actuarial expertise, expand capabilities, strengthen distribution relationships, and invest in the organization's productivity are affording us access to a greater number of business opportunities than previously available to United Fire Group, Inc. This has allowed us to remain disciplined, highly selective underwriters focused on profitably growing our business as we more broadly serve our distribution partners. As we continue to thoughtfully, responsibly, and profitably grow our business through expanded opportunity, I am confident the underwriting discipline we have instilled in the organization the past three years will serve us well in the evolving market. I will now hand the call over to Julie Anne Stephenson to discuss our underwriting results in more detail. Julie? Julie Anne Stephenson: Thanks, Kevin. We are pleased with the continued positive momentum in the business, particularly in the face of competitive headwinds emerging in the marketplace. Net written premium increased 12% in the first quarter driven by disciplined growth as well as lower ceded reinsurance premium. Net written premium growth was 9% absent the impact of some unique ceded premium transactions outlined last year in our first quarter call. Growth continues to be fueled by our core commercial business, which includes small business, middle market, and construction. Core commercial grew net written premium 11% in the first quarter with all three business units contributing. We have been able to leverage our deep distribution relationships and expanded capabilities to maintain a healthy but moderating retention, secure positive rate outcomes, and continue to grow new business by 14% while maintaining our unrelenting commitment to the underwriting rigor we have established over the last three years. Our expanded capabilities have contributed to growth by allowing us to attract more complex risks within the lower to mid range of the middle market spectrum. Our average account size is growing in a sector of the market that has so far experienced a more modest deceleration in pricing than national accounts, evidenced by our 4.3% rate achieved for the quarter. Current pricing continues to offer attractive returns. Specialty E&S net written premium growth in the first quarter was largely impacted by ceded premium adjustments in 2025. While submission activity is strong, competition is intensifying in the E&S market. Double-digit rate increases achieved a year ago are now mid-single digits as capacity is prevalent from both new entrants and the return of some accounts to the admitted market. Renewal defense for adequately priced and well-performing accounts remains a priority. New business efforts are focused on moderate hazard opportunities in both property and casualty to balance the volatility of the portfolio over time. Surety premiums were stable compared to prior year as we remained staunchly focused on quality. Given favorable growth momentum and strong submission activity, we continue to have high confidence in the underwriting discipline and growth prospects for this business. Alternative distribution, which provides United Fire Group, Inc. with profitable business through three primary channels—treaty, programs, and Funds at Lloyd's—net written premium increased 13% over prior year. We had a successful and disciplined January 1 standard treaty cycle. While pressure on market pricing has increased, we benefited from favorable premium development in existing relationships while selectively adding attractively priced accounts that offered opportunities beyond the lines feeling the brunt of the softening market. We also expanded our Funds at Lloyd's portfolio with $20 million of additional stamp capacity supporting four new syndicates for 2026 that will provide additional premium throughout the year. The Lloyd's market enjoys an A+ rating from AM Best as a result of the improvement in operating returns. Rates are holding at recent highs, and this investment vehicle offers significant diversifying opportunities. With the breadth of distribution and product opportunities available to us, combined with our tightly managed exposure in this space, we believe our alternative distribution business will continue to afford the flexibility to prudently grow this highly curated portfolio through varying market cycles. Moving to profitability, our loss ratio continues to reflect the quality of our improved portfolio with an underlying loss ratio of 57% in the first quarter. The Commercial Lines business continues to benefit from strong earned rate achievement and the benefits of our refined underwriting appetite and portfolio actions. The improvement in commercial results was offset by an increased loss ratio in the assumed reinsurance business driven by rate reductions more prevalent in this market. Despite this impact, our reinsurance business continues to meet our profit expectations. We have also incorporated some additional conservatism into our estimates, recognizing the uncertainty and the changing market dynamics, yielding a small increase in the underlying loss ratio over prior year. Prior-year reserve development was neutral overall in the first quarter. Our actuarial review this quarter reflected an abbreviated analysis, and we made some modest offsetting adjustments across the portfolio. Of particular note, development in our liability portfolio was flat as our estimates began showing some stability for the quarter after continued emphasis to strengthen these reserves. The first quarter catastrophe loss ratio of 3.7% was 1.3 points below prior year. Our first quarter result was below historical five- and ten-year averages and reflects our ongoing actions to improve our catastrophe risk profile in recent years. I will now turn the call over to Eric to discuss the remainder of our financial results. Eric John Martin: Thank you, Julie. Our high-quality fixed income portfolio continued to deliver a sustainable increase in net investment income, which grew 15% in the first quarter to $27 million. Fixed maturity income of $24.9 million increased 18% from prior year while maintaining duration and an average AA credit quality rating. Over the past four quarters, the size of our fixed maturity portfolio has grown by nearly $300 million as the virtuous cycle of improved underwriting profitability benefits all aspects of enterprise value creation. The elevated interest rate environment continues to provide opportunities to sustainably increase fixed maturity portfolio return as new money yields remained steady at approximately 5% and exceeded the overall portfolio average. Outside of fixed income, our portfolio of approximately $100 million of limited partnership investments generated a return of $1.3 million in the quarter that, while positive, was lower than in recent quarters. Turning to the expense ratio, the first quarter result of 34.9% improved three points from prior year. While the prior-year expense ratio was elevated by costs associated with the final stages of development of a new policy administration system, the benefits of ongoing growth and disciplined management actions have contributed more than one point of improvement in the expense ratio over the past year. We expect our ongoing actions to result in a continued gradual reduction of the expense ratio over time. First quarter net income was $1.15 per diluted share, with non-GAAP adjusted operating income of $1.16 per diluted share. This quarter's earnings improved book value per common share to $37.06. An increase in interest rates in the first quarter caused our unrealized loss position to increase from $34 million at year-end 2025 to $53 million at the end of the first quarter, negatively impacting book value per share by $0.57. Adjusted book value per share, which excludes the impact of unrealized investment losses, increased $0.74 to $38.61. From a capital management perspective, during the first quarter, we declared and paid a $0.20 per share cash dividend to shareholders of record as of February 24, 2026. With United Fire Group, Inc. delivering double-digit return on equity and stock price trading near adjusted book value, we are attractively positioned to deliver compelling growth and shareholder value over time. This concludes our prepared remarks. I will now have the operator open the line for questions. Operator: We will now open the call for questions. We will now begin the question and answer session. Our first question comes from Ken Bianchi from Piper Sandler. Please go ahead. Analyst: Good morning. This is Ken on for Paul Newsome. Congrats on the quarter. You are starting to see solid growth and retention improvement in core commercial. Are you seeing any incremental competition in that business, and how are you balancing that growth versus margin discipline in that business? Julie Anne Stephenson: Hi. This is Julie. I will answer that for you. This moderation in rates and increased competition is not unexpected for the quarter, but we still feel very good about our growth trajectory. The underlying discipline that we have worked so hard to put in place over the past few years, I think, has positioned us really well going into this market. We believe there are still ample opportunities with positive margin available to us in this market, and we are very confident about the quality of the portfolio. Retention may fluctuate quarter to quarter as the market continues to soften, but we will continue to insist on adequate pricing account over account, and I think we are positioned very well to continue to grow. Analyst: And then on the expense ratio improvement, you broke down a little bit how much of that is structural versus more of a one-time improvement. How should we think about run-rating those improvements from the new policy administration system on the expense ratio? Eric John Martin: Good morning, Ken. This is Eric. Thanks for joining us. As we mentioned in our comments, when you look quarter over quarter, we are down about three points on the expense ratio. Two points of that improvement were due to the completion of some costs from our policy administration system that we were finishing up in the early stages of last year, and then we have got one point due to growth. So this quarter's number is a very clean number at 34.9; there is really nothing unusual in it. As we look forward here, we would continue to see improvement in the expense ratio. With an assumption that we grow at 10%, we would expect it to come down around 60 or 70 basis points year over year looking into the future here. Analyst: Awesome. That is all for me. Thanks. Operator: Next question comes from Jason Weaver from JonesTrading. Please go ahead. Hi, Jason. Is your line on mute? Analyst: Good morning. Thanks for taking my question. We are all back now. I know you touched on this before—just one for me—but looking at the deceleration trend in renewal rate increases, would you ascribe that to mix-related dynamics reflective of the elevated competition that you have been speaking about, or possibly an intentional effort to bump share gains here? Julie Anne Stephenson: I think it is more based on competitive behavior. We are very pleased that the rates are still positive. It does vary significantly by line of business, and so we are trying to approach every single account and every single opportunity by finding the right rate for the exposures that we are underwriting. We feel very good about where we are positioned, and we will continue to navigate the competition in that way. Analyst: All right. Thank you for that color. Congrats on the quarter, guys. Operator: There are no more questions in the queue. This concludes our question and answer session. I would like to turn the conference back over to Kevin James Leidwinger for any closing remarks. Kevin James Leidwinger: Well, thank you for joining us today. We are off to a great start in 2026. Our deepened underwriting expertise and expanded capabilities are affording us access to a greater number of business opportunities than previously available to United Fire Group, Inc. We are leaning into those opportunities as a disciplined, solution-oriented underwriting company focused on profitably growing our business as we more broadly serve our distribution partners. We remain confident in our ability to strategically execute our business plan while navigating the complexities of a changing market. Thanks again for joining us, and we look forward to talking with you next quarter. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and welcome to The Manitowoc Company, Inc. First Quarter 2026 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Ion M. Warner, Senior Vice President of Marketing and Investor Relations. Please go ahead. Ion M. Warner: Good morning, everyone, and welcome to our earnings call to review the company's first quarter 2026 financial performance and business update outlined in last evening's press release. Joining me this morning with prepared remarks are Aaron H. Ravenscroft, our President and Chief Executive Officer, and Brian P. Regan, our Executive Vice President and Chief Financial Officer. Earlier this morning, we posted our slide presentation to the Investor Relations section of our website, www.manitowoc.com, which you can use to follow along with our prepared remarks. Please turn to Slide two. Before we start, please note our Safe Harbor statement in the material provided for this call. During today's call, forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 are made based on the company's current assessment of its markets and other factors that affect its business. However, actual results could differ materially from any implied or projected due to one or more of the factors, among others, described in the company's latest SEC filings. The Manitowoc Company, Inc. does not undertake any obligation to update or revise any forward-looking statement, whether the result of new information, future events, or other circumstances. And with that, I will now turn the call over to Aaron. Aaron H. Ravenscroft: Thank you, Ion, and good morning, everyone. I would like to take a moment to thank The Manitowoc Company, Inc. team for their unwavering commitment to serving our stakeholders. Over the last twelve months, the team has continued to execute our Cranes+50 strategy, enabling us to weather the downturn in the crane cycle and be better positioned for the next leg up. Although there is a great deal of uncertainty in the Middle East, Ukraine, and even in the United States with respect to tariffs, the overall market has been resilient. Our orders during the first quarter were almost $650 million, and our backlog ended the period at $940 million. In addition, rates in April remained strong. Please turn to Slide three. Starting with the Manitowoc Way, I recently challenged our organization to eliminate hammers, similar to what we did with ladders a few years ago. We are simply too reliant on hammers. They create quality problems and are a major source of safety risk. In our Katy Grove plant alone, we had over 1,200 hammers in use. Thus far, we have eliminated 264. As you can see on this slide, the organization has quickly developed a variety of improvements ranging from simple to ingenious solutions. Eliminating hammers not only helps create a safer workplace but also supports the Manitowoc Way culture as we consistently drive for continuous improvement and innovation. Ultimately, the goal is to have zero injuries. In terms of new product development, in March we unveiled an 80-ton boom truck and an 800-ton eight-axle all-terrain crane at CONEXPO. Both received outstanding feedback from customers and crane operators. The eight-axle crane was a real head turner at the show, and I really look forward to getting the first units into the field in 2027. Please move to Slide four. Turning to our Cranes+50 strategy, our non-new machine sales for the quarter grew 3% year over year. On a trailing twelve-month basis, we improved 8% to $696 million. Growing this part of our business, which is less impacted by economic cycles and produces higher returns, is a key part of our strategic plan and is working well. As I preach to our teams, for us to continuously grow our non-new machine sales, we have to focus on four major buckets. Number one, we are adding more service locations. For example, in Australia we doubled the capacity of our Sydney facility, and we recently approved new service centers in Brisbane and Melbourne. Brisbane will host the 2032 Olympics, and we are preparing for a lot of activity in the region. Number two, we are adding more aftermarket sales representatives and field service techs. We ended the first quarter with 567 field service techs, up 50 techs in just three months. The growth was driven by two major actions. First, we reorganized our approach to talent acquisition in North America by enhancing our recruiting team. And second, in India, we transitioned from a dealer model to a direct model in order to better service our customers. The third bucket, we are increasing sales of complementary lifting accessories. In Europe, our tower crane team has introduced anti-intrusion panels to reduce theft and to discourage curious social media influencers during the off hours. In addition, the team has introduced urinals to replace the less-than-desirable traditional bucket system. In the UK, our mobile team has started selling outrigger pads and a rear-mounted storage compartment, which they designed in-house. Our goal is straightforward. We want to make our customers' lives easier so they can focus on executing lifts. And the fourth bucket is the fact that we are leveraging technology. I have mentioned our implementation of ServiceMax a few times. This tool has several different modules to help us better track machines and more effectively fix and bill crane repairs. In April, we completed the implementation of ServiceMax’s asset management system. We are now under the development of the dispatching and work order module, which increases our visibility to service work and enables us to capture more incremental revenue opportunities. Please move to Slide five. For my regional update, let us start with the Americas. First and foremost, overall customer sentiment at CONEXPO was very positive. Crane rental houses were quite optimistic about the market outlook. While everyone is unhappy with tariffs, customers told us project work is abundant. In addition, dealer inventory levels declined during the first quarter, which is a great sign that folks are buying again. For example, all-terrain crane inventory levels are at a ten-year low. In Europe, the crane business feels pretty good. Demand for tower cranes continues to grow with new machine orders up 76% year over year. Mobile demand has remained relatively steady. In the Middle East, many big projects like the new Dubai Airport continue to move forward. Not surprisingly, Saudi Arabia has pulled back on the home front, and considerable development activity remains underway in Riyadh. Given the circumstances around the Iran conflict, we find ourselves in a wait-and-see mode as we monitor the situation, but I am very encouraged by the level of optimism in the region, with construction companies eager to get back to business. Finally, Asia-Pacific continues to gain momentum with increasing demand in Hong Kong, Vietnam, Australia, and South Korea. I recently visited the new SK Hynix and Samsung semiconductor projects where roughly 100 POTAIN tower cranes are currently operating. Korean construction companies continue to leave me in awe of their scale and speed. The Samsung site alone will reach 70,000 workers at its peak. I left South Korea very optimistic about demand in the coming quarters. With that, I will hand it over to Brian to walk you through the financials before I make a few closing remarks. Brian P. Regan: Thanks, Aaron, and good morning, everyone. Please turn to Slide six. Our financial performance for the quarter tracked largely in line with expectations, which supports reaffirming our previously issued guidance. We anticipated difficult comps as tariffs were a headwind to the quarter versus the prior year. The tariffs introduced in 2025 fully impact us until the second half of the year. Moving to the numbers, we had orders of $646 million in the first quarter, relatively flat from a year ago on a currency-neutral basis. Order activity was solid and broadly consistent with recent trends. Keep in mind, order comps were difficult in Q1 due to the post-election bump in 2025 and the large stocking orders we received at the end of the year. Backlog ended the quarter at a strong $940 million, up $146 million from where we exited 2025 and up $10.442 billion year over year. This supports our revenue expectations for the full year. Net sales in the quarter were $495 million, essentially flat on a currency-neutral basis. Non-new machine sales in the quarter were $166 million and, on a trailing twelve-month basis, reached a record $696 million, up 8% from the prior year. While growth lagged our expectations in the first quarter, mainly due to used sales, the overall mix of non-new machine sales favored our higher-margin categories. SG&A expenses were $91 million in the quarter. On an adjusted basis, SG&A was up $7 million, with foreign currency accounting for $3 million of the increase. The remaining increase was driven primarily by the CONEXPO trade show and inflation from other employee-related costs. Adjusted EBITDA in the quarter was $20 million, down $2 million, or 10% year over year. As expected, tariffs impacted our results by $2 million. Please turn to Slide seven. Net working capital ended the quarter at $536 million, an increase of $47 million year over year, driven primarily by inventory. The higher year-over-year inventory was driven by $26 million from foreign currency, $15 million from tariffs, and $10 million in prototypes, and was partially offset by operational improvements. Moving to cash flow, operating activities provided $27 million of cash during the quarter. Capital expenditures were $8 million, including $6 million for our rental fleet, resulting in free cash flow of $19 million. This was a $17 million improvement year over year, driven by increased collections on accounts receivable. We ended the quarter with $316 million in liquidity, and our net leverage ratio was 3.1 times. In April, S&P upgraded our corporate credit rating from B to B+. This upgrade underscores the progress we are making in strengthening our financial profile through the cycle while investing in long-term growth through our Cranes+50 strategy. Looking ahead, first quarter results did not change our expectations for the full year, and as such, we are affirming our previously issued guidance of net sales of $2.25 billion to $2.35 billion and adjusted EBITDA of $125 million to $150 million. With that, I will turn the call back to Aaron. Aaron H. Ravenscroft: Thank you, Brian. Please turn to Slide eight. Standing back and looking at the forest through the trees, I think there are many reasons to be optimistic. Number one, Europe is on the rebound. For sure, towers have rebounded more aggressively than mobiles, and there is still a big need for residential housing and power generation. Number two, in the Middle East, all things considered, folks are pretty optimistic to get back on track. In normal times, all construction would have dried up overnight with such regional conflict. Number three, in Asia, our strongest markets are pumping even in the face of weaker currencies. Number four, in LATAM, copper has traded above $6 per pound. With several new governments in the region, I believe we will start to see more investments in brownfield and greenfield mining projects. Number five, in the U.S., although fleet ages continue to increase, customers are begrudgingly making purchases. Data centers continue to expand rapidly, and there is a strong need for additional power generation and transmission infrastructure. And finally, number six, the success of our Cranes+50 strategy is increasingly helping us weather this economic cycle and positioning us for a higher-margin profile in the long term. Of course, there is still a lot of uncertainty in the market, but I believe that we are starting to see light at the end of the tunnel. Keep in mind, we have been living in this mode essentially since 2020. There is plenty of pent-up ambition from folks to renew and expand their businesses, which is why I believe that the markets have held up steady. With that, operator, please open the line for questions. We will now open the call for questions. Operator: Yes, thank you. We will now begin the question-and-answer session. The first question comes from Jerry Revich from Wells Fargo. Aaron H. Ravenscroft: Good morning, Jerry. Morning. Analyst: This is Kevin on for Jerry. I just had a question on the changing tariff dynamics as it relates to your outlook. It would be helpful to get more color on that, maybe bifurcating between impacts from the AIIPA overturn and the new Section 232 ruling. Brian P. Regan: Yep. Thanks, Kevin. A lot is going on with the tariff landscape, as you can imagine. I will start by saying that the net go-forward impact of what is in place today is in line with what we thought coming into the year. There are no real changes to our expectations based on those changes. With that said, there is still uncertainty regarding what the Section 301 country-by-country tariffs will be and what net effect they will have on us versus the Section 232 current tariffs. Related to AIIPA, we did file our refund through the process. We paid approximately $25 million in AIIPA, so we are in a wait-and-see mode as far as that process goes. Additionally, you will see in our Q, we voluntarily submitted a prior disclosure to Customs related to potential errors in our methodology in calculating the 232 steel and steel derivative tariffs. This will allow us to review our calculation to determine if any adjustments are required. To give some perspective, we paid approximately $18 million prior to the April change in the 232 tariffs. Analyst: Got it. Very helpful. And then given that Q2 is typically a seasonally strong quarter for both net sales and margin, how should we think about performance versus normal seasonality? Any one-time impacts we should be thinking about from Q1? Brian P. Regan: As I said in the prepared remarks, from a comp standpoint, the second half is going to look better because of the impact of the tariffs. They really hit us more in the second half than the first half. With that said, we talked about restructuring in our plan, and that is still in place. Again, that is going to affect us more favorably in the second half. So, I think Q2 will be better than Q1, but the second half is going to be better than the first half. Analyst: Understood. Thank you. That is all I have for questions. Ion M. Warner: Thanks, Kevin. We received several emails this morning, and I would like to read them to you. The first question that I received online was: Could you provide more color on these lifting accessories as part of your Cranes+50 strategy? Aaron H. Ravenscroft: Yes. The analogy that I use with our team internally is that the crane business is a lot like a restaurant. When you think about the restaurant, it is the steak that brings us all to the restaurant—it is that main platter. But the reality is the restaurant is living off of the appetizers, the desserts, and the wines. I think that the crane business is exactly the same. Obviously, you have to have a great crane to be in the lifting business, but there are a lot of accessories that go around that product and really add value to our business and to our customers. What really brings it all home is great service. A great recent example: we got an order in France for seven tower cranes for €6.5 million, and on the back of that, the sales team was able to add commissioning and dismantling services for €900,000 and then several accessories for a total of €300,000. On top of the normal crane order, they added anti-intrusion panels, lighting, cameras, anti-collision software, aircraft warning systems, and lifts. To me, that is a great example of what the team can add when they think outside of the box and have a bigger view of the customer and how we service those customers. Hopefully, that color helps. Ion M. Warner: Thanks. We received another email: What were your orders in April? Brian P. Regan: Yes. As Aaron mentioned, orders were strong. We are still rolling up the numbers, but we expect between $225 million and $250 million of orders in April, which is a little bit higher than the run rate we saw in Q1. Ion M. Warner: Okay. I just received this email: You seem more optimistic on this call. How should we think about the full-year guidance? Aaron H. Ravenscroft: We reaffirmed our guidance, but orders have been strong, and April, as Brian just said, is looking good. Backlog is strong. Dealer inventory is on the low end in the United States, and we are really starting to see some momentum in places like South Korea. So I think there is a lot of optimism and a lot of opportunity. The big question mark is just how the Strait of Hormuz situation plays out because we still have plenty of orders that need to make their way into the Middle East through that strait, and as of right now, it is shut down. So there are some good opportunities, but there is still some uncertainty in terms of our ability to execute within the year depending on how that situation plays out. Ion M. Warner: I received another email, and I will read it to you: How is the implementation of the Manitowoc Way lean practices impacting the aftermarket business? Aaron H. Ravenscroft: We traditionally were manufacturing-focused, so we are still figuring it out, and I think we are in the early innings, but we are starting to see some good gains. I think when you look at what we did in terms of our new hires of field service folks during the quarter, that is a good example of how we are gaining. We continue to tweak our approach to recruiting and how we manage each organization, and it looks like we have found the right formula. That is a real success of us trying to continuously do a better job and be more effective at it. We have some good kaizens going this year; they are more than just a one-week kaizen. It will take us a few weeks to work through those. We do pre-delivery inspections at our dealerships. We have never really gotten good feedback; there are a lot of fixes that happen that people just do not report. So we built a system around that to start to get feedback closer to our assemblers, and I think that is going to yield good results for us. In our Jeffersonville distribution center, this is where we typically ship out parts, but there are a lot of kits that go with encore work and upfit and some bigger projects. I could best describe that as a terrible IKEA project at the moment. There is a lot of work for us to do and improve in terms of the kitting because, when we do that, that is going to drive a significant productivity gain at our service centers when they are doing that work, because it is hard to figure out all the different nuts and bolts and parts that are in some of these boxes. I think that is great. And then a big shout-out to our team in Chesapeake. She has done a fantastic job. She was a Manitowoc Way winner last year for improvements, and in the first quarter, she put forward an improvement around using QR codes to manage TPM on forklifts. I love the amount of creativity we have in those locations. To me, the big challenge and why I say we are in the early innings is just around how we collaborate and share all these lessons learned. It is a lot of cats to herd in all these different locations, but we are gaining speed. I am really looking forward to what we are able to do as we move forward. Thank you. Those are the questions that we received in the queue. Ion M. Warner: Operator, any other questions in the queue? Operator: No, sir. There is nothing at present. Ion M. Warner: Very well. Please note that a replay of our first quarter 2026 earnings call will be available later this morning by accessing the Investor Relations section of our website at www.manitowoc.com. Thank you, everyone, for joining us today and for your continued interest in The Manitowoc Company, Inc. We look forward to speaking with you again next quarter. Operator: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Operator: Good morning, and welcome to the Icahn Enterprises L.P. First Quarter 2026 Earnings Call with Andrew Tino, President and CEO; Ted Papapostolou, Chief Financial Officer; Robert Flint, Chief Accounting Officer; and Joseph Passeri, Director of SEC Reporting. I would now like to hand the call over to Joseph Passeri, who will read the opening statement. Joseph Passeri: Thank you, operator. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements we make in this presentation, including statements regarding our future performance and plans for our businesses and potential acquisitions. Forward-looking statements may be identified by words such as expects, anticipates, intends, plans, believes, seeks, estimates, will or words of similar meaning and include, but are not limited to, statements about expected future business and financial performance of Icahn Enterprises L.P. and its subsidiaries. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors that are discussed in our filings with the Securities and Exchange Commission, including economic, competitive, legal and other factors. Accordingly, there is no assurance that our expectations will be realized. We assume no obligation to update or revise any forward-looking statements should circumstances change, except as otherwise required by law. This presentation also includes certain non-GAAP financial measures, including adjusted EBITDA. A reconciliation of such non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the back of this presentation. We also present indicative net asset value. Indicative net asset value includes, among other things, changes in the fair value of certain subsidiaries, which are not included in our GAAP earnings. All net income and EBITDA amounts we will discuss are attributable to Icahn Enterprises unless otherwise specified. I'll now turn it over to Andrew Teno. Andrew Teno: Thank you, Joe, and good morning, everyone. I wanted to say thank you to everyone, who I've worked with over the past few years, both before becoming CEO and after. It is an honor and privilege to work with and learn from the living legend of activism in our Chairman, Carl Icahn. Over the past few years, we have worked hard to high-grade the Investment Fund portfolio and to get our controlled operations moving in the right direction. I leave the company knowing that it's in good hands with a significant war chest to take advantage of opportunities as they arise. It's been a pleasure and honor. And with that, I will hand it over to Ted, our new CEO. Congratulations, Ted. Ted Papapostolou: Thank you, Andrew. Before turning to the work ahead, I want to begin by thanking Andrew for his leadership and service to Icahn Enterprises and wish him continued success in his next chapter. I am honored to take on the role of CEO and excited by the opportunity ahead. Icahn Enterprises has a unique portfolio, a strong heritage of disciplined capital allocation and a culture of accountability and long-term thinking. I look forward to building on that foundation, working closely with Carl and our Board to continue strengthening the enterprise and executing on our priorities. I also look forward to working with Rob in his new role as CFO. With that, let's get into the results. First quarter NAV increased by $201 million compared to year-end. The increase was primarily driven by an increase of $605 million in our long position in CVI, which was offset in part by losses on refining hedges of $320 million in our Investment segment, also known as the funds. Regarding CVI, major geopolitical events drove volatility, which have set up attractive market opportunities for the balance of 2026. We believe CVI is well positioned to allow for potential future debt reductions and capital returns to shareholders. We are pleased with CVI's announcement of a $0.10 dividend. For Q1, the Investment segment was up approximately 4%, excluding the refining hedges. In terms of our top positions, AEP is an electric utility that benefits from the AI infrastructure build. In the first quarter, the company reaffirmed its 2026 operating EPS outlook and increased its long-term operating earnings CAGR to greater than 9%, supported by 63 gigawatt of incremental contracted load and 11% rate base growth through 2030. AEP stock was up approximately 14% for Q1. Centuri reported strong base revenue and gross profit growth of 28% and 50% in Q4. The company also guided to strong double-digit base revenue and gross profit growth for 2026 as it continues to capture the tremendous tailwinds from increased energy infrastructure investment. The stock was up approximately 16% for Q1. IFF continues to execute on its portfolio optimization, running a sale process for its food ingredients business and announcing the completion of its divestiture of the soy crush business. IFF stock was up approximately 8% for Q1. Caesars reported solid Q1 results with Vegas stabilizing regional sales growing in the low single digits and digital posting strong EBITDA growth of 61%. Caesars is expected to generate significant cash flow in 2026, which we hope to fund meaningful share repurchases and debt paydown. Caesars' stock was up approximately 13% for Q1. Echostar lowered its total expected tax and decommissioning costs related to its divested assets, which we believe meaningful upside remains for the position with the IPO of SpaceX potentially serving as a material positive catalyst. Echostar stock was up approximately 8% for Q1. As of quarter end, we had approximately $782 million in cash at the funds. Lastly, the Board declared an unchanged distribution at $0.50 per depositary unit. I will now pass it to Rob to discuss our financial results. Robert Flint: Thank you, Ted. For the first quarter of 2026, net loss attributable to IEP was $459 million, or a loss of $0.71 per unit. Our first quarter consolidated results include $425 million of losses on refining hedges in our Investment segment and $158 million of unrealized derivative losses in our Energy segment. Q1 '26 adjusted EBITDA loss attributable to IEP was $216 million compared to adjusted EBITDA loss attributable to IEP of $228 million for the prior year quarter. I will now provide more detail regarding the performance of our individual segments. The Investment Funds had a positive return of 4.4% for the quarter, excluding refining hedges. Including the refining hedges, the funds had a negative return of 8.2% for the quarter. Long and other positions had a net positive performance attribution of 4.1% and short positions had a negative performance attribution of 12.9%. The investment funds had a net short notional exposure of 29% at the end of the quarter compared to net short of 13% at year-end. Excluding our refining hedges, the funds had a net short notional exposure of 2% as of quarter end compared to net long of 19% at year-end. Our investment in the funds was approximately $2.2 billion as of quarter end. Moving to our Energy segment. Energy segment adjusted EBITDA attributable to IEP was negative $5 million for Q1 '26 compared to negative $6 million for Q1 '25. The first quarter refining operations were solid with crude utilization of 97%, although margins were weighed down by higher RFS obligation costs and unrealized derivative losses. The Fertilizer segment had strong results driven by robust demand for the spring planting season. We believe that CVI's assets are well positioned to benefit from the global tightness in refined product and nitrogen fertilizer. Now turning to our Automotive segment. Q1 '26 Automotive Services revenues decreased by $9 million compared to the prior year quarter, primarily driven by closure of stores during the balance of 2025, offset in part by increased price. Same-store sales paints a better picture having increased by approximately 2% as compared to the prior year quarter. We are pleased with this positive revenue trajectory, but there's still a lot more work to be done. We continue to focus our efforts on product, pricing, labor and distribution strategy. Now turning to all other operating segments. Real Estate's Q1 '26 adjusted EBITDA increased by $18 million compared to the prior year quarter. The increase is primarily driven by income from the assets that were transferred from the Automotive segment, of which $9 million is intercompany income from the auto segment and $2 million from third-party tenants. Food Packaging's adjusted EBITDA attributable to IEP decreased by $6 million for Q1 '26 as compared to the prior year quarter. The decrease is primarily due to lower volume and disruptive headwinds from the restructuring plan. Home Fashion's adjusted EBITDA decreased by $2 million when compared to the prior year quarter primarily due to softening demand in retail and hospitality business and supply chain disruptions in the Strait of Hormuz. Pharma's adjusted EBITDA decreased by $10 million when compared to the prior year quarter, primarily due to the reduced sales resulting from generic competition in the anti-obesity prescriptions and increased R&D expenses related to our ongoing pivotal drug trials. The Transocean trial preparation for our PAH drug is on schedule, and the first patient will be dosed in the next 60 to 90 days. The physician community remains excited by the potential for disease-modifying designation. Now, turning to our Liquidity. We maintain Liquidity at the holding company and at our operating subsidiaries to take advantage of attractive opportunities. As of quarter end, the holding company had cash and investment in the funds of $2.8 billion, and our subsidiaries had cash and revolver availability of $1.3 billion. We continue to focus on building asset value and maintaining liquidity to enable us to capitalize on opportunities within and outside our existing operating segments. Thank you. Operator, can you please open the call for questions? Operator: [Operator Instructions] As I see no questions in the queue, I will pass it back to Ted Papapostolou for closing comments. Ted Papapostolou: Thank you, everyone, and looking forward to our next update call. Operator: This concludes our conference. Thank you for participating, and you may now disconnect.
Operator: Good morning, and welcome to the Fubo Second Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Ameet Padte, SVP, FP&A, Corporate Development and Investor Relations. Thank you. Please go ahead. Ameet Padte: Thank you for joining us to discuss Fubo's Second Quarter Fiscal 2026 Results. With me today is David Gandler, Co-Founder and CEO of Fubo; and John Janedis, CFO of Fubo. Full details of our results and additional management commentary are available in our earnings release and letter to shareholders, which can be found on the Investor Relations section of our website at ir.fubo.tv. Before we begin, let me quickly review the format of today's call. David will start with some brief remarks on the quarter and our business, and John will cover the financials and guidance. Then we will turn the call over to the analysts for Q&A. I would like to remind everyone that the following discussion may contain forward-looking statements within the meaning of the federal securities laws, including, but not limited to, statements regarding our financial condition, our expected future financial performance, including our financial outlook, guidance and long-term targets, business strategy and plans, including our products, subscription packages and tech features, our partnerships and other arrangements, the benefits of the business combination, including expected synergies and integrations and expectations regarding growth and profitability. These forward-looking statements are subject to certain risks, uncertainties and assumptions. Important factors that could cause actual results to differ materially from forward-looking statements are discussed in our SEC filings. Except as otherwise noted, the results and guidance we are presenting today are on a continuing operations basis, excluding the historical results of our former gaming segment, which are accounted for as discontinued operations. During the call, we may also refer to certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are also available in our Q2 2026 earnings shareholder letter and press release, which are available on our website at ir.fubo.tv. With that, I'll turn the call over to David. David Gandler: Thank you, Ameet. We appreciate everyone joining us for today's call to discuss our Q2 2026 financial results. We delivered the strongest second quarter in our history on an adjusted EBITDA basis. More importantly, on a trailing 12-month basis, we have now exceeded $100 million in pro forma adjusted EBITDA, an important milestone that reinforces our confidence in delivering against our long-term target of at least $300 million in adjusted EBITDA by 2028. We also achieved record revenue for the quarter, driven by continued expansion of our Fubo and Hulu + Live TV offerings, differentiated content and product innovation. The migration of our advertising business to the Disney Ad Server began in February, and we are pleased with the early benefits to date with both fill rates and CPMs experiencing healthy increases. The business combination fundamentally expands our strategic position. Fubo is now built to scale as a preeminent video player driven by flexible content packaging. We can aggregate and deliver a range of content packages at different price points, allowing us to serve distinct consumer segments rather than forcing a single package across the entire bundle. That flexibility is a durable advantage and a key driver of both growth and margin over time. We are already executing on this strategy. We now offer our Spanish-speaking customers 2 clear options. Fubo Latino, a lighter bundle without Univision and Hulu + Live TV Espanol, a more comprehensive package launched this quarter, which includes Univision. Fubo is applying the same approach across our broader service portfolio. We offer the Fubo Sports service alongside our core Fubo bundle as well as a more comprehensive entertainment offering through Hulu Live, which includes NBC and Versant. This diversified product set is designed to expand choice while reducing churn. Importantly, we believe we have successfully navigated the loss of NBCU on Fubo, even during a period when NBC held a dominant portion of February sports programming. Customers continue to access that content through Hulu Live and incremental churn at the combined business during the quarter was minimal. This provides a clear example that we are not reliant on any one programming provider as we segment our content strategy across our portfolio. At the same time, we are beginning to unlock synergies following our business combination. Over the last 12 weeks, we have been hard at work to explore, define and execute against a series of initiatives we've identified to power future growth. Let me expand upon a few of these. First, Fubo's aggregated storefront now offers the full Fubo and Hulu + Live TV content portfolios. Consumers can select the content plan that's right for them, whether that's an English or Spanish package, our Fubo Sports service, the Fubo virtual MVPD or Hulu + Live TV's complete cable replacement package. Second, through our integration with ESPN, fans looking to watch a live game will soon be able to seamlessly access Fubo via linkouts on ESPN's Where to Watch pages, creating a new acquisition channel. Third, we previously announced that our Fubo Sports service will be integrated into ESPN's e-commerce flow through a reseller and marketing arrangement. I'm pleased to update you that launch is expected in the first half of calendar year 2027. As a reminder, the ESPN ecosystem reaches over 100 million users every month. Through our progress on various cross-selling initiatives, we are building a powerful growth flywheel to scale our business. But this is just the start. We believe the next phase of aggregation will be the conversational layer, where discovery becomes the product. As content libraries expand, simplifying how consumers find and engage with programming becomes critical. This fall, we intend to launch our first AI conversational feature within the Fubo app, starting with sports. With Fubo's AI Assistant, customers will be able to use natural conversational voice to search their DVR'd content for game highlights and ask for recommendations. They can ask precise questions, such as give me all of the scoring plays by the New England Patriots quarterback in the past 2 games, but I only want to see passing touchdowns, no rushing. Or I'm trying to figure out who to move on to my fantasy team. Show me all of the Kansas City Chiefs defensive highlights from last month. We believe our AI Assistant is a fundamentally more intuitive way to interact with live sports and video than scrolling up and down or being fed algorithmic carousels. We expect this to drive deeper engagement and stronger attention over time. We look forward to adding the AI Assistant to Fubo's Roku, Apple TV and mobile apps to start. We also plan to extend the AI Assistant to news and entertainment talk shows, enabling the Fubo app to instantly retrieve any clip our customers are looking for. In closing, we are more confident than ever in the Pay TV category and in Fubo's growing position within it. Based on these and other initiatives, we believe there will be opportunities to drive growth and scale as we focus on our long-term target of at least $300 million in adjusted EBITDA. I will now turn the call over to John Janedis, CFO, to discuss our financial results in greater detail. John? John Janedis: Thank you, David, and good morning, everyone. The second quarter of fiscal 2026 marked our first full quarter as a combined company following the close of our business combination with Hulu + Live TV. As a reminder, to facilitate comparability between periods, we will discuss our results on both an as-reported and a pro forma basis, which gives effect to the transaction as if it had been completed at the beginning of the first period presented. Turning to results for the quarter. In North America, our revenue for the second quarter was $1.566 billion compared to $1.125 billion in the prior year period. Pro forma revenue in the prior year period was $1.556 billion, representing 1% growth year-over-year. In terms of our user base, we ended the quarter with 5.7 million total subscribers in North America compared to 5.9 million in the prior year period. Turning to our profitability metrics. Our net loss for the second quarter was $6.2 million compared to a reported net loss of $40.9 million in the prior year period. Pro forma net income in the prior year period was $120.6 million, positively impacted by a $220 million net gain related to the settlement of litigation. Earnings per share for the quarter reflected a loss of $0.07. We delivered adjusted EBITDA of $37.7 million in the second quarter compared to pro forma adjusted EBITDA of $1.4 million in the prior year period. From a cash and liquidity perspective, Fubo ended the quarter with $244 million in cash, cash equivalents and restricted cash on hand, and we continue to expect to finish the year with more than $200 million of cash on our balance sheet. I would also like to provide some additional commentary around the near- and long-term financial targets we recently released. For fiscal 2026, we continue to expect pro forma adjusted EBITDA of $80 million to $100 million and at least $300 million in fiscal 2028. We also expect to deliver positive free cash flow in fiscal 2027 and fiscal 2028 under our current operating plan. Our outlook is supported by elements of our business combination in which we have a high degree of conviction. As a reminder, for our commercial agreement, Fubo received a wholesale fee relative to Hulu + Live TV's carriage costs, currently at 95% in calendar 2026 and scaling to 99% by 2028. This contractual step-up provides strong visibility into our expected earnings profile and adjusted EBITDA expansion. Furthermore, the company captures advertising revenue from both the Fubo and Hulu + Live TV businesses. Together, these elements reinforce our expectations regarding the long-term earnings power of our combined entity. In summary, Q2 was a healthy quarter for our business, and we believe we are just beginning to realize the full potential of the Fubo and Hulu + Live TV business combination. As David noted earlier, we are excited about our new initiatives and the opportunities ahead. As we move forward, we remain focused on establishing a sustainable foundation for growth. With that, I'll turn the call back to the operator for questions. Operator? Operator: [Operator Instructions] Our first question comes from Kutgun Maral from Evercore ISI. Kutgun Maral: There's a lot to talk about, but I wanted to actually focus on advertising. With Fubo's inventory having now moved over to Disney's ad platform, it seems like there's a lot of opportunity, but the broader streaming ad market has been choppy for some folks. So I'd be curious if you could talk about any of the early indicators you're seeing on whether the Disney relationship is creating real upside net of the 15% agency fee, perhaps, in terms of CPMs, filler rates or something else? And how much of the medium-term EBITDA plan that you laid out assumes a meaningful ad monetization improvement versus just stabilization? John Janedis: Kutgun, this is John. Let me answer this one. I would just say the short answer is yes, and we're already seeing that. It's been less than 90 days since we started the migration of the inventory to Disney's ad server. And we have seen improvement in both CPMs and fill rate. And as you know, those are the key components of that ARPU, and we think that can continue. The CPM improvement has come in faster than expected. I'd say in terms of timing, we expect the migration to be fully completed by the end of the year. And then at that point, the Fubo ad ARPU is expected to converge with Hulu Live. On the second part of the question, look, the largest component of the adjusted EBITDA improvement will come from the contractual increase in the wholesale fee from 95% to 99%. But I would say the ad monetization improvement is tracking in line to better as of now. And I'd say also the quarter came in ahead of expectations. Operator: Our next question comes from Matt Condon from Citizens Bank. Matthew Condon: I just want to ask, just given the combination with Hulu Live TV meaningfully expanding your subscriber base and with it sort of your content cost leverage, can you just help frame the timing of when that scale benefit really begin to show up in your content cost structure? John Janedis: Matt, this is John. I'll start with this, and David may want to chime in also. Look, I'd say cost broadly in terms of scale benefit to your question, first, on the content cost, we historically haven't spoken to the timing of specific deals. What I can tell you is that we've had a couple of small renewals come up since the close of the business combination. We're happy with that outcome or those outcomes. And I think what I've also said historically is that on the timing, but we've talked to medium, short and longer term in terms of seeing that benefit. On the content cost side, given that we typically have about 1 renewal per year, that will have a bit of a longer tail to show up in the numbers. Operator: Our next question comes from Drew Crum from B. Riley. Andrew Crum: So on your fiscal '26 adjusted EBITDA guidance, you've generated $79 million during the first half, which suggests a pretty meaningful step down in the second half, can you reconcile the 2 and address what's driving the deceleration? David Gandler: Yes. This is David. Why don't I start, and then I'll let John chime in. So just in terms of where we are, as you know, we are a sports-first cable replacement service and the seasonality of our business typically allows us to generate 40% to 50% of our gross ads in the last fiscal quarter. And therefore, we keep our powder dry until then. So we do expect to spend more in marketing. And also, given the initiatives that we just laid out for you in my opening comments, we want to make sure that we have the flexibility to not only focus on profitability, but also growth. So this really allows us to take a balanced approach. John Janedis: And I would just want to add one quick point in terms of a one-timer. We did have a $6.5 million above the line tax-related benefit during the quarter. David Gandler: Yes. And just one last thing I'll say is look, we provided guidance a few weeks ago. Our plan is really to focus on the at least $300 million of EBITDA in 2028. And so we're planning accordingly and working with Disney on a number of these initiatives that we -- again, of course, as we get traction, we'll look to double down on some of these efforts. Operator: Our next question comes from Tyler DiMatteo from BTIG. Tyler DiMatteo: I was hoping we could unpack some of the organic growth trends in the business, in particular, the subscriber trends. I was hoping we can kind of get a little bit more color about maybe the split between Hulu Live and Fubo and then also more importantly, kind of how you see that trending through the year? And maybe any comments on ARPU as well. David Gandler: Yes. Thank you. I'll start. So one, we don't separate our sub count going forward. This is one company, and we're focused on creating leverage for the business as a combined entity. In terms of where we are from an organic perspective, I laid out 3 initiatives that we're working on at the moment just to kind of reinforce those. The first is utilizing our storefront to drive sales for Hulu Live. I think you know the Fubo team has been very strong in driving growth organically and inorganically over the last few years. So we'll look to really attempt to drive growth on the Hulu side. Due to the array of products that we offer, it makes sense for us to be able to push people towards a bundle that includes a comprehensive portfolio of networks. And I think part of the opportunity here is we're the only company today that offers such an array of offers, everything from as low as $9.99 on the Fubo Latino package. Then there's the Hulu Español package, which starts at the $30 range, which is well below some of our competitors and really gives us an opportunity to drive growth across these packages. As you know, lower pricing typically yields greater subscriber growth and top-of-the-funnel conversion. So we're focused on that. From a product and technology perspective, we've built a pretty strong mousetrap, I would say. Today, we're really focused on continuing to enhance our product capabilities to drive engagement and to take advantage of what John was talking about earlier around the advertising. The more engagement that we can drive on the platform, the more Disney will be able to drive ad sales on behalf of Fubo Inc. John Janedis: And I would just add on seasonality given your question in terms of organic. Look, the Fubo service tends to have a bit more seasonality than Hulu Live. But when we look at the sequential change in subscribers from fiscal 1Q to 2Q over the past 2 years, the trends were nearly identical for both periods and for both services. Operator: Our next question comes from Brent Penter from Raymond James. Brent Penter: It's good to see some of the RSN deals ahead of MLB season. I just want to zoom out and get your broader view as that space evolves and some of those businesses face some headwinds. How do you maintain your advantage in local sports as that ecosystem changes? And then with Hulu Live now, any plans to push Hulu Live more into the RSN space? David Gandler: Yes. So obviously, we are working in an ever-evolving landscape. I think we've done a very good job navigating the different changes that the industry is dealing with. As you said, we've done a great job adding -- I think it was 14 local baseball teams in a very short period of time as well as the Dodgers, the Braves and the Mets before opening day, if I'm not mistaken. And that allowed us to really offset our losses from the subs that rolled off due to the NBCU drop. So we feel pretty good about where we are. Of course, we enjoy our position as a leader in local sports. But we'll be focused on football season next -- the World Cup and then football season after that at this juncture. So that's where our focus is, and we'll look to evaluate the situation as things change. But as you know, we've constantly been proactive about some of these decisions that we've made, and they've obviously worked out very well for us. Operator: Our next question comes from David Joyce from Seaport Research Partners. David Joyce: Could you just provide a little bit more color on what you said about the Olympics earlier and Super Bowl and NBCUniversal. What's your retention experience been like versus prior years? And then secondly, it seems like you're mostly integrated with Disney ad sales. Was there any technological work remaining on that front? David Gandler: Why don't I start with the first part of the question and let John touch on the technological side of the ads. Look, from a retention perspective, I think we've done very well. As I said, we've navigated the issues with the NBC loss in a particularly dominant month for NBCUniversal, which included the Super Bowl, the Olympics and let's not forget the All-Star game. So I think from January through March, we've experienced better retention across all plans, which is obviously very important, and we've seen growth on that front, which really translates into the, I would say, relatively flat sub base on a year-over-year basis, which I think is very impressive. In April, what we've already experienced is retention levels that are on par with 2024. Again, that's offset by local baseball. And the only year, I think where we may have experienced better retention was during the pandemic in 2021. Reactivations were also very strong, which really highlights the fact that people really enjoy the Fubo product during the baseball season. So again, we're very focused on continuing to drive growth across all of our plans and to ensure that we don't rely on any one provider of programming for our service. John Janedis: David, just on the tech front, look, I would just say that there was, as you'd expect, a fair amount of tech work that was done, and that's also largely complete. Operator: Our next question comes from Alicia Reese from Wedbush. Alicia Reese: And then moving back to onetime events or occasional events. I'd like to ask on the World Cup. And I have a couple of questions or a two-parter on that. If you could talk first about what level of subscription uplift is embedded in the guidance from the World Cup? And then also, if you could talk about any -- like how you're participating outside of subscriptions in terms of perhaps shoulder programming around the World Cup that you can advertise against, whether it's on Fubo or Hulu? John Janedis: Reese, this is John. Look, for World Cup, we do think there may be a good incremental opportunity for us, particularly on Fubo Sports, given the lower price point. I would say on previous World Cups, really haven't had a major impact on ad revenue. I'd say this time around, we do have several sponsorships that we haven't had in the past because we're now selling hubs. And so combined with that, given with the friendlier time zone, there could be more of an advertising opportunity this year. On subscribers, look, I'd say that we haven't shared a subscriber outlook specific in terms of our guidance, but I would say that our marketing team expects an uplift in trials. And so it could also be upside based on conversion. Operator: Our next question comes from Patrick Sholl from Barrington Research. Patrick Sholl: With your free cash flow expectations for 2027 or sooner, could you maybe outline some of your capital allocation priorities whether in terms of growth, investments, leverage targets and other areas of investment? John Janedis: Pat, it's John. Look, we're investing in several areas. David alluded to them in the letter. But I would just add again, we're investing in product and tech. I think we're seeing some of the fruits of that in terms of what we're seeing in retention and churn, content in terms of the RSNs, marketing, all in an effort to drive customer delight and customer growth. On the free cash flow front, look, I would say we are tracking in line to slightly better relative to our expectations. Look, on leverage, we don't have a leverage target, but more or less what we've said is that in terms of cash, we expect to have north of $200 million of cash on the balance sheet at the end of the fiscal year. Based on our debt outstanding, we have a very manageable net debt level, if you will. Operator: Our last question today comes from Laura Martin from Needham. Laura Martin: Okay. On AI, can you guys talk about how you're affecting -- AI is affecting cost and also whether it's accelerating revenue? And then on international, could you tell us sort of what's going on in the international subs and how those subs fit into your strategy now that you're a part of Hulu + Live TV? David Gandler: Yes. Thank you. Laura, this is David. I'll take both of those, I think. Let me start with the international question. I think post our business combination with Hulu + Live TV, we're very focused on driving domestic growth given the size of our subscriber base here. So we'll probably put that on the back burner given all the priorities we have, particularly with some of the initiatives that we are implementing in the relatively short term. As it relates to AI, I think you and I are sitting together on May 12 at your conference. I'm looking forward to it. This is a major topic. I think this is one of the most underrated topics within streaming video. On the back end, I would say, from a business perspective, about 35% of all of our code is now completed with AI. About 200 of our employees now use either ChatGPT or Claude to code to really drive more effectiveness and efficiency. Some of our top engineers actually don't code anymore. So there's still a learning curve here. We're still going through that. But I do think that there's opportunities for us to enhance across all of the various functions in the company. From an external-facing perspective, as I mentioned, on the technology front, we're going to start with our AI assistant. I actually think times are changing. Everyone has been so focused on the billing relationship. I think going forward, it's really the conversational layer that's going to really drive value for consumers and for companies. And our job really is to try and to compress the entire journey from discovery to purchase. And that means that there will be some level of graphic UI deconstruction where I think we're going to really start to experiment as we've done historically with 4K and MultiView and other capabilities that we brought to the forefront, which I think the industry has benefited from. So we're looking forward to implementing some of these features in the short term before the fall to start testing and looking forward to talking about these in the future. Operator: We have no further questions. This will conclude today's conference call. Thank you for your participation. You may now disconnect.
Operator: Hello, everyone. Thank you for joining us, and welcome to Millrose Properties First Quarter 2026 Earnings Call. [Operator Instructions] I would now like to hand the conference over to Jesse Ross, Millrose's Head of Financial Planning and Analysis. Jesse, please go ahead. Jesse Ross: Good morning, and thank you for joining us to discuss Millrose Properties First Quarter 2026 Results. Joining me on the call today are Darren Richman, our Chief Executive Officer and President; Robert Nitkin, our Chief Operating Officer; Garett Rosenblum, our Chief Financial Officer; and Steven Hensley, our Senior Market Risk Analyst. Before we begin, I'd like to remind everyone that today's discussion may include forward-looking statements and references to non-GAAP financial measures. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. For a more complete discussion of these factors as well as reconciliations of non-GAAP measures, please refer to our earnings release and investor presentation, both of which are available on our Investor Relations website. With that, I'll turn the call over to Darren. Darren Richman: Thank you, Jesse, and good morning, everyone. Millrose delivered solid results in the first quarter of 2026, performing in line with our expectations and continuing to demonstrate the strength and durability of our platform. We deployed capital in a disciplined manner, expanded our relationships across the homebuilding ecosystem, and generated predictable recurring earnings consistent with the design of our model. Before I walk through the quarter, I want to share a broader observation. Over the past several weeks, we have had the benefit of listening to virtually every major public homebuilder report. The message was remarkably consistent, and it was also very relevant to what Millrose does. Builders today are navigating 4 competing priorities simultaneously. Maintaining sales pace through incentives and inventory management, protecting balance sheets amid meaningful margin compression, preserving, and in many cases, growing their land pipeline and community count, and restricting direct land ownership when visibility is limited. Those 4 objectives are fundamentally intention with one another. You cannot grow community count while also shrinking your balance sheet unless you have a partner like Millrose. It is important to understand the time horizons embedded in these decisions. The homesite builders are taking down today may support closings this quarter or next, but the land acquisition and development commitments they are making right now are 3- to 5-year decisions about where they want communities producing in 2028 and 2029. Builders told the market very clearly this quarter that they will not sacrifice future community count even in an uncertain near-term environment. That long-duration commitment is exactly the duration of a Millrose option agreement, and it is why near-term demand variability does not translate into a pause in land investment activity. That tension is not a cyclical phenomenon. It reflects a permanent evolution in how this industry thinks about capital. Gross margins across the public builders have compressed 200 to 500 basis points year-on-year. When that happens, every point of return on equity matters more and owning land becomes more expensive in opportunity cost terms. Put simply, when builders are earning less on every home, the last thing they want is more capital tied up in the land that won't produce a closing for years, but they can't afford to lose those future communities either. That is the exact problem Millrose solves. Capital efficiency is no longer just a balance sheet preference, it is a profit center. That framing is important because it distinguishes what Millrose offers from simply providing financing. Demand from the homebuilders for land acquisition and development funding remains steady. Our platform continues to expand, and our model is working exactly as intended. Our model continues to generate predictable recurring cash flows supported by strong capital recycling dynamics and a stable earnings profile that is independent of land price appreciation or market timing. During the quarter, invested capital increased to approximately $8.7 billion, up from $8.5 billion at year-end, of which 95% is pooled, reflecting continued discipline in deployment. That growth is reflected in our expanding relationships across the homebuilding ecosystem. We ended the quarter with 17 counterparties, up from 15 at year-end, with approximately 31% of our portfolio deployed outside of the Lennar master program agreement. This continued diversification is a key indicator of both demand for our platform, and our ability to scale beyond our foundational anchor relationship. AFFO for the quarter was $125.9 million, an increase from last quarter despite the first quarter 2 fewer calendar days, 90 days versus 92 days in the fourth quarter. On a per day basis, AFFO was 2.5% higher versus last quarter. Our income is contractual, recurring and not dependent on land price appreciation, home prices or the pace of home sales. Despite a dynamic macro environment, we have seen no changes in our counterparty behavior, no terminations and continued engagement from builders seeking to optimize their balance sheets through our platform. As we move through the spring selling season, early indicators remain constructive. Builders are described as choppy through the first quarter, generally solid in January and February with some moderation in March tied to rate volatility and geopolitical uncertainty. What we are seeing from our counterparties is the continued discipline, pulling back on starts where appropriate, prioritizing returns and leaning into partners like Millrose to maintain community growth without adding balance sheet risk. That is exactly the behavior our model is designed to support. Steven will provide more detail on what we are seeing across markets momentarily. During the quarter, we further strengthened our capital base. We amended and restated our credit agreement, converting it from a secured structure to an unsecured facility, and adding a new $500 million delayed draw term loan commitment, bringing our total unsecured capacity to approximately $1.8 billion. This reflects the confidence our partners have in the durability of our platform and positions us to deploy capital with greater speed and flexibility as our pipeline continues to build. As a publicly traded company with $1.5 billion of quarter end liquidity, and a fully unsecured investment-grade caliber capital structure, Millrose offers counterparties a degree of capital certainty and transparency that private land banking alternatives are structurally unable to replicate. Operationally, we continue to execute at a high level. Our technology and operating infrastructure enable efficient capital deployment and portfolio management, while ongoing capital recycling supports reinvestment across a growing opportunity set. We are continuing to deepen our reputation as the most operationally mature and efficient strategic capital partner to homebuilders, enabling their growth with confidence while improving their capital efficiency. Finally, we remain committed to delivering consistent and durable returns to our shareholders. We declared a quarterly dividend of $0.76 per share, fully covered by AFFO of $0.76 per share, representing an annualized dividend yield of 8.7% on book equity, up approximately 30 basis points from the prior quarter. The full coverage of our dividend by AFFO reflects the predictable recurring cash flow characteristics of our platform and our confidence in the sustainability of these returns. With that, I'll turn the call over to Rob for an operational update. Robert Nitkin: Thank you, Darren. Our platform has continued to perform well at scale, executing consistently across deployment, portfolio management and capital recycling. We continue to deploy capital selectively in high-quality opportunities, maintaining disciplined underwriting standards while deepening both existing and new builder relationships. During the quarter, we grew our total home sites under management to approximately 143,000 across 904 communities in 30 states, serving 17 distinct counterparties. We added 2 new counterparties in the period, including a newly added top 10 publicly traded national homebuilder counterparty, further evidence of the continued institutional adoption of our platform and the ongoing industry-wide demand for capital-efficient homesite solutions. Darren described the competing priorities facing builders today. Increasingly, the decision to work with Millrose is being led by the CEO and CFO's office, not just the land acquisition team. When margins are compressed and return on equity is under scrutiny, the leadership of these organizations becomes the primary advocates for capital-efficient growth as they are the ones ultimately responsible for delivering on growth plans and shareholder returns. Our value proposition, lower capital intensity, improved inventory turns, liquidity preservation and higher return on equity speak directly to the metrics that leadership is measured on. Our ability to deliver on this need as the leading scaled institutional provider is why our relationships tend to rapidly expand once they begin. Across the industry, builders are telling the markets they intend to grow community counts while simultaneously exercising discipline on capital allocation. Millrose is the bridge between land spend discipline and community growth. We enable builders to open new communities, maintain consistent subcontractor relationships and serve buyer demand without the balance sheet drag of owning land outright. That positioning is precisely what our counterparties are executing on today, and it's reflected in the growth we've seen. As Darren noted, these are not quarter-to-quarter decisions. A builder acquiring land today is making a commitment about where it wants to be selling homes 3 to 5 years from now. The development time line from raw land through entitlement, horizontal development, vertical construction means that pausing land investment today creates a community count gap years into the future. Builders understand that from hard experience in prior cycles, and it's why we continue to see robust engagement with our pipeline even in quarters where near-term demand signals are mixed. The duration of their business plans align precisely with the duration of our option agreements, which makes our platform the natural structural solution for builders who want growth without ownership. Crucial to our scalability is the infrastructure we've built around execution. The technology and processes underpinning our platform allow us to underwrite based on real-time market data, effectuate lot selection and deed transfers required for home site takedowns and monitor project level performance in real time to manage risk proactively as market conditions evolve. This operational discipline, combined with our experienced team is critical to maintaining predictability and protecting downside while continuing to grow. One point that may be counterintuitive, we believe the current environment is actually widening our competitive moat. In a more challenging market, the requirements to operate effectively as a land banking partner increase, not decrease. Builders need sophisticated counterparties who could underwrite with precision, not just provide capital. Effective land acquisition, like all real estate requires certainty of execution, not contingent offers. Scale matters because diversification across geographies and counterparties is what protects the portfolio through uneven market conditions. Underwriting discipline matters and the software and workflow complexity of managing nearly 144,000 homesites across 904 communities in real time is a barrier that cannot be replicated quickly or cheaply. Our proprietary lot pricing data set but transaction by transaction across 30 states has become a genuine competitive advantage in underwriting, compounds with every deal we evaluate, giving us a quantitative real-time lens into market lot pricing that few market participants can match. When we pass on a deal, we don't just say no. We give our builder partners data-driven feedback on how their proposed pricing compares to our average comps on an anonymized basis. Builders see real value in these insights, and it deepens the relationships regardless of whether that particular transaction closes. Newer entrants to land banking are more challenged in exactly this kind of environment. For Millrose, it's where the value of our platform, our team and our track record compounds most visibly. The growth we are seeing reflects both expanding wallet share with existing partners and new relationship formation. The embedded nature of our platform within builders' operating models is what drives that wallet share expansion and what makes these relationships durable over time. Turning to portfolio composition. We continue to see a clear evolution in both mix and earnings power. Our Lennar master program agreement remains the stable foundation of the business, representing approximately 69% of invested capital. The remaining 31% are other agreements represents the primary growth driver for the platform. These investments are higher yielding and diversified across counterparties and geographies, currently generating weighted average yields of approximately 10.7%, against an average cost of debt at Millrose of roughly 6%, a spread that drives directly accretive AFFO growth with every incremental dollar deployed. As we've discussed, the option rates on these agreements are typically floating rates subject to a fixed rate floor. The weighted average yield on the segment of this portfolio declined approximately 30 basis points quarter-over-quarter, directly correlated with a similar decline in SOFR base rates with option rate spreads over that base rate remaining unchanged. Importantly, the impact of lower base rates on option yields was largely offset by a corresponding reduction in interest rate on Millrose's floating rate credit facility, a natural hedge that is a deliberate feature of our capital structure. I also want to highlight the development that occurred shortly after quarter end. It speaks directly to the quality of our underwriting. In early April, we received a full payoff of approximately $284 million on a development loan cross-collateralized by multiple Florida communities, principal accrued interest and fees paid in full. Florida has received attention in recent months given pockets of new home oversupply in certain submarkets. This realization, however, is a reminder that market level headlines often obscure significant dispersion of the submarket and asset level. Specific location selection and rigorous collateral underwriting are what matter, and this result reflects both. As we look ahead, our focus remains unchanged. Disciplined deployment, strong portfolio oversight and deepening relationships with high-quality builders. Our pipeline is deep, diversified and increasingly driven by repeat engagement from existing partners alongside continued inbound interest from builders seeking to adopt off-balance sheet land strategies to support their growth. The environment reinforces the value of our model, and we believe we remain well positioned to deliver consistent outcomes for both our builder partners and our shareholders. With that, I'll turn it over to Steven to walk through what we're seeing across our markets and why we remain constructive given the macro outlook. Steven Hensley: Thanks, Rob. The macro environment has introduced some near-term variability since the start of the year, mainly higher interest rates and weakened consumer confidence. None of this changes the long-term backdrop of the industry, and we believe it is important to stay grounded in the fundamentals. Since our last call, we have had the benefit of hearing from virtually every major public homebuilder through their most recent quarterly earnings reports. That commentary provides valuable context for understanding the operating environment and why the strategic need for homesite auction solutions continues to grow. Let me walk you through the key themes. The overarching message from the industry is straightforward. As builders seek to preserve margins while sustaining growth, demand for capital-light lot access is increasing. That single sentence captures the environment we are operating in. Let me unpack the specific dynamics behind it. The macro backdrop remains challenging but manageable. Affordability is a central theme across the industry, but several builders also flag potential inflationary pressures from tariffs and rising energy costs, as well as geopolitical uncertainty tied to the Middle East as factors that have dampened consumer sentiment. These are near-term headwinds, but none of them change the structural undersupply of housing in this country. Incentive levels are elevated but showing signs of stabilization. Across the public builders, rate buydowns remain the dominant incentive tool, though several management teams reported sequential declines in incentive levels on new orders. For Millrose, elevated incentives are relevant in context but do not affect our contractual income. Our option payments are owed regardless of incentive levels or home pricing dynamics. Builders are pivoting decisively toward build-to-order and actively reducing spec inventory. This was a near universal theme across the earnings season. Several builders reported meaningful reductions in finished inventory levels. Builders are also targeting meaningfully higher build-to-order sales. This pivot is significant for Millrose because it signals that builders are taking a disciplined, long-duration approach to their community life cycles, exactly the posture that supports steady, predictable homesite takedowns from our platform. Builders who are building to order still need entitled development-ready homesites, they just don't want to own the land while they wait for the buyer. Construction costs are anecdotally declining and cycle times are generally near or below pre-pandemic levels. Several builders reported direct construction costs declining year-over-year and cycle times improving by a month or more compared to the prior year. These efficiencies are a tailwind for the builders and reinforce operational discipline that supports healthy takedown activity in our communities. Community count growth is a near universal priority and a direct demand driver for Millrose. Across the builders we track, community count growth targets range from 3% to as high as 25% year-over-year. Several builders are planning to open more than 80 to 125 new communities this year. Every new community requires entitled development-ready homesites. When homebuilders are simultaneously growing their community count and telling the market they want to reduce land ownership, we believe that math flows directly to platforms like ours. Demand is choppy, but not collapsing with clear segmentation by buyer profile. Net order trends were generally positive across the group [indiscernible] digits to nearly 30% year-over-year growth depending on the builder. The cadence within the quarter was instructive. January and February were generally solid with some moderation in March tied to the rate volatility and geopolitical concerns. Move-up and active adult buyers are proving meaningfully more resilient than first-time buyers. Now turning to our proprietary MSA monitoring system. The geographic signals are consistent with what builders are reporting. The Carolinas, much of the broader Southeast and several of the Midwest markets continue to show relative strength, all are aided by stable job growth, low inventory and comparative affordability. We are also encouraged by the signals we are picking up across most Florida markets. The supply-demand equation has improved meaningfully from a year ago in almost every market across the state. Multiple public builders reinforced this recently by reporting strong order growth in the state. The full payoff of our Florida development loan that Rob described is another data point reinforcing that well-located Florida assets continue to perform. Conversely, Texas continues to be somewhat challenged by high inventory levels. We expect that normalization to remain a 2026 story and our underwriting continues to reflect that patience. We are being appropriately selective in our Texas deployments while maintaining confidence in the long-term fundamentals of those markets. Overall, the current environment reinforces the strategic need for homesite option solutions. Builders are not pulling back from land. They are rethinking how they access it. The shift toward asset-light models, off-balance sheet structures and build-to-order strategies all increase the relevance and utility of what Millrose provides. The geographic diversity of our portfolio, spanning 30 states and 904 communities, and partnerships with strong operators means we are not dependent on any single market's performance. To wrap up, the long-term fundamentals of this industry are intact. The demographic tailwinds and housing shortage that underpin demand have not changed, and we remain well positioned to serve our builder partners through any market environment. With that, I'll hand the call over to Garett to walk through our financial performance. Garett Rosenblum: Thank you, Steven, and good morning, everyone. As Darren noted, our first quarter results were consistent with our expectations and demonstrate the cash-generating power of our business model and the direct translation of capital deployment into shareholder returns. For the first quarter, we reported net income of $122.9 million, or $0.74 per share, driven by $185 million in option fees and approximately $10 million in development loan income. As Darren noted, the quarter comprised 90 days versus 92 in the fourth quarter. In a spread business at our scale, that difference creates a modest reduction in option fee income with no bearing on the underlying earnings trajectory. First quarter adjusted funds from operations came in at $125.9 million, or $0.76 per share. AFFO offers the clearest view into the recurring distributable earnings power of our business, with every dollar we deploy into other agreements at current yields directly driving accretive AFFO growth. Our ability to sustain and expand that spread while maintaining discipline on credit and structure is the core engine of our earnings trajectory. There is no change to our previously issued guidance. Book value per share at the end of the quarter stood at $35.26. Our management fee expense was $28.2 million, calculated transparently at 1.25% of gross tangible assets. Interest expense was $39.2 million and income tax expense was $5 million. On March 23, 2026, we declared a quarterly dividend of $126.2 million, or $0.76 per share, reflecting the direct linkage between our growing invested capital base, earnings generation and our capacity to distribute to shareholders. Turning to the balance sheet. We ended the quarter with total assets of approximately $9.6 billion and invested capital of $8.7 billion. Our debt-to-capitalization ratio stood at approximately 29% inside our stated maximum of 33%. This intentional headroom provides meaningful capacity to fund the next phase of growth without compromising the conservative financial posture that underpins our platform. We ended the quarter with approximately $425 million drawn on our revolving credit facility and approximately $49 million of cash on hand, providing ample liquidity of $1.5 billion to fund our near-term pipeline. During the quarter, we completed a significant upgrade to our capital structure, converting our credit facility from a secured to an unsecured structure and expanded our total capacity, including a $500 million delayed draw term loan commitment. This enhances our financial flexibility, aligns our funding structure more closely with our asset base and positions us to deploy capital efficiently as our pipeline continues to build. With that, I'll turn the call back to Darren. Darren Richman: Thanks, Garrett. I'll leave you with a few closing thoughts before we open the line. Our business is built around contractual recurring income, disciplined capital deployment and a long-duration relationships with high-quality homebuilders. Those fundamentals were evident again this quarter, and they continue to differentiate Millrose in a dynamic market environment. What this earnings season made clear, across builder after builder is that the industry shift towards a capital efficiency is not a cyclical response to a soft patch. It is a permanent evolution in how the industry operates. Builders are telling the market in their own words that they intend to own less land, control more through options and grow community counts through partnerships rather than through their own balance sheets. That secular trend is the single most important demand driver for Millrose, and it is accelerating. As Rob described, we believe that this environment is widening our competitive moat, not narrowing it. The complexity of what we do, the scale at which we do it and the trust we have earned with our 17 counterparties in 30 states are advantages that compound over time and are difficult to replicate, particularly in a more demanding environment. We are operating with strong visibility into our cash flows and expanding and diversified builder base and enhanced balance sheet flexibility to support future growth. The current environment where builders need to simultaneously protect margins, grow communities and exercise land discipline is one where we believe Millrose is not just a financing option, but a strategic necessity. We are focused on executing thoughtfully, scaling responsibly and delivering consistent and durable returns to our shareholders. Thank you for your continued support and interest in Millrose. We look forward to updating you on our progress next quarter. With that, operator, please open the line for questions. Operator: [Operator Instructions] Your first question comes from the line of Julien Blouin with Goldman Sachs. Julien Blouin: Just a question on yields in the quarter. I was wondering if there was any impact to yields from adding the large top 10 builder. Would the yields for a larger builder be any lower than some of your smaller relationships? Robert Nitkin: No, that wasn't an impact. In general, when you think about a newly added counterparty, we're going to be starting small and building on, sort of, the origination platform in itself that's created when you have a new counterparty. So it certainly wasn't just that builder. It was -- as we tried to lay out in the earnings slide, it was just the impact of SOFR base rates. So as we mentioned in the remarks, part of the genesis of this structure in our other agreements category is that our shareholders are not meant to be taking interest rate risk. Similarly, part of our value proposition to our customers and builders is that there is -- they themselves are not taking interest rate risk on their agreements. So what you're seeing in the yield impact is just simply the impact of the SOFR base rate. And similarly, in the spread business, we expect to get the benefit of that on our own liabilities. Julien Blouin: Got it. And maybe taking a step back, I mean, it sounds like the demand for your capital and your solution continues to be strong. But I guess what do your partners make of the fact that soon they won't be able to expand their relationships with you if you end up, sort of, being capital constrained? And are there any other options you're considering for access to capital to extend the runway here, things like JV capital, or I don't know if there are other things that you're considering? Darren Richman: Yes, Julien, it's Darren. We haven't yet turned our attention to alternative financing securities structures. For now, we have enough in our revolver and through just the recycling nature of our balance sheet. When we -- as you would imagine, we spend a lot of time thinking though, about what could next steps be. We are hopeful that we will trade at a level where we'll unlock the equity markets as a financing vehicle. But we're not going to walk away from business, and we're certainly not going to walk away from our existing clients, and our new and growing relationships. So we'll have more to say in the coming months and quarters about that. But for right now, we're going to stay the course and continue to just leverage our revolver, our debt capital until -- unless and until the equity markets become accommodating. So we'll just stay the course for now. Operator: Your next question comes from the line of Eric Wolfe with Citi. Eric Wolfe: You've mentioned in the past that there's a floor on all your option rate agreements, and you were close to that floor on average, I think. Can you just help us think through sort of how close you are to that floor? Just trying to understand if SOFR continues to drop, what would the sort of floor be on your average option rate? Robert Nitkin: Yes. The average floor is similar to what it's been in past quarters, which is approximately 10%. So there's still a bit of a buffer there, but it does provide a good base as we approach it. Eric Wolfe: And I think you mentioned matching liabilities to assets. I think right now, $400 million of your debt is floating today, correct me if I'm wrong, but around that. I guess as we look towards the next, call it, $1 billion or so of deployment, I guess, do you think that, that, sort of -- floating rate debt will, sort of, approach your floating rate exposure on the asset side? Just trying to think through how the floating rate debt might grow from here. Robert Nitkin: Yes. As we talked about actually in last quarter's call, we do plan to use floating rate debt for this reason going forward. And the way to think about it is that we could use our existing credit facility, which is now larger with the additional $500 million term loan. Or if any other debt security becomes available to us that we think the rate on our credit facility is representative of with a similar tenor, we could take advantage of that also provided if it's as accretive or more accretive. But we do plan to continue use of floating rate debt as we've talked about in the last couple of calls. Eric Wolfe: And just last question for me. There's obviously quite a bit of differences on Washington about sort of SFR bill. I guess could take a long time to figure out sort of the rules there. I guess, are you thinking about that business differently? Are any of your partners thinking about that business differently? Have you seen, sort of, less desire to move forward with projects that hadn't been started yet? Can you just give us a sense of, sort of, how you're thinking about it given the uncertainty around potential regulation there? Darren Richman: Yes. This is Darren. I mean it's a hard area to wait into trying to forecast what's going to happen in D.C. What I will comment on is we've seen no change in behavior in our existing portfolio. We've definitely seen changes prospectively in behavior in terms of -- capital has definitely been cooled from entering the market to finance, build-to-rent and/or buying for-sale homes and turning them into rental product. That's more on a go-forward basis. The builders continue to do a really good job of, kind of, reorienting their own businesses, slowing starts, dealing with inventory that they have on hand. So like the fundamental picture continues to brighten if you kind of step back a little bit. So they're handling it as well as they can. They may overcorrect with bringing less land ultimately into production, because some of that land and some of those homes were going to go into a build-to-rent structure at some point in the future. But for right now, we've seen no change in behavior as it relates to our existing portfolio, but we do suspect that prospective -- like already prospectively, the builders are kind of recalibrating their production to not have that demand in the future. Operator: [Operator Instructions] Your next question comes from the line of Craig Kucera with Lucid Capital Markets. Craig Kucera: I think you answered this question about the new top 10 builder that became part of the fold. But is it fair to assume that most of the third-party investment growth this quarter came from existing counterparties and that we might see more of a ramp-up from those news that were added this quarter? Robert Nitkin: Yes. Craig, it's Rob. Thank you for the question. That is fair to assume. The nature of this business is that each relationship starts small, but builds on itself, and builds on itself quickly. And the ramp-up that we've seen this quarter and really over the past few quarters really speaks to having already secured a beachhead, becoming operationally integrated with the land finance team, gain trust with the C-suite, the wallet share just grows within each counterparty. And so each relationship builds on itself. So in any given quarter, including this quarter, the growth you're seeing exactly like you just suggested is existing relationships continuing to, not just move towards capital-efficient asset-light community count growth, like we spoke about in the remarks, but also generally, we believe, moving more of the land banking wallet to the largest institutional operator, which we believe is us. Darren Richman: Yes. I mean -- and I'd add to that to say that each relationship is its own sourcing mechanism, its own sourcing platform. So once we have a relationship, it becomes a beachhead into growing with that counterpart. The other point I'd make, and I'm going to use this as an opportunity to go back to something that I think Julien was pulsing on. And that is, does the decline in our yield have anything to do with the new relationship. It's -- let me address that by saying that our rates are holding steady where they are. So we haven't seen any noticeable change as it relates to the rate at which we're able to put money out at the window, and no new relationship is really going to degrade that ability for us to put money to work at the same sort of spreads that we've historically been doing it at. Craig Kucera: Okay. Great. And changing gears, I appreciate the color on the loan repayment in April, supported by the Florida communities. I think that was the majority of your loans outstanding. Does the guidance include any new development loan originations, which I think yield a little bit higher than the land acquisition? Or is that primarily land acquisition funding? Robert Nitkin: I would expect development loan yield to on average yield similar to the option agreements. And all of our guidance is inclusive of that development loan item, which again is a similar risk, similar form of exposure to homebuilders just through a slightly different avenue to get exposure to builders who choose to take their finished lots from developers and providing financing to that avenue. So it is inclusive. And while we're certainly pleased with that repayment, any investment manager is certainly going to be happy to see realizations and repayments in the underwriting proving out, there has been just as much, if not more demand for other similar investments, not just growth in option agreements, but more development lending also. So we certainly feel good about our guidance. Craig Kucera: Okay. Great. And just stepping back, I mean, given the continued margin compression in the industry this year. Are you hearing any increased chatter regarding M&A that Millrose might be able to participate in? Darren Richman: We -- there's always M&A out there, especially in times like this where there's been a retrenchment in valuations and there's been a compression in margins. This is a scale business. So there are always discussions that are going on. We are definitely aware of certain discussions that are happening. And we're in a fortunate position to now be a tool in the tool belt for M&A in the sector. So it's hard to predict when a deal will be announced or consummated, but we are definitely in the middle of conversations that are occurring. Operator: There are no further questions at this time. I would now like to turn the call back over to Darren Richmond, CEO and President, for closing remarks. Please go ahead. Darren Richman: Yes. Thank you to everybody for joining us today. We tried to give a little bit more of an expansive overview of what we were seeing in the industry. There are a lot of cross currents that we all are reading about, whether it's D.C. or it's from the builders themselves. We're always available to answer questions on a one-off basis, and we appreciate you joining us today. So thank you. Operator: This concludes today's call. Thank you all for attending. You may now disconnect.
Operator: Greetings, and welcome to the Celanese Q1 2026 Earnings Call and Webcast. [Operator Instructions] Please note that this conference is being recorded. I will now turn the conference over to Bill Cunningham. Thank you, Bill. You may begin. William Cunningham: Thank Daryl. Welcome to the Southern East Corporation First Quarter 2026 Earnings Conference Call. My name is Bill Cunningham, Vice President of Investor Relations. With me today on the call are Scott Richardson, President and Chief Executive Officer; and Chuck Kyrish, Chief Financial Officer. Celanese distributed its first quarter earnings release via Business Wire and posted prepared comments as well as a presentation on our Investor Relations website yesterday afternoon. As a reminder, we'll discuss non-GAAP financial measures today. You can find definitions of these measures as well as reconciliations to the comparable GAAP measures on our website. Today's presentation will also include forward-looking statements. Please review the cautionary language regarding forward-looking statements, which can be found at the end of both the press release and the prepared comments. Form 8-K reports containing all of these materials have also been submitted to the SEC. With that, Daryl, let's go ahead and open it up for questions. Operator: [Operator Instructions] Our first questions come from the line of Ghansham Panjabi with Baird. Ghansham Panjabi: I guess, first off, based on your first quarter operating results, it seems like your major end markets are basically weak apart from some order pattern distortions specific to prebuys, et cetera. As it relates to your guidance for the back half of the year, are you basically assuming that the operating environment reverts back to what you were seeing prewar? And I guess I'm referring specifically to the $3 per share in EPS you're guiding towards for the back half of the year. Scott Richardson: Yes. Thanks for the question, Ghansham. I think we've been pretty consistent with where our focus is. And it really remains on cash generation while we position our businesses for long-term success. And that's because we're in a world where demand continues to be low at an end use level. And certainly, with some of the supply chain disruption, that we're seeing here in the second quarter, we're going to go capture that. But we are really building something that we believe is very resilient as we go forward. So as we look to the second half, we ran a lot of different scenarios. And as we look at the scenario, we do believe the right one to assume in the second half is one where supply chains start to unwind here by the end of the quarter here in Q2, and you see that kind of moderate on where volumes and margins are in the second half. And we just believe that's the right assumption at this point. Ghansham Panjabi: And then as it relates to some of the network moves you've made in terms of ramping up capacity in certain cases in Frankfurt, et cetera, VAM, VAE and so on and so forth. What happens in the scenario that demand normalizes, would you adjust accordingly given that you're ramping up this capacity again, obviously, based on search demand, et cetera? Scott Richardson: Yes. The words we use internally, Ghansham, are being positioned to respond. And that's not just here in Q2. This is how we operate every single day. And we've run Frankfurt, we've run Singapore as swing units, but we also swing our operating rates in the acetyl chain as needed. We pivot our supply chain in Engineered Materials as customer demand shifts and changes. And so we're going to continue to position the company and the day-to-day business where it needs to be to respond. And so if demand continues to stay where it is, we've got the assets running where they are. Demand changes, then we'll pivot as needed. Operator: Our next question has come from the line of Patrick Cunningham with Citi. Patrick Cunningham: Your U.S. production at Clear Lake has a pretty significant advantage. I guess how have operating rates trended in the first quarter? And how are they progressing into 2Q and I'm just curious if there are any limiting factors to maximizing those rates or any logistics bottlenecks you foresee across the complex. Scott Richardson: Yes. Thanks, Patrick. It really is about reliability of supply for our customers. And Clear Lake is a great asset that can flex really across the products that we make there. And then we've got downstream assets positioned around the world that can also flex. And as I just mentioned on the previous question, Frankfurt is one of those assets that we block operated in a way that can flex as needed. And we're going to continue to adjust those rates as needed, as you can imagine, just given where some of the supply chain challenges have been this quarter, Clear Lake is running at a relatively high utilization rate. Patrick Cunningham: Got it. And then just on EM. Can you talk a little bit about the playbook in sort of response or in context of the crisis in terms of pricing, share gain opportunities how is the Nylon 66 market performed? And any meaningful change in supply or trade flow dynamics at this point? Scott Richardson: Yes. Look, how we look at our EM business, these are the right products at the right time to drive growth in a world that is challenged for growth. And we do that by ensuring that we've got the right segment focus and then kind of drill down below that into a subsegment focus. And we are extremely well positioned with the asset base from a compounding standpoint, which is where we create the most value in that last step of the process, our assets are extremely well positioned in each region. And so we are able to move polymer or buy polymer in each region to be able to adjust as certain products may have scarcity because of supply chain challenges, or be able to adjust pricing to deal with rising feedstock costs. And it does tend to take a quarter or 2 for those feedstocks to really fully flow through in the Engineered Materials business. And so it was important that we work to try to get ahead of that from a pricing standpoint now. Operator: Our next question is come from the line of Jeff Zekauskas with JPMorgan. Jeffrey Zekauskas: Can you talk about prospects for [ benzene ] and how that will affect your Engineered Materials EBIT or EBITDA or equity income? Scott Richardson: Yes. Thanks, Jeff. When you look at benzene, in 2025, they actually had a fairly large turnaround. So earnings were a little bit lower last year. And so right now, as we estimate earnings 2026 versus 2025, we're assuming pretty much flattish, Jeff, on what rolls through equity earnings right now. Now the plant -- most of the assets there have not been operating for the last 6 weeks or so because of shipping constraints as well as a raw material feedstock disruption. And so you'll have to see kind of where that goes here into the second half, but given the fact that we are on a 1-quarter lag, there. And the fact that 2025 was a pretty low number, we're right now assuming flattish. Jeffrey Zekauskas: Okay. Great. And then in the acetyl chain, in the second quarter, you're going to make maybe a little less than $200 million more. Can you analyze that in terms of -- is it more acetic acid? Is it more VAM? Is it more China? Is it more U.S. exports? Can you give us an idea of how that improvement in the acetyl chain flows? Scott Richardson: Yes. So I would say it's not really dissimilar to kind of fundamentally how the business operates in most quarters. The majority of the profit, as we've said in the past, comes from the Western Hemisphere. And I think the lift here from Q1 to Q2 is definitely weighted heavier towards the Western Hemisphere as well. And it's that low-cost advantage that we have in our asset base in Clear Lake and being able to utilize that across the Western world. We have seen margins move up in Asia as well. I would say from a product standpoint, Jeff, very much disproportionate to the vinyls chain. So think VAM downstream into vinyl emulsions and then redispersable powder. So again, not dissimilar to how we've talked about the business to being a lot of the profitability coming less from selling acetic acid as acetic acid, but really monetizing downstream and then seeing pockets of growth opportunity. We've talked over the last year or so about the importance of vinyl emulsions as well as powder is kind of being a very small pocket of growth in certain parts of the world, and we're definitely seeing that right now. And vinyls chemistry has a nice advantage in a higher oil environment over competing systems. And so we're seeing and working with customers on growth opportunities to drive some switching as well. And so that's really where that focus is much more downstream in the product portfolio. Operator: Our next questions come from the line of Vincent Andrews with Morgan Stanley. Vincent Andrews: I wanted to ask on the second half in EM. There's some comments in the prepared remarks about what you're doing on the nylon side of the equation that you expect some inventory drawdowns and some structural inventory reductions that were already underway. So is that coming on the customer side of the equation? And you think that's going to accelerate because you're going to be reducing capacity? If you could just color on some of those lines for us, that would be helpful. Chuck Kyrish: Yes. Vincent, yes, in the second half, in Engineered Materials, we would expect an additional $50 million of absorption hit on the income statement. That is from drawing that nylon from the transition. But we've had, as you know, some other structural inventory production actions underway, right? So yes, I would say, even with all that, we are targeting to grow at the end of the year, which will more than offset these -- so absorption hits over the year, which is about $35 million, the turnaround expense, which is about $15 million here coming in Q2. Potential raw material cost pressures that Scott talked about or even demand pull back and also offsetting the Micromax earnings, right? So at the same time, I think it's important to remember, we're also fortifying the base in EM, reducing costs, reducing complexity, taking this inventory permanently out of the system. So it's really been in the plan and in place for some time. Vincent Andrews: Okay. And if I could just follow up on the Acetyl Chain. I didn't -- I don't think I saw this in prepared remarks. Does the second half assume that you're still running Frankfurt for the full second half? Or does it assume some reduction in operations there? Scott Richardson: Vincent, there's different scenarios that could potentially play out. And so we are assuming that Frankfurt is going to operate into the second half at this point. We do have some turnaround activity in two of our VAM units around the world. We've got both the U.S. VAM units in turnaround between now and the end of the year. And so just depending on where demand is at, we'll determine what that Frankfurt operating rate schedule will look like. And -- but certainly, the expectation is that it's going to operate into the second half. Operator: Our next questions come from the line of Michael Sison with Wells Fargo. Michael Sison: Nice start to the year. In terms of the second half, just curious, if nothing really changes in terms of the conflict here, does the run rate in 2Q for EPS kind of mirror third quarter, meaning does third quarter look like second quarter and then you sort of have a bigger drop in the fourth to get to your $3? Or is it -- are you assuming things get better and we're kind of $1.50, $1.50?. Scott Richardson: Yes. Let me hit kind of a high level there, Mike. And then I'll turn it to Chuck to talk about kind of the cadence. As we look at the second half guide, it was really kind of looking at a scenario where we start to see some of the unwinding of the supply chains here by the end of Q2 and then kind of continuing into the third quarter and then into the fourth quarter. Your question is, if we see things kind of stay where they are, I would look at how we think about our business. I mentioned that position to respond earlier. It's kind of like a coiled spring. And if the opportunity is there, then we're going to release that spring. And so if things stay where they are from a demand and a supply chain standpoint, then there's certainly upside in the second half. Chuck Kyrish: Yes, Mike, based on the guide, there's a lot of moving parts and a lot of uncertainty. But I think probably the easiest way to think about it right now is if you look at normal seasonality in any given year, Q3 versus Q4, it's about $25 million, $30 million in each business. I think for now, that's a pretty good place to start. I wouldn't be surprised to see a similar pattern this year. Michael Sison: Got it. And then just a follow-up on Clear Lake. I recall Clear Lake II was running full out or running pretty high. Is Clear Lake I now sort of ramped fully up to sort of take advantage of the higher pricing and such? And then where are industry margins now relative to the past peaks? Scott Richardson: Yes, Mike, let me answer your last question first. Certainly, we are nowhere near kind of what would be past peak demand levels globally or mid-cycle demand levels globally. And so I would not necessarily compare that to past periods from a margin or a volume perspective. And in terms of your first question, I would go back to the answer to Jeff's question is the majority of the opportunities that we're seeing are more downstream for acetic acid in the vinyls chain. And so as we look at Clear Lake operating rates, we've got both of those assets that we have there kind of dialed in at the right level to get the optimal usage, et cetera, and efficiency that we want from both assets and being able to pivot up or down as needed. So really, it's more of a downstream opportunity that we're seeing as opposed to fundamental acetic acid demand. Operator: Our next questions come from the line of David Begleiter with Deutsche Bank. David Begleiter: Scott, some of your peers have talked about 9 to 12 months until supply chains normalize post the end of the conflict. It looks like you're targeting maybe a shorter time line to normalization acetyls. Can you talk to that time line you're looking at? Scott Richardson: Yes. Thanks, David. Look, it's about scenario planning, and there's a lot of different scenarios that could play out. And as you kind of look at the assumptions that we've made here that we start to things begin to unwind and that begin of that unwinding. It just -- it depends on what that kind of decline curve looks like in terms of volume and price based upon the speed of that unwinding. And I think that is uncertain right now. But we felt like it was important to be prudent in terms of how things could play out because there's also a potential offset to demand with feedstock prices high and where they are, there could be an impact to underlying demand. And so we kind of put all those things out there. And again, felt like it was the prudent guide for the second half. But also, as I said earlier, look, we are ready. And our team has done a great job of responding to the environment here in the second quarter. And if we see that environment continue, then we'll go capture that upside. David Begleiter: Very good. And just on EM, you've announced some price increases. So what's the cadence of price cost as we go through Q2? Are you ahead behind or neutral? And how is it go into the back half of the year? Scott Richardson: Yes, we're starting to get some of that price flowing through as it is kind of a slow uptick here in the second quarter, but it's important that we really begin to achieve that because the cost, while flowing through a little bit here in Q2 is going to hit us heavier in Q3. And I think we should see that hopefully fully materialize in the P&L in the third quarter. And so it's important as we exit Q2 that we're achieving the maximum amount of that price. So we're certainly on the trajectory there. But the next 6 weeks here as we finish the quarter are going to be really important in that equation. Operator: Our next questions come from the line of Frank Mitsch with Fermium Research. Frank Mitsch: Terrific. And actually, David's question leads nicely into what I wanted to ask about, and that's on the acetyl side of things. I mean, as you look at the second quarter, my assumption, and please correct me and expand upon it is that you're raising price in the acetyls upstream and downstream. And the expectation would be that you're going to end the second quarter at a higher price level than what the 2Q average would be such that we're going to start 3Q at a higher level. I mean -- so a couple of questions. Is that how you're thinking about it as well? And based on your prudent guidance, are you factoring some measure of price degradation in the third quarter? Or how do you think about the price balance on acetyls and how we're going to enter the second half? Scott Richardson: Yes, Frank, I don't know on a global basis that, that necessarily is right assumption. We've already seen pricing in China start to moderate as from where it was in -- at the beginning of April. So actually, I don't think on a global basis, that's actually kind of the case of where things will be. I think we'll probably see that price in Asia, stay where it is or possibly moderate a little more as we work our way through the quarter. In the Western Hemisphere, where pricing is now is probably similar to where it will be at the end of the quarter, depending on where competitive dynamics are. So I actually think where we were in April was probably the higher watermark just as we look at the cadence today. Frank Mitsch: I understand what you're saying about China. My understanding is that some of that was also demand destruction. So they actually don't have -- you can't sell the products downstream at least here in the near term. But from -- in the Western world, would you assume that in North America, that you would give back something on price in the third quarter? Scott Richardson: I think it's TBD, Frank. I think volume, we've got a moderation of margins and price as you work your way through the third quarter. Just from a normal seasonality standpoint, Q2 tends to be the highest quarter from a volumetric perspective, typically in acetyl. So you would normally have some volume come off in Q3 from a seasonality perspective through the holiday period. And so we've kind of factored some of that into the assumptions for Q3. Operator: Our next questions come from the line of Hassan Ahmed with Alembic Global. Hassan Ahmed: Just wanted to sort of dig a little deeper about this sort of uneven sort of pricing dynamic regionally that you guys talked about within acetic. I mean my understanding is that as I take a look at the raw material side of things, just in the Middle East alone, there seems to be 26 million to 27 million tons of methanol capacity that is off-line, right? And obviously, methanol pricing across the globe has risen quite rapidly, including China, right? So I'm just trying to understand this recent dip that we've seen, particularly in Chinese spot acetic pricing. Where are the margins there? Are operating rates still relatively elevated? Just trying to sort of make sense of this uneven sort of pricing environment by region. Scott Richardson: Yes, Hassan, I think that's a good time to really call out the decisive actions that our team in acetyls has taken around the world in the quarter. They responded really quickly at the end of Q1 in order to take advantage of the margins started to move up there in China, in particular, and that's really the only place that we saw benefit from some of the supply chain disruption in Q1, but they were really working to position for the second quarter. And as we kind of look at it, your margins were highest probably here in Q2 in China at the very beginning of the quarter, and they've come off. But we're certainly not at margin levels where they were at the beginning of 2026. So you're kind of in between that -- where they were at the beginning of April and where they were when we started the year. And so it's somewhere in that zone. We did see -- China was in holiday last week, came back today. Pricing did move up a little bit. So we're going to have to kind of see where -- how that holds and where demand is. But demand has held relatively steady from what we can tell through the value chain in China. Hassan Ahmed: Very helpful, Scott. And as a follow-up, can you just give us an update on where you guys stand with regards to any further potential divestitures? Chuck Kyrish: Yes, Hassan. Yes, we continue to work that very aggressively. And I would say the current events haven't helped the M&A market. But regardless, we do feel good about signing another deal this year. It could be a smaller deal, but we're working hard to get one signed. We have not baked in any assumption for cash proceeds from a deal just from the uncertainty of kind of signing versus closing. Operator: Our next questions come from the line of Kevin McCarthy with Vertical Research Partners. Kevin McCarthy: Scott, can you speak to your mix of contract versus spot business within acetyls on a pre-war basis and speak to how that is evolving, if it's changing at all post war. For example, if we consider VAM and some of the parabolic price action there, is your philosophy to sort of strike while the iron is hot and take advantage of this windfall opportunity, you might say? Or is it to really focus on upgrading your contracts and the terms and the mix with an eye toward the medium to longer term or some balance of those? Maybe you can just kind of talk through that and how you're thinking about it.. Scott Richardson: Yes. Let me just kind of step back a minute, Kevin. Our team is first focused on being the most reliable supplier in each region, in each product. And I think we've developed a network pretty deliberately for over many, many years that can achieve this and give us flex to be able to respond to what happens and what kind of landscape changes happen. And so the pricing mechanisms that we have are different in each region, in each product, to be honest. We've got some formula pricing in certain regions, particularly VAM in the United States that we've talked about. It kind of moves with raw materials, gives us a nice base, gives us cost pass-through. We've got a lot more contracted business in Asia, but moves with how the market is moving very quickly. And then we've got blends in the balance of the business in the U.S. and in Europe on different mechanisms. And so this is about being ready in an environment like we are now. And so being able to flex with some extra volume gives us that ability to be that reliable supplier for customers and for new customers that are just coming to Celanese or just coming back to Celanese. And so it is about how do we get that business secured longer term. And we are securing business that we had -- didn't have under agreement for the second half. And so as that process works here in the second quarter, it will give us better clarity on what the third and fourth quarter are going to look like as we are able to utilize this flex capacity that we have. Kevin McCarthy: And then secondly, I wanted to ask about your new strategic initiatives in nylon that you announced last night in the U.S. and Singapore, I think you're targeting incremental cost savings of $30 million. So maybe you can step through what you're doing there and comment on the cash cost to achieve those savings? And the timing of the flow-through of the $30 million in coming quarters or years? Scott Richardson: Yes. Let me hit kind of the philosophy and the strategy around the changes, Kevin, and then I'll turn it to Chuck to talk about some of the details. When it comes to Nylon 66, we've been very open about this now for more than a year. And as we said in the past, our value is in the compounding step of the process. And that's not changing here. And in fact, we're enhancing our compounding capabilities in our specialty products where we need to, to ensure the reliability of supply to our customers. And we've had a very thoughtful step plan to ensure the short- and long-term sustainability of how we get polymer. And so being able to optimize this make versus buy on polymer is critically important. And so these announcements around polymer capacity for us is really the next big wave of that commitment to improving the fundamental profitability of the Nylon 66 business, and we believe these are the right news for us right now. I think as we go forward, we would expect about $30 million of savings. As you mentioned, about 1/3 of that will probably hit here in the second half of the year. And I'll turn it to Chuck to talk about the other details. Chuck Kyrish: Yes. Thanks, Kevin. Yes, like Scott said, about 1/3 of that $30 million starts rolling in this year. Your question on the cash costs, think about that as sort of less than a 1-year payback of that $30 million. That's been in our free cash flow forecast this year. So nothing incremental there. Operator: Our next questions come from the line of Laurence Alexander with Jefferies. Laurence Alexander: Just wanted to flesh out how you're thinking on working capital. How much you think in your base case, working capital will be a use of cash for this year? And as you think about this year and next year, is working capital just ebbing and flowing with your expectations around input costs? Or is there going to be some net drag on EBITDA at some point to work to reduce your working capital position? Chuck Kyrish: Yes. Thanks, Laurence. Let me talk about free cash flow this year and sort of talk about working capital within that. If you look at our midpoint of our earnings guide, that's about a few hundred million of EBITDA growth this year. That will translate into free cash flow, but it is likely that -- it will be split between '26 and '27 as it works its way through working capital. Right now to simplify, we're assuming we collect about half of that increased EBITDA this year and half next year. So that would mean about half of that gets tied up in working capital. I think before that, we were assuming this year actually that working capital would be a source of cash of, say, call it, $100 million as we continue to reduce inventory in EM. So maybe working capital in this scenario is closer to flat for the year. And then I think you kind of ebb and flow with demand, but we do expect to continue to take inventory out of the system and generate tailwinds in working capital. Operator: Our next questions come from the line of John McNulty with BMO. John McNulty: So on EM, with all of the work that you've been doing and I guess, some incremental work even this year, I guess, is there a way to think about -- maybe this year is not necessarily a normal year, I guess, is there a way to think about what you think the mid-cycle earnings power of the business is now just given all the changes that you're completing and also maybe a more normalized demand environment? Scott Richardson: Yes. Thanks, John. The words that we used in the prepared comments, I think, are important to think about here. It's really about growth and Fortify. And as we think about the Fortify piece, I mean that's -- we've been working that hard with the cost reduction actions that we've taken out, the efficiency that we've been able to drive, how we're adding technology to the business with our CAMIL platform, there is -- we are strengthening this business and positioning it to be able to ready to respond to customer needs. The other thing that the team has been working really hard on is kind of building a really deep segment approach focused on where we can win and where we can hold that business. So where we have a differentiated offering in growth subsegments in things like medical, electronics, data centers, some key growth industrial applications, high-performance athletic wear, there's just a lot of really great work the team has been doing in these high-growth areas. And so positioning well there, building the pipeline so that we can hit that growth piece going forward. And look, growth is always hard. Growth is even harder when the world around you isn't growing broadly, but there are pockets of growth here, and that's really where that focus is. And so it's hard to say what mid-cycle will look like. We do not believe we're anywhere near mid-cycle demand in kind of our historical key end uses as well as some of these emerging growth areas. So as we work that, as we continue to build out what we think the addressable market space is there, then we'll provide that color in the future. Operator: Our next questions come from the line of Matthew DeYoe with Bank of America. Matthew DeYoe: I think there's a desire amongst investors really sell side as well to just get a better handle on like what EM is now, given just the kind of asset aggregation and then closures and repolymerizations and closures. I get the core identity and thesis behind Fortify. But like at the end of the day, what is an achievable -- I don't know, I don't want to call it mid-cycle because it's not necessarily a pure commodity business. But what should the people or what should the market think about as like a reasonable expectation on profitability for this business under normal demand, normal kind of margin structure? Scott Richardson: Yes. Thanks, Matt. There's a lot to unpack there. What I would say is this is a business that is customer-focused with an eye towards building unique solutions. And it's a business that we've been working hard over the last 3.5 years to make sure that we're well positioned in the environment that we're now in globally with a lot of the competitive landscape that's changed to be able to win. And it's a business that has unique capabilities. It has unique products and it has a unique ability to be able to get polymer solutions to do just about anything. And we've got a great model that I think ensures that the things that we're working on are going to drive the profitability on our worth the time and effort that it takes to work these solutions. And so I think what we've been able to do now is take a business that was performing on an EBITDA basis in the low teens now to one that's now consistently performing north of 20%. And the idea is to keep moving that upward. Even if the world around us is not growing, we are focused on growth. And when you look at and kind of back into our assumptions for this year and you normalize out Micromax and the $40-or-so million of EBITDA that comes out of that, this is a business that's going to grow year-over-year, even though its end markets are not growing. And so I think that's the way to think about it. It's a business that should be able to grow like we did in the past, going back 5, 10 years ago at 5% to 10% minimum on the EBITDA line and a business that's consistently going to find a way to be able to deal with whatever the global environment is. And if we see a normalization of demand back to mid-cycle, and it's hard to say what that looks like because the world's changed quite a bit, then I think you also possibly get kind of a hockey stick lift on that at some point. So it's about being consistent. It's about being ready, and it's about continuing to take the hard steps to ensure that we have the cost structure in place to be able to win in a very competitive landscape. Matthew DeYoe: If I could just ask on the acetic side, right, like I've never really trusted some of the consultants when it came to U.S. acetic prices. But to your point, Asia is off peak. And that would lead me to believe like absent another leg higher, it remains maybe a bit curiously below Western markets. So how does that sustain -- well, first off, is that right? Because, again, I don't have confidence in the U.S. pricing, I get. But how does this sustain? And then how does weaker acid pricing not translate to weaker VAM? Or would that weaker acid back up into methanol? Like how possible is this just stays kind of relegated to one market? I would assume it's not, but I don't just want to hear you opine on it. Scott Richardson: Yes. Matt, as you know, I'm old, and I've been here at Celanese for 21 years. And when I joined Celanese, you are what we now call Acetyl Chain business was an acetic acid business. And now it is an acetyl chain business. And it's a business that doesn't rely on us just selling acetic acid in order to be successful. And back then, 20 years ago, over half of what we sold to an end customer in this business was acetic acid. That is very much not the case anymore. And so some of the dynamics that you talk about, we are very much less susceptible to those acetic acid movements. And yes, you are going to see acetic acid pricing in some regions roll through into the downstream, but it usually takes some time, both on the way up and on the way down. And so it's about managing that, and it's also then continuing to position for the pockets of growth that are in this business. And yes, they've been small, but there have been pockets of growth for us in the vinyl emulsions part of the business as well as in redispersible powders. And in the environment we're in now, we're finding ways at which to expand that. As I mentioned earlier, with some of the switching that customers want to do away from oil-based systems, this is giving us a nice advantage and the opportunity is now for us to go get that business, get it contracted and extend it into next year and beyond. Operator: Our next question has come from the line of John Roberts with Mizuho. Unknown Analyst: This is [ Eden Badiger ] for John. My quick one, Scott. So in this inflationary environment, like how concerned are you about demand disruption in the later parts of the year? And related to that, are you seeing any signs of prebuying by customers that trying to get ahead of price increases that they're seeing coming? Scott Richardson: Yes. Thanks for the question. Yes, look, it's something that we're very much concerned about, and we're watching very closely. And it factors into the scenarios that we put out for the second half. And there's no doubt that's something that we are looking at. And we put it in our prepared comments that particularly in Engineered Materials, that we may be seeing a front-loading of some of that volume. And so that certainly factors into the guide that we made for the second half. I don't think we're seeing much of that in acetyls, to be honest with you. I mean the products that we have there largely are liquid bulk chemicals. They have some element of shelf life as well as storage limitations around the world. So I don't think it's much of a factor there, but it's certainly something that we're cognizant of on the Engineered Materials side of the house. William Cunningham: Daryl, we'll make the next question our last one, please. Operator: Our final question will come from the line of Josh Spector with UBS. Christopher Perrella: It's Chris Perrella on for Josh. Can you size the Palm turnaround impact in the second quarter there? I might have missed that earlier. And is the later restart dependent on the ability to get speed out of benzene? Or can you make the economics work buying methanol to feed the plant there? And I guess the corollary is, are you seeing raw material sourcing issues, particularly in Asia at this point? Scott Richardson: Yes, Chris, let me start, and I'll let Chuck fill in the details. Let me hit the second part of your question first. No, we are -- we have already moved and we are moving methanol from our plant in the United States over to Europe. So our Palm unit in Europe either uses sourced methanol from the market or uses our own cost-based U.S. natural gas-based material. Chuck Kyrish: Yes. Let me talk about kind of walk Q1 to Q2, both the turnaround and some of the other inventory. So in Q1, we built POM inventory, hit the income statement, $25 million benefit in Q1. Now in Q2, we're going to draw that POM inventory down, but we will build some nylon for the transitions that we've talked about. Expect a net $10 million absorption hit to the income statement in Q2, plus about $15 million of turnaround expense. As you know, from the guide, we do expect to offset the majority of that $50 million sequential headwind through the volume improvement and pricing actions we've talked about. William Cunningham: Well, thank you, everyone. We like to thank you for listening in today. And as always, we're available after the call for any follow-up questions. Daryl, please go ahead and close out the call. Operator: Ladies and gentlemen, thank you so much for your participation. This does conclude today's teleconference and webcast. Please disconnect your lines at this time, and have a wonderful day.
Operator: Good day, and welcome to the Magnite, Inc. 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, there will be an opportunity to ask questions. To ask a question, you may press star, one on a touch-tone phone. To withdraw your question, please note this event is being recorded. I would now like to turn the conference over to Nick Kormeluk, Investor Relations. Please go ahead. Nick Kormeluk: Thank you, Operator, and good afternoon, everyone. Welcome to Magnite, Inc.'s First Quarter 2026 Earnings Conference Call. As a reminder, this conference call is being recorded. Joining me on the call today are Michael G. Barrett, CEO, and David L. Day, our CFO. We have posted financial highlight slides on our Investor Relations website to accompany today's presentation. Before we get started, I will remind you that our prepared remarks and answers to questions will include information that might be considered forward-looking statements, including, but not limited to, statements concerning our anticipated financial performance and strategy, including the potential impacts of macroeconomic factors on our business. These statements are not guarantees of future performance. They reflect our current views with respect to future events and are based on assumptions and estimates and subject to known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from expectations, or results projected or implied by forward-looking statements. A discussion of these and other risks, uncertainties, and assumptions is set forth in the company's periodic reports filed with the SEC, including our quarterly reports on Form 10-Q and our 2025 annual report on Form 10-K. We undertake no obligation to update forward-looking statements or relevant risks. Our commentary today will include non-GAAP financial measures, including contribution ex-TAC, or less traffic acquisition costs, Adjusted EBITDA, and non-GAAP income per share. Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our earnings press release and in the financial highlights deck that is posted on our Investor Relations website. At times, in response to your questions, we may offer additional metrics to provide greater insight into the dynamics of the business. Please be advised that this additional detail may be one-time in nature, and we may or may not provide an update on the future of these metrics. I encourage you to visit our Investor Relations website to access our press release, financial highlights deck, periodic SEC reports, and the webcast replay of today's call to learn more about Magnite, Inc. I will now turn the call over to Michael. Please go ahead, Michael. Michael G. Barrett: Thank you, Nick. Thanks, everyone, for joining us today. We delivered a strong first quarter, exceeding expectations across both revenue and profitability. Top line came in ahead of consensus, with DV+ outperforming our guide and CTV in line. Adjusted EBITDA exceeded consensus by $5 million, driven by earlier-than-expected cost efficiencies, and we are encouraged by the margin expansion we are seeing. Importantly, the broader market trend remains unchanged: ad dollars continue to shift towards streaming. In Q1, CTV contribution ex-TAC grew 30% and represented 51% of total, maintaining the momentum we saw in 2025. That strength was broad-based. We saw continued growth across leading publishers, including LG Ads, Netflix, Paramount, Roku, Vizio Walmart, and Warner Bros. Discovery. Our top 10 accounts grew in the mid-30% range year-over-year, with the rest of the base growing in the mid-20s. This is not isolated performance. It reflects a platform that is gaining share as the market scales. The acceleration we are seeing in CTV is not surprising. We are materially outpacing the market, and we believe that is sustainable. This is driven by both new wins and expanding partnerships, but more fundamentally, by SpringServe. SpringServe has evolved from a best-in-class ad server into the operating system for CTV monetization. We sit at the center of the transaction, unifying demand, optimizing yield, managing ad experience, and orchestrating data across the workflow. There are point solutions in the market, but no other scaled platform in CTV combines ad serving, mediation, and monetization infrastructure in a single unified layer. For publishers, this drives higher yield and better control. For buyers, it provides a direct path to the broadest set of premium inventory. And this capability scales across every cohort we serve. We support OEM monetization across home screens in emerging formats, partner with streamers to build and support their offering, and help broadcasters optimize their sales efforts, particularly as live and SMB demand grows. And in live TV, where performance requirements are highest, our differentiation is even more pronounced. Live sports remains one of the largest and least penetrated opportunities in programmatic. We are seeing strong traction here, including more than 80% growth year-over-year in revenue from March Madness. On the demand side, buyer marketplaces are scaling, ClearLine adoption is increasing, and buyers are prioritizing more direct and efficient access to premium CTV supply. We are also seeing commerce media emerge as an important driver across both DV+ and CTV. These partners are bringing valuable first-party data and incremental demand into the ecosystem, increasingly activating across streaming environments. Our recent announcements with Expedia Group, Walmart Connect, and Roku Curate show further traction on the commerce media front. Across all of these areas, our role is consistent. We are the infrastructure layer that connects the ecosystem. As our capabilities expand, so does our position. We are increasingly the single entry point for buyers to access premium CTV inventory at scale, becoming the easy button for CTV. And as the market consolidates around scaled platforms, we believe our lead is durable and widening. Turning to DV+, DV+ declined 5% in Q1, which was better than expected. While budget shifts towards CTV continue, we remain confident in the long-term role of DV+. Trends improved exiting Q1 and into Q2, with signs of stabilization driven by mobile in-app, online video, audio, and commerce media. Mobile in-app grew 8% year-over-year and remains a durable growth segment supported by deeper integrations and new publisher and DSP onboarding. Commerce media continues to build momentum, with 21 partners and 13 now deployed and ramping, expanding both our demand footprint and data capabilities across DV+ and CTV. On the Google AdTech remedies, our view remains unchanged, and we continue to believe the potential upside is meaningful. Stepping back, what ties this together is how our platform is evolving, particularly with AI. We are embedding AI across the platform to improve how media is bought and sold. At the core, AI enhances how inventory is valued, how campaigns are executed, and how decisions are made in real time. For publishers, AI is improving monetization through dynamic pricing and demand optimization. And with ClearLine, AI is simplifying activation, curation, and optimization, reducing friction and enabling faster execution. Across the platform, we are beginning to see the emergence of agentic workflows, enabling greater automation and efficiency for both buyers and sellers. What matters is not a single feature; it is how these capabilities work together across our scaled infrastructure. We are already seeing adoption from the leading players across the ecosystem, using our AI to automate workflows, act on real-time signals, and improve performance. This is still early, but the direction is clear: AI is increasing efficiency, expanding working media, and driving more volume through platforms like ours. This is a tailwind for Magnite, Inc. Before I conclude, I want to address David's retirement. As previously announced, David has decided to retire after more than 13 years of exceptional service. He has been an invaluable partner and a steady leader whose financial stewardship helped shape Magnite, Inc. into the company we are today. We are grateful for his leadership and for his commitment to ensuring a smooth transition, as he remains in his role through September 30 while we evaluate internal and external candidates. On behalf of the board and the entire Magnite, Inc. family, I want to thank David and wish him and his family all the best. With that, I will turn the call over to David for more details on the financials. David L. Day: Thanks for those kind words, Michael. I appreciate it. We are off to a good start to 2026. Q1 total contribution ex-TAC grew 10% and came in at the top end of our guidance range. As Michael mentioned, CTV increased an impressive 30% year-over-year, and DV+ declined 5% but exceeded our previous expectations. We are pleased with the results and are encouraged by the many positive catalysts that are driving momentum in our business. Total revenue for Q1 was $164 million, up 6% from Q1 2025. Contribution ex-TAC was $161 million, up 10% at the high end of our guidance range. CTV contribution ex-TAC was $82 million, up 30% year-over-year. DV+ contribution ex-TAC was $79 million, a decrease of 5% from the first quarter last year. Our contribution ex-TAC mix for Q1 was 51% CTV, 34% mobile, and 15% desktop. From an overall vertical perspective, health and fitness, retail, and food and beverage were the strongest performing categories, while automotive and technology were our weakest performing categories. Total operating expenses, which include cost of revenue, were $157 million, flat from last year. Adjusted EBITDA operating expense for the first quarter was $118 million, $4 million better than our guide and an increase from $109 million in the same period last year. Operating expense was better than expected due to significant improvements in cloud spend and some early AI-related productivity gains. Our net income was $4 million for the quarter, compared to a net loss of $10 million for 2025. Adjusted EBITDA grew 16% year-over-year to $43 million, reflecting a margin of 27% as compared to 25% in Q1 last year. As a reminder, the first quarter is always seasonally our lowest margin quarter. We calculate Adjusted EBITDA margin as a percentage of contribution ex-TAC. GAAP earnings per diluted share were $0.03 for 2026, compared to a net loss of $0.07 for 2025. Non-GAAP earnings per share for 2026 were $0.13, compared to $0.02 in Q1 last year. The reconciliations to non-GAAP income and non-GAAP earnings per share are included with our Q1 results press release. Our cash balance at the end of Q1 was $185 million, a decrease from $553 million at the end of the fourth quarter. The drivers of the change were the $250 million payoff of our convertible debt, planned capital expenditures, share repurchases, and normal seasonality in working capital. Operating cash flow, which we define as Adjusted EBITDA less CapEx, was $23 million. Capital expenditures, including both purchases of property and equipment and capitalized internal-use software development costs, were $20 million, in line with the expectations we discussed last quarter. Net interest expense for the quarter was $5 million. Net leverage was 0.7x at quarter-end, consistent with our target of less than 1x. During the first quarter, we repurchased or withheld over 2.2 million shares for approximately $29 million. As of quarter-end, $186 million remained available under our current repurchase authorization, which is effective through February 2028. Now that we repaid our convert, we plan to be more aggressive with share repurchases given our expected free cash flow generation. As discussed last quarter, our capital allocation strategy aims to return approximately 50% of free cash flow to shareholders via share repurchases. We believe our shares currently trade at very attractive levels. For the second quarter, we expect contribution ex-TAC to be in the range of $177 million to $181 million, which represents growth of 9% to 12%. Contribution ex-TAC attributable to CTV to be in a range of $90 million to $92 million, which represents growth of 26% to 29%. DV+ contribution ex-TAC to be in the range of $87 million to $89 million, which represents a decline of 4% to 2%. We anticipate Adjusted EBITDA operating expenses to be in the range of $115 million to $117 million, which implies Adjusted EBITDA margin of 34% to 36%. And for the full year 2026, we reaffirm total contribution ex-TAC growth to be at least 11%, reaffirm Adjusted EBITDA percentage growth in the mid-teens, raise Adjusted EBITDA margin to be at least 35.5% from greater than 35%, raise free cash flow growth to be in the mid-30% range from greater than 30%, and reaffirm CapEx of approximately $60 million, a reduction from prior year. I want to point out that our estimates do not include any potential market share gains as a result of remedies from the Google AdTech trial. Lastly, a note regarding our tax position: we would not expect to have any significant increases in cash taxes. Finally, on a personal note, I am incredibly pleased with our performance and the robust financial position the company maintains today. It is from this position of strength that I have decided to retire, marking the end of what has been the most rewarding chapter of my professional life. My journey here from the early days of Rubicon Project through our 2014 IPO, transformative merger with Telaria, and the acquisitions of SpotX and SpringServe has been an exhilarating ride. I am immensely proud of the durable company we have built, our winning culture, and a world-class finance team. While I am looking forward to spending more time with my family, I will continue to energetically serve as CFO through September 30 to ensure our momentum continues uninterrupted and to assist Michael and the board in identifying my successor. I leave with full confidence that Magnite, Inc. is extremely well positioned to lead the future of digital advertising. Thank you all for an unforgettable decade-plus partnership. 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 speaker phone, 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. We ask that you please limit yourself to one question and one follow-up. If you have additional questions, please rejoin the question queue. At this time, we will pause momentarily to assemble our roster. The first question today comes from Daniel Louis Kurnos with Stifel. Please go ahead. Daniel Louis Kurnos: Great. Thanks. Good afternoon. And let me be the first, David, to wish you the best. It has been a pleasure working with you. Michael, let me jump in and unpack DV+ a little bit. Your comments suggest that we are still seeing mix shift to CTV, but your guide suggests— I mean, you talked about stabilization — your guide is almost flat in Q2. I am trying to figure out how much of that is these commerce media wins backing up here and how you think that might trend as we proceed through the year, understanding there is uncertainty in the macro and the pressures we are still seeing in the traditional desktop business. And then, since you brought up live sports, we have a very big event coming up, the Summer World Cup. We are starting to see more of Fox’s strategy, and we are finally going to get real games on Tubi. They have DTC out there now. How should we think about the impact of that event? It seems like every time we get one of these big events, even starting with the Olympics this year, and you mentioned March Madness, more and more inventory shifts to programmatic. Is that also an incremental catalyst for more inventory to keep moving in that direction? Michael G. Barrett: Yeah, Dan. I noticed you did not say it was a pleasure to work with me, so that is kind of hurting. But good observation. We do think we have seen stabilization to DV+, driven largely by the fact that the open web display is certainly under siege, but other pockets — mobile in-app, commerce media, as you pointed out, and audio — are growth areas for us. The macro weighs heavy on DV+ particularly, but seeing it return to flattish is something that I think would still outperform the market, and that is kind of where I think we should be in either one of our businesses. On the World Cup, it will certainly be a good guy for us. Given the volume of games and some of the added ad breaks — for instance, the mandatory water breaks — that is going to be a big ad load. We are expecting good things from it. I am not so sure it will be something that we will be citing as a comp issue in 2027, but it will certainly be part of the portfolio of sports that is going to add to the revenue growth. Operator: The next question comes from Shyam Vasant Patil with Susquehanna. Please go ahead. Shyam Vasant Patil: Hey, guys. Congrats on the results, and David, congrats on your retirement as well. I had a couple of questions. David, in your remarks, you talked a little bit — almost a side comment — about an uncertain macro. Did this have any impact on you in Q1 or Q2? Obviously very strong results, but would they have been even better if it were not for some of the macro events? And then, Michael, strong CTV growth and outlook — is there any reason to think that CTV cannot continue to grow at these levels on a secular basis? And related, how are you thinking about the secular profile for desktop and mobile? David L. Day: Great. On the macro front, it certainly was not an overwhelming drag on the quarter. But you see it in a couple of verticals in particular. Automotive, most importantly, and that is a large vertical, was down significantly. Technology also. So you see some impacts from tariffs, supply chain challenges, and then just uncertainty with things in the Mideast. Those are the data points underlying my comment. It is not booming, but we are not prognosticating doom and gloom either. Michael G. Barrett: Yes, Shyam. On the CTV front, we are really pleased with the growth rates and feel very strongly that they are sustainable. The market as a whole, from peer reports and analyst expectations, looks like it is growing in the low teens, so we are significantly outperforming market growth, and that has been a stated goal of ours. I think that will continue given the penetration we have with all the top streamers, their growth profiles, and increasing wins across the globe. An untold story for us is the success of these US-based streamers going international — when they go international, we go with them, and they disrupt the local market, forcing adoption of programmatic and streaming. It is a real positive story for us internationally. As far as DV+ is concerned, it is a portfolio. High-growth areas include in-app mobile and audio — both are promising — and even digital out-of-home is growing fast. We think DV+ as a whole is an important part of the business and will be a positive contributor. It is just hard to swag on a specific basis going forward. Operator: The next question comes from Jason Michael Kreyer with Craig-Hallum. Please go ahead. Jason Michael Kreyer: Great. Thank you. Michael, I wanted to ask on AI. I know you have brought some new solutions to market in the last several weeks. Can you talk about demand and adoption trends of AI-enabled tools? And what pain points exist in the industry that you can leverage AI to make more efficient? And then, David, congratulations on your retirement. It has been my pleasure working with you for most of that 13 years. I wanted to touch on the EBITDA OpEx that came in better in Q1, and you are guiding better for Q2. You outlined cloud and AI benefits. How durable are those savings, and is there more to squeeze out as we move forward? Michael G. Barrett: Great question, Jason. Wow. No love for David. AI in 2026 will be the story of AI with modest amounts of revenue flowing through. There are several working initiatives, several different standards. A lot of it is replacing direct-sold — not truly real-time programmatic — but bringing more dollars into the programmatic ecosystem because it is so much easier to do it agentically. The biggest benefit you are going to see is workflow and productivity. Instead of toggling between 13 different dashboards, you can use natural language to ask the agent to perform a task. It will free up a lot of bandwidth for traders, be more efficient, and drive more working media. We are exceptionally well positioned with the tools we have built and are building to catch it when the dollars start to flow. I would imagine 2027 will be the year where AI results in real revenue, and we are well positioned to take advantage. David L. Day: I think as a general matter, the savings are very durable. The primary drivers are twofold: moving some of our activity from the cloud to on-prem, and our dev team optimizing how we run more efficiently on the cloud. I am excited about that. That said, we have resources going into product development later in the year. We have a lot of new business and volume increases. I would not go too crazy with lowering costs, but the trend line is definitely durable. We have more to come as we bring a new data center in Northern California online later in the year. There is lots of opportunity, particularly as we spring into 2027 on the margin expansion front. Operator: The next question comes from Laura Anne Martin with Needham. Please go ahead. Laura Anne Martin: Hey. I have two. Taboola said on their call this morning that they see programmatic workflows being replaced by agentic. You just mentioned you thought it might be additive, but why do we not have agentic buy-side agents talking directly to agentic sell-side agents in the ad business and therefore getting rid of most of the 40% to 50% take rate that currently sits in the open web programmatic ecosystem? Second, on pricing power — at Possible, everybody is introducing AI products, and nobody is charging for them. They are table stakes, making products more interesting, more automated, higher ROAS, but are we actually going to get price uplift from these AI innovations, or does it just become table stakes where we spend money on AI but do not get revenue upside? Michael G. Barrett: Hi, Laura. On agentic replacing the need for software companies: as we said in our previous quarter script and this one, AI is a real tailwind for us. It makes things easier to work with. It lets our publishers go from a dozen dashboards — a SpringServe dashboard, a DV+ dashboard — to one, and they can execute more seamlessly. The agent-to-buyer connection makes a ton of sense. But who is to say that the buyer agent is not ours that they are utilizing, just like they utilize ClearLine? There is real upside there. Also, if you want to conduct conversations, execute plans, and buy programmatically from tens of thousands of buyer agents, that is where we really shine. We ensure those are the agents you want to talk to, that it is brand-safe inventory, we are collecting payment, policing fraud, and our plumbing and servers are being utilized to make it happen. We feel there is going to be more volume on the platform than we have ever seen, and yes, we will charge for that and it will improve, not pressure, our margin profiles. David L. Day: Building on that, particularly in CTV where we do have lower take rates at the moment, those are stabilizing. There is so much value-add. As we provide additional value-added services, we only see those increasing in the future, and that value-add will be accelerated with the AI implementations we are making. Operator: The next question comes from Analyst with B. Riley. Please go ahead. Analyst: Great. Thank you very much. A couple of questions from me. And, David, all the best. First, on commerce media, you have talked about 21 partners and 13 now deployed. Can you give us a sense of the scale of this business currently and how fast it might be growing? And then on live sports, you called it out as a sizable opportunity. Can you talk about penetration levels of live sports with programmatic and where it could be over time? Thank you. Michael G. Barrett: Sure. Commerce media is super exciting for us. We mentioned the number of partners, and that total keeps growing. The most important thing is how quickly the strategy has changed for commerce media players. Chapter one was: take my valuable retail data, park it in one DSP, and force all the advertisers that want to utilize that data to go through that DSP. Now you are seeing that unwind. The strategy now is to keep the data close to the retail media partner, working with an SSP like Magnite, Inc. That way you can democratize it and allow multiple DSPs to access it in a safe, privacy-compliant way. That is a huge tailwind for us. As far as contribution, it has been a significant contributor and will expand because many of these players are now adding CTV to the inventory mix. They start with owned and operated inventory, then go off-net; typically that has been in DV+. Now their advertisers are saying, “I do a lot of advertising on TV, and I want to do that with your data.” We are the perfect on-ramp for that to occur. On live sports, we are just scratching the surface. As a consumer, you see live sports everywhere in streaming. But programmatically, very little inventory is bought and sold programmatically. So when we say gains like 80% plus for March Madness, it is still minuscule compared to the opportunity that is coming. We are super excited about the World Cup and the fall slate of sports. Little by little, it is getting more programmatically driven, and it is a big tailwind for us. Operator: The next question comes from Shweta Khajuria with Wolfe Research. Please go ahead. Shweta Khajuria: Hi. This is Ken on for Shweta. Congrats, David, on the retirement. Two for me. Michael, can you provide us an update on the impact of OpenPath, particularly with smaller advertisers and agencies? And David, can you provide the puts and takes of EBITDA in the second half of 2026? Thank you. Michael G. Barrett: Yeah. On OpenPath, as we have talked about, it came as a shock to the system a couple of quarters ago. We stated that all the big buyers from the agencies that use Magnite, Inc. as an invaluable partner had flipped it back on. You can see in our results it is certainly not deteriorating. So the OpenPath extinction event came and went, and we are still here and doing quite well. David L. Day: On EBITDA in the second half, we mentioned we expect 11% or greater growth on the top line — stable and steady. On the cost side, we have cloud usage savings, but we also have volume growth and resources that will neutralize some of that savings at least this year. As mentioned, EBITDA margin is increasing — we expected something north of 35% and now expect about 35.5% this year. We are in a great spot. What is really great is our EBITDA margin is increasing and it is cost-driven at this point. To the extent we have upside on revenue, that upside will flow almost 100% to free cash flow. We feel really well positioned. Operator: The next question comes from Robert James Coolbrith with Evercore ISI. Please go ahead. Robert James Coolbrith: Good afternoon. Congratulations on a great run to David, and best wishes on your retirement. Michael, you are great too. On AI creative generation, any update on the role you are playing there? We are beginning to see more tools released to general availability. Are you seeing more AI-generated creative showing up in the market? Could that catalyze incremental demand and creative refresh, and what does that do for CTV? And related on AI, we heard some speculation about different ad tech players monetizing AI engine inventory itself. Do you think there is an opportunity for Magnite, Inc. there? Michael G. Barrett: Hey, Robert. As you know, we purchased a couple of quarters ago a company called SpringServe Streamr, which is one of the leading tools that allows small to medium-sized businesses to create TV ads, track them, measure them, and buy them on our platform with access to all the premium streamers. That product is really taking off. Our role is not to chase down the SMB directly, but to put those tools in the hands of folks that have those relationships — either large aggregators that now bring that demand onto our platform, or publishing partners that offer it as self-serve to their small advertisers. It has turned out to be a wonderful acquisition, and we are starting to see the benefits reflected in the growth rates of CTV. On monetizing AI engine inventory, it is very early, but the encouraging thing is the ad-supported ones are reaching out for third-party demand. History is pretty clear: initially, if you are just going to work with one DSP, maybe there is not a need for someone like Magnite, Inc. But once you work with three, four, five, six, seven — and do it globally with specialty DSPs — SSPs become invaluable. We feel very encouraged by the initial direction and believe we are well positioned when the time is right. Operator: The next question comes from Barton Evans Crockett with Rosenblatt. Please go ahead. Barton Evans Crockett: Thanks for taking the questions. First, perspective on an environment where agencies could be working with a single integrated interface — through Quad or something — to place outcome-driven marketing dollars across social walled gardens, search, AI environments, and the open web. If the front end is simplified and built on an LLM, does that impact take rates or revenue flows? Do you think that is where it is going? And second, on Google AdTech antitrust: we are sitting here in May without a decision on remedies. If a remedy decision were to come out today, when could you begin to see the impact? Is it pushed into 2027, and how much time would implementation take given legal and technical considerations? Michael G. Barrett: I certainly think simplified buying tools for agencies that deliver on marketers’ goals are where many people want to go. Our role remains quite valuable and necessary in that world. We are the system of record — the rails upon which the transactions take place. It is one thing to have an agent talk to another agent; it is another to be involved in complex transactions in real time, doing it trillions of times a day. You really need the infrastructure, and that is where we shine. I do not think there is a change to our take rates in that world. It is just easier for sellers and buyers — fewer interfaces and knobs — perhaps freeing up more working media. Our role remains unchanged as that system of record, so I feel confident in the durability of our take rates. On Google AdTech antitrust, it really depends upon the remedy. Some are behavioral; some would require Google to do technical work. Even in their case, they cited a six- to nine-month window for changing two of the things they were talking about. But I definitely think there would be some instant gains. We see all the inventory, bring it to auction, and our win rate is very low when it goes up against Google. If there were a behavior change, the impact could be somewhat instantaneous. I do not think all the benefits are pushed to 2027. We are disappointed there has not been a ruling yet, but we anticipate a favorable ruling for us and impact in 2026. Operator: The next question comes from Matthew John Swanson with RBC Capital Markets. Please go ahead. Matthew John Swanson: Hey, guys. This is Cameron on for Matt Swanson. Congrats on the quarter, and congrats, David. Going back to CTV and DV+ for a second, we have seen CTV hit an inflection point for the business. Last quarter, we talked about accelerated reallocation of budget from DV+ to CTV. While there are areas of growth in mobile and commerce for DV+, to what extent does this reallocation remain a headwind? Has it accelerated this quarter, and do you expect it to continue for the year? Michael G. Barrett: Great question. I do not know if we have seen an acceleration, and you can see the freshening of DV+ growth rate exceeding our expectation. I think there is stabilization. A big slug of that portfolio is open web display, and it is safe to say that is going to be a negative grower. But could that be outpaced by mobile app, audio, commerce media, and digital out-of-home? Certainly. Our long-term expectation for DV+ is that it is a grower, but it is certainly not going to have the profile of a CTV growth rate. Increasingly, our revenue balance will be more CTV than DV+. Operator: The next question comes from Analyst with Lake Street Capital Markets. Please go ahead. Analyst: Hey, guys. Thanks for taking my question. Just a quick one. CTV is now over 50% of total contribution ex-TAC. How should we look at incremental margins on CTV versus DV+? Is there a mix shift that structurally lifts margins by itself, or are there offsetting costs? David L. Day: It is generally equal. We do not see headwinds by having a greater proportion of our business be CTV. In fact, as we mentioned earlier, we have significant gains in the cost basis on our CTV business with our cloud costs going down. It will not be one of the more significant drivers — more neutral — but positive on the cost side. Operator: This concludes our question and answer session. I would like to turn the conference back over to Michael G. Barrett for any closing remarks. Michael G. Barrett: Thank you, Operator. CTV’s long-awaited ramp in programmatic has clearly arrived, and the investments we have made over the past several years are now translating into profitable, scalable growth. We believe CTV is in a powerful phase of its evolution. The shift to programmatic is real, and as the channel matures, it is increasingly taking share from both linear television and other digital formats. Before we close, I want to thank our team at Magnite, Inc. The progress we discussed today is a direct result of your hard work, innovation, and commitment to our partners. Your efforts continue to position us at the center of this transformation. We are confident in the momentum of the business and in the long-term opportunity ahead. Thank you for joining us today. We look forward to updating you next quarter. With that, I will turn it back over to Nick to cover our upcoming marketing events. Nick Kormeluk: Thanks, Michael. We look forward to seeing many of you at our upcoming investor events. To tick through them for your info and participation: we have a post-Q1 virtual NDR tomorrow hosted by B. Riley; an in-person AI tech demo with SSR in New York City on May 12; the Needham Conference in New York on May 13; the B. Riley Conference in Marina del Rey on May [inaudible]; the RBC Bus Tour in New York on May 27; the Craig-Hallum Conference in Minneapolis on May 28; the BFA Conference in San Francisco on June 2; Rothschild Redburn Investor Meeting in San Francisco on June 3; Evercore’s conference in San Francisco on June 3 as well; a Bronto NDR with RBC on June 9; a Chicago NDR with Benchmark on June 10; the ROTH Virtual AdTech Summit on June 15; and analyst and investor meetings with a variety of our covering analysts in Cannes the week of June 22. Thank you, and have a great evening. We look forward to seeing many of you at our events. Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
Operator: Thank you for standing by. At this time, I would like to welcome everyone to today's Hamilton Beach Brands Holding Company 2026 First Quarter 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, please press star and the number one to raise your hand. To withdraw your question, please press star and the number one again. Thank you. So without further ado, I would like to turn the call over to Brendan Frey, partner with ICR. Brendan, you have the floor. Brendan Frey: Dustin, are you there? Operator: Yes. Hello? Mr. Frey, you might be muted. Brendan Frey: Am I back in? Alright. Sorry about that. We will give this another shot. Good afternoon, everyone, and welcome to the first quarter 2026 earnings conference call and webcast for Hamilton Beach Brands Holding Company. Earlier today, after the stock market closed, we issued our first quarter 2026 earnings release, which is available on our corporate website. Our speakers today are R. Scott Tidey, president and CEO, and Sally M. Cunningham, senior vice president, chief financial officer, and treasurer. Our presentation today includes forward-looking statements. These statements are subject to risks and uncertainties that could cause results to differ materially from those expressed in either our prepared remarks or during the Q&A. Additional information regarding these risks and uncertainties is available in our 10-Q, our earnings release, and our annual report on Form 10-Ks for the year ended December 31, 2025. Hamilton Beach Brands Holding Company disclaims any obligation to update these forward-looking statements, which may not be updated until our next quarterly conference call, if at all. We will also discuss certain non-GAAP measures. Reconciliations for Regulation G purposes can be found in our earnings materials. I will now turn the call over to Scott. Scott? R. Scott Tidey: Thank you, Brendan, and good afternoon, everyone. Thank you for joining us today. We are pleased to report first quarter profitability that exceeded our expectations. First quarter revenue was expected to be down year-over-year as we are up against a challenging comparison, and while it declined slightly more than planned, we delivered exceptional gross margin expansion of 510 basis points, which drove operating profit growth of 115% to $5 million. Sales were modestly below our expectations, primarily because March was softer than planned. Consumers remained under pressure and discretionary spending weakened in parts of our business. The impact was most pronounced in our U.S. consumer business, where shoppers in our price segments appear to be especially affected by elevated fuel costs. At the same time, our gross margin performance was significantly stronger than planned. Thanks to the implementation of the foreign trade zone last year at our distribution center, we were able to quickly capitalize on the Supreme Court's ruling on IEPA tariffs in late February, shipping certain products in March that had no additional tariff charges. First quarter gross margins also benefited from other tariff mitigation actions, including diversifying our sourcing strategy and selectively raising prices, the latter of which will continue to be a tailwind in the second quarter due to the delta and the timing between the price increases and higher costs hitting our P&L. This margin expansion more than offset modest sales shortfalls and resulted in profitability that exceeded our expectations. Besides the recent global uncertainties, we continue to make meaningful progress on our five strategic initiatives, and I wanted to update you on each of these. Starting with driving growth of our core business, we are executing well on our product innovation pipeline. Our three new innovative blender kitchen systems are gaining traction in the market, bringing fresh innovation to one of our strongest categories. The redesigned Durathon iron platform launched during the quarter with exceptional reception, building success on an established Durathon technology. We are particularly excited about our expansion into garment steamers with new models and believe we are well positioned to capture share in this large and growing segment. Looking ahead, our two new single-serve coffee platforms launching in the second half of the year will bring needed innovation to another important category. Additionally, we recently picked up placements for multiple product categories. This includes expanding several programs with a leading department store in the fall, adding shelf space at two top wholesale membership clubs, and increasing penetration with a leading mass market retailer. These wins are being supported by our significantly increased investment in digital, social media, and influencer marketing, which is helping us connect with consumers in new and more efficient ways. Moving to accelerating our digital transformation. The consumer shopping journey continues to evolve rapidly, and we are adapting our approach to meet them where they are. We are leveraging our strong foundation of e-commerce capabilities and our consistently higher consumer reviews and ratings, which average above four stars across our brands, to drive discoverability and conversion. Our increased advertising investment is focused on ensuring we are present and relevant when consumers are making purchase decisions. We have added resources specifically focused on improving our discoverability across platforms and sharpening our AI shopping tactics to stay ahead of the curve as generative AI increasingly influences shopping behavior. And we are excited to announce that we recently selected a new advertising agency that will help oversee and drive our digital marketing strategy starting in the second half of the year. Gaining a larger share in the premium market is our next strategic initiative. The premium market represents approximately half of the $9 billion U.S. appliance market, and we currently hold only about a 1% share in this segment, providing us with tremendous runway for growth. Our LOTUS brand expansion continues to exceed expectations. Following the strong double-digit sell-through results we achieved with the LOTUS Professional launch in 2025, we are preparing for the fall launch of LOTUS Signature. Our key retail partner has committed to expanding shelf space based on the brand's performance, which validates our strategy and provides a platform for accelerated growth. Turning to leading in the global commercial market. Our commercial business continues to gain traction and represents a significant growth opportunity. The Summit Edge high-performance blender remains a cornerstone of our commercial strategy. We are deepening our relationships with large foodservice and hospitality chains with particular emphasis on regional and global penetration. To that end, another of our commercial blenders, the Eclipse, will soon be added to a leading national coffee chain. Meanwhile, we recently picked up a spindle maker placement for a leading U.S.-based fast foods chain for their Central America location. Lastly, our Sunkist commercial juicers and sectionizers, which we launched in the second quarter of last year, continue to exceed expectations with accelerating demand from leading restaurants, hospitality chains, and schools. Finally, accelerating growth of Hamilton Beach Health. The first quarter marked the third consecutive quarter of profitable growth for this business, and we are on track to increase sales by 50% this year. We are making excellent progress expanding our injectable reach by adding more specialty pharmacy and pharmaceutical company partnerships. We recently signed on a new injectable drug that will be available on our SmartSharp Spin platform starting this quarter. At the same time, we are broadening our connected medical device platform beyond our core injectable medication management. In the third quarter, we will launch the pilot of our pill management platform, which is designed to improve medication adherence and provide valuable patient feedback. We were initially targeting oncology and mental health treatments, with plans to expand to other therapeutic areas as we validate the platform's effectiveness. This expansion represents a significant opportunity to address additional patient pain points and grow our distribution network with large specialty pharmacies. As Sally will discuss shortly, we remain confident in delivering our 2026 financial goals despite the recent downturn in consumer sentiment. In addition to comparisons beginning to ease starting in April, which has helped our recent trend line, we plan to reinvest the margin upside from the first quarter into additional promotional programs to help drive demand in the current environment. Looking past the current headwinds, we believe our diversified business model across consumer, commercial, and health, combined with our strong brand portfolio and the strategic initiatives we are executing, provides multiple avenues for growth and positions us well to capitalize on opportunities as market conditions continue to stabilize. I want to thank our teams for their continued dedication and execution. Their agility in navigating the March consumer headwinds while delivering exceptional margin performance exemplifies the resilience and commitment that defines our organization. With that, I will turn it over to Sally. Sally M. Cunningham: Good afternoon, everyone. Echoing Scott's comments, we are pleased with our start to the year, especially our gross margin and operating profit performances. For the first quarter, revenue was $122 million compared to $103.4 million a year ago, a decline of 8.6%. The revenue decline was primarily driven by lower volumes in our U.S. consumer business as we lapped our highest growth rate from last year. The lower volumes in our U.S. consumer business were partially offset by higher prices, and our overall results include another quarter of robust sales growth from our health care division. Turning to gross profit and margin. Gross profit was $36.2 million in the first quarter, up 10.4% compared to $32.8 million in the year-ago period. Gross profit margin was 29.7%, compared to 24.6% of total revenue in last year's first quarter. This 510 basis point improvement in gross profit margin was due to favorable pricing and customer mix, partially offset by higher product costs. I want to highlight that the margin improvement included a one-time benefit of 190 basis points related to the sell-through of inventory that was priced in anticipation of IEPA tariffs that were eliminated following the Supreme Court ruling. This benefit is nonrecurring and will not persist beyond the sell-through of affected inventory. The other 320 basis points of improvement was driven by the timing of our price increases that Scott touched on earlier that will normalize as we get into the second half of the year, and increased penetration of our higher-margin commercial and health care business. Selling, general, and administrative expenses increased to $31.2 million compared to $30.5 million in 2025. The increase was primarily driven by $1.4 million of accelerated depreciation of our legacy ERP system, which we are in the process of replacing, partially offset by the benefit of restructuring actions we took during the second quarter of last year. Our strong gross margin gain allowed us to more than double operating profit to $5 million compared to $2.3 million in 2025. Income tax expense was $1.4 million in the first quarter compared to $700 thousand a year ago, and net income in the first quarter was $3.5 million, or $0.26 per diluted share, compared to net income of $1.8 million, or $0.13 per diluted share, a year ago. Now turning to our balance sheet and cash flows. For the three months ended 03/31/2026, net cash provided by operating activities was $3.3 million, compared to $6.6 million for the three months ended 03/31/2025. The decrease was primarily driven by higher net working capital, including a planned increase in accounts receivable following our decision to exit the arrangement with a financial institution to sell certain U.S. trade receivables of a single customer, which shifted the timing of cash receipts. This was partially offset by lower incentive payout compared to 2025. During 2026, we allocated our cash flow to repurchase approximately 55 thousand shares totaling $900 thousand and paid $1.6 million in dividends. At the end of the first quarter, net debt was $2.6 million compared to net debt of $1.7 million on 03/31/2025. Turning now to our outlook for 2026. We are reiterating our previously issued guidance. We continue to expect revenue growth to approach the mid-single-digit range. Gross margins are still projected to be similar to slightly better than 2025's level, as we reinvest the upside from Q1 into additional promotional programs to drive demand. While operating profit on a reported basis is expected to decline low-teens on a percentage basis, inclusive of an incremental $6 million in planned advertising spend in 2026 to support our strategic growth initiatives and approximately $6 million in accelerated depreciation associated with our legacy ERP system. Cash flow from operating activities less cash used for investing activities for 2026 is expected to be in the $35 million to $45 million range. Our current earnings and cash flow outlook excludes any potential impact from IEPA-related refunds, which total approximately $41 million of tariffs paid in 2025 and early 2026 that the company is actively pursuing; however, the timing and ultimate recovery remain uncertain. In closing, we entered 2026 with building momentum and renewed confidence in our ability to deliver sustainable growth and shareholder value. Our diversified business model, strong brand portfolio, and the work we have done strengthening our foundation positions the company to capitalize on improving market conditions this year and create a platform for long-term growth. This concludes our prepared remarks. We will now turn the line back to the operator for Q&A. Operator: Thank you. We will now open the call for questions. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star and the number one on your telephone keypad. To withdraw your question, please press star and the number one again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please standby while we compile the Q&A roster. Your first question comes from the line of Adam Bradley from AGB Capital. Your line is open. Please go ahead. Adam Bradley: Hi, Scott and Sally. Question about LOTUS. The investment behind them and just how things are going, and if we should expect additional investment behind LOTUS beyond 2026. R. Scott Tidey: Hey, Adam. This is Scott. Yes, as we indicated, we had a great launch with our initial exclusive national chain in 2025. That exclusivity with that chain ended in 2026, so we are now rolling LOTUS Professional out to other retail customers as we speak. And as mentioned, we are super excited about launching LOTUS Signature later in the year. That will be closer to the holiday time period. We did support the business with several million dollars last year, and we expect to do so with more this year, and that would continue through into 2027 as well and beyond. Adam Bradley: Alright. So will there be a time—given the level of investments—what are your kind of long-term expectations for LOTUS? R. Scott Tidey: I do not think we have a dollar revenue amount that we are going to put out there and project. We believe that we can go in and grab multiple share points in this very large segment of the small kitchen appliances. We have what we believe are very targeted retailers to be able to do that. Those are both brick-and-mortar and online customers that we feel are more in the premium position, and the revenue will come. Again, we are willing to commit. We know this is building our own brand, so we are willing to commit to the advertising investment behind it to build that brand awareness. Adam Bradley: Okay. Thank you. R. Scott Tidey: Thank you. Operator: Again, if you would like to ask a question, please press star and the number one on your telephone keypad. There are no further questions in the queue. That concludes our question-and-answer session. That also concludes our call for today. Thank you all for joining, and you may now disconnect.
Operator: Good day, everyone, and welcome to Bristow Group Inc.'s first quarter 2026 earnings call. Today's call is being recorded. To ask a question, press star followed by the number 5 on your telephone keypad. At this time, I would like to turn the call over to Redeate Tilahun, Senior Manager of Investor Relations and Financial Reporting. Thank you, Michael. Redeate Tilahun: Good morning, everyone, and welcome to Bristow Group Inc.'s 2026 earnings call. I am joined on the call today by our President and Chief Executive Officer, Christopher S. Bradshaw, and Senior Vice President and Chief Financial Officer, Jennifer Dawn Whalen. Before we begin, I would like to remind everyone that during the course of this call, management may make forward-looking statements that are subject to risks and uncertainties described in more detail on slide 3 of the investor presentation. You may access the investor presentation on our website. We will also reference certain non-GAAP financial measures such as EBITDA and free cash flow. A reconciliation of such measures to GAAP is included in the earnings release and the investor presentation. I will now turn the call over to our President and CEO. Christopher? Christopher S. Bradshaw: Thank you, Redeate. The company delivered on our goal of zero air accidents in the first quarter, and the Bristow Group Inc. team remains committed to safety as our number one core value and highest operational priority. Bristow Group Inc.'s first quarter financial results place us on track for what is expected to be a transformational year for the company. We are pleased to affirm our financial guidance ranges for 2026, which notably reflect adjusted EBITDA growth of approximately 25% year over year. While geopolitical conflicts and tensions have driven turbulent and concerning global conditions thus far in 2026, these macro developments underscore the conviction we have in the outlook for Bristow Group Inc.'s business. I will have more comments on the strong tailwinds poised to benefit the company later in the call, but for now, I will hand it over to our CFO for a detailed discussion of Q1 results and our financial outlook. Jennifer? Jennifer Dawn Whalen: Thank you, Christopher, and good morning, everyone. Today, I will begin with a review of Bristow Group Inc.'s sequential quarter financial results on a consolidated basis before covering the financial results and 2026 guidance ranges for each of our segments. While the first quarter is typically our seasonally lowest quarter, Bristow Group Inc.'s total revenues were $11.4 million higher compared to Q4 2025, primarily due to increased activity in our Government Services business and increased rates and activity in certain of our key Offshore Energy Services (OES) markets. Adjusted EBITDA was $0.9 million lower in Q1, mainly due to higher repairs and maintenance costs and leased and equipment costs across our segments. We are affirming our 2026 guidance ranges of $1.6 billion to $1.7 billion for total revenues and $295 million to $325 million for adjusted EBITDA. Turning now to our segment financial results. Revenues in our OES segment were $6.9 million higher in Q1 versus Q4 2025, primarily due to increased rates and higher utilization in the U.S. and Trinidad and higher utilization in Africa, which were partially offset by lower utilization in Europe. Adjusted operating income was $0.7 million lower, primarily due to higher operating expenses of $5.6 million and lower earnings from unconsolidated affiliates of $1.8 million offsetting the higher revenue. Operating expenses in OES were higher primarily due to lower vendor credits recognized this quarter, coupled with additional aircraft leases, which were partially offset by lower personnel and other operating expenses. During the quarter, the company recognized additional noncash depreciation expense of $6.4 million related to S-76 medium helicopters used in our OES segment as it finalizes plans to retire this model and transition to newer models as part of Bristow Group Inc.'s ongoing fleet management efforts to better meet customer needs. The company plans to complete this transition of models by early 2027 and expects to recognize approximately $24 million of additional depreciation expense through the transition period. Our 2026 OES revenue guidance range remains between $1.0 billion and $1.1 billion, and our 2026 adjusted operating income guidance range remains $225 million to $235 million for this segment. Moving on to Government Services. Revenues were $7.8 million higher, primarily due to the transition of the Irish Coast Guard contract, including the full quarter impact of the base in Sligo that began operations last quarter and the commencement of operations at the final base in Waterford this quarter. Adjusted operating income was $1.9 million higher in Q1, primarily due to the higher revenues, partially offset by higher operating expenses of $4.8 million as a result of higher repairs and maintenance, increased headcount in Ireland, higher lease and equipment costs related to the ongoing transition activities in the U.K., and higher general and administrative expenses of $0.5 million largely related to professional service fees. Our 2026 Government Services revenues guidance range remains between $440 million and $460 million, and the adjusted operating income guidance range remains $70 million to $80 million, which is roughly double that of 2025. Finally, revenues from Other Services were $3.2 million lower in Q1, primarily due to lower seasonal activity in Australia, partially offset by favorable foreign exchange rate impact. Adjusted operating income decreased by $2.9 million due to the lower seasonal revenues, partially offset by reduced operating expenses of $0.4 million related to the lower seasonal activity. Our 2026 revenues and adjusted operating income guidance for this segment remain between $130 million and $150 million and $20 million and $25 million, respectively. Turning now to cash flows and liquidity. Net cash used in operating activities was $8.3 million in the current quarter. The working capital uses in the current quarter primarily resulted from an increase in accounts receivable largely due to timing of customer payments. In comparison to the prior year, working capital changes consumed more cash flow in Q1 2025 than was the case in Q1 of this year. The company does not have material amounts of aged receivables, so we expect to see improvements in working capital in the coming quarters. As of March 2026, our unrestricted cash balance was $342 million with total available liquidity of approximately $394 million. As a reminder, in January, Bristow Group Inc. closed a private offering of $500 million senior secured notes due in 2033 with a coupon of 6.75%. The company used a portion of the net proceeds to redeem its existing 6.875% senior notes, with the remaining net proceeds to be used for general corporate purposes. We are very pleased with the successful refinancing transaction highlighted by an upsized deal at a lower coupon rate and extended maturity. Bristow Group Inc.'s financial flexibility, positive financial outlook, and robust balance sheet represent a competitive advantage for the company and favorably position us to pursue various potential growth opportunities. Lastly, Bristow Group Inc. paid $3.7 million in dividends during the quarter, and on April 30, 2026, declared another dividend of $0.25 per share of common stock. This dividend is payable on May 29, 2026 to shareholders of record at the close of business on May 15, 2026. At this time, I will turn the call back to Christopher for further remarks. Christopher? Christopher S. Bradshaw: Thank you. Looking forward, we believe Bristow Group Inc. is favorably positioned to benefit from three global megatrends: increased defense spending, the importance of energy security, and the electrification of transportation. Taking each of these in turn, number one, increased defense spending. Given recent hostilities and the overall geopolitical landscape, we expect defense spending to increase significantly over a multiyear period. With the expected scale of these defense expenditures and the continued budgetary pressures for most countries in the Western world, we anticipate the need for increased public-private partnerships to realize these government and military objectives. We see additional growth opportunities in our core government search and rescue business as well as a broader spectrum of aviation services to government and military customers, particularly in Europe and the Americas. In the context of a complicated geopolitical landscape and expectations for higher defense spending, we believe there will be compelling organic and inorganic growth opportunities for a specialized aviation services provider with Bristow Group Inc.'s track record, operational expertise, and financial flexibility. Number two, importance of energy security. While oil and gas remain commodities, recent geopolitical events have placed an enduring emphasis on where hydrocarbon supplies are located. In the established offshore energy basins that Bristow Group Inc. services, these represent some of the most attractive and secure sources of supply. Deepwater projects are favorably positioned, offering attractive relative returns within the asset portfolios of oil and gas companies, and we believe offshore projects will receive an increasing share of future upstream capital investment. This positive demand outlook is paired with a tight supply dynamic. The fleet status for offshore-configured heavy and super-medium helicopters remains tight, and the ability to bring in new capacity remains constrained with long manufacturing lead times. This constructive supply-demand balance, combined with an increased prioritization of energy security, supports a positive outlook for the offshore helicopter sector. Number three, the electrification of transportation. We have continued to advance Bristow Group Inc.'s position as an early leader in the development of the advanced air mobility industry, which will incorporate the operation of next-generation aircraft powered by electric, hybrid-electric, and other new propulsion technologies. As a leader in vertical flight solutions over seventy-five years, Bristow Group Inc. has a unique opportunity to leverage our core competencies as an advanced, proven operator to serve the needs of this new industry sector. We believe the company has created significant option value with minimal capital commitment to date in what is expected to be a large and rapidly growing addressable market for these new-generation aircraft. In conclusion, we have a very positive outlook for Bristow Group Inc.'s business in 2026 and beyond as we continue the company's evolution as a scaled, multi-mission aviation services provider with complementary business lines. We will now open the call for questions. Operator: At this time, I would like to remind everyone, in order to ask a question, press star then the number 5 on your telephone keypad. If you would like to withdraw your question, press star and the number 5 once again. We will pause for just a moment and compile the Q&A roster. Our first question comes from Savanthi Syth from Raymond James. Your line is now open. Savanthi Syth: Hey, good morning. First question was on fuel prices, especially the jet fuel price and availability. Is that affecting your business either directly or indirectly, and what are your expectations as you go through the year? Christopher S. Bradshaw: Good morning, and thanks for the question. There is a lot of attention, rightfully so, around the aviation jet fuel market globally. Fortunately, Bristow Group Inc. is naturally hedged, as fuel is a pass-through in the vast majority of our business. For example, in all of our OES contracts, there is a pass-through of fuel cost to the end customer. There is one of our government contracts that has a slight lag in the reset, but that is more of a timing issue. So again, we are naturally protected through our pass-through mechanisms. The one area of the business which is a bit different is the commercial airline that we own and operate in northern Australia. There, our recovery mechanisms are more around increasing rates and imposing, as we recently have, a fuel levy on ticket sales. In terms of supply of aviation fuel, thankfully, we have had ample supply to date, and our suppliers assure us that we should continue to do so. That is obviously something we will continue to monitor, and in a scenario where there may be some rationing, we think as a provider of critical transportation services and search and rescue services that we should receive priority. But again, availability has not been an issue to date, and we are naturally hedged and protected through the pass-through mechanisms in our customer contracts. Operator: Our next question comes from Joshua Ward Sullivan from JonesTrading. Your line is now open. Joshua Ward Sullivan: Hey, good morning. As we think about trends in global defense spending you are highlighting as an opportunity for Bristow Group Inc., historically we have primarily known you as a civilian search and rescue operator. As we think about Bristow Group Inc. fitting into the broader defense spending cycle, can you highlight where and how that conversation is going to evolve? And then on the new international sandbox project in Norway with Electro.Aero, how does that differ from the previous one with Dufour? Is it a continuation with just a different aircraft, or are you thinking new insights and different use cases? Finally, on operating expenses and working capital dynamics in the first quarter or even first half, what are the bigger tent poles that will keep us on track with guidance in the second half? Christopher S. Bradshaw: We believe there are multiple avenues of potential benefit for us. First, in our core civilian Coast Guard search and rescue services, where we are the market leader. What we are seeing in a lot of conversations, particularly out of Europe right now, is as those countries have committed to increase their defense spending, usually tied to percentages of GDP, they are looking for ways to balance their overall budgets. One of the ways they could potentially do that is, after spending more money on tanks and missiles, to outsource some of the civilian services like the Coast Guard. We are having conversations with more countries, again particularly in Europe, about potentially outsourcing their civilian services, which could be a source of growth for our core search and rescue business. In addition to that, we already provide other aviation services to militaries and government customers, such as troop movements and ISR, or intelligence, surveillance, and reconnaissance missions. We think those mission profiles will be an additional source of growth for Bristow Group Inc. as we look to expand our capabilities and expand our customer base by providing that broader spectrum of services. Regarding the new international sandbox project in Norway, we would characterize it as an evolution. It is a different aircraft that we are using this time. In the first test arena, there was a focus primarily on shorter routes around cargo logistics. In the new test arena, we are looking at broader regional air mobility applications, which could include both cargo and passenger transportation along longer routes, so more regional mobility with a different range and payload capability. Again, we would characterize it as an evolution of the exploration of this new market for these next-generation aircraft. Jennifer Dawn Whalen: To the question on operating expenses and working capital, this quarter the draw on working capital was related to timing of customer payments, which was similar to 2025. Those have since been almost completely collected. On working capital trends, it should potentially look similar to last year. As for the cadence versus guidance, we provide an annual guidance number. Our Q4 and Q1 are typically lower quarters than Q2 and Q3, and we expect that seasonal trend to continue in 2026. Operator: We will go back to Savanthi Syth from Raymond James. Your line is now open. Savanthi Syth: Thank you. On slide 13, could you remind us how global offshore production CapEx and OpEx translate into offshore opportunities? I am guessing there is a lag, but how do those progress through to Bristow Group Inc.’s P&L? Christopher S. Bradshaw: With reference to slide 13 in the investor presentation, there is an expectation that drilling and exploration activity will pick up in the latter half of this year, and we expect overall offshore spending, both CapEx and OpEx, to remain elevated at increasing levels through the end of this decade. For the two components, OpEx, or operating expenditures, relates to existing established projects, primarily production support, and 85% of the revenues that Bristow Group Inc. generates in our OES business are related to those production activities. That is a direct indicator of spend that goes to services like ours. CapEx is related to new projects, including new exploration and development activities. Any increases there provide upside to us through that 15% of our OES business. Successful new discoveries on the exploration side lead to next year’s or following years’ operating expenditures as production expands. The fact that both categories are expected to grow meaningfully over the next two years are positive tailwinds for our business. Savanthi Syth: Is there a general timeline to look for when these plans step up versus when it translates to Bristow Group Inc.’s P&L? Christopher S. Bradshaw: Project timelines have a spectrum. If it is a tieback to an existing platform, that is typically faster than an entirely new greenfield project. We expect activity to increase in the latter half of this year, and we will see almost an immediate benefit from that. The flow-through into the rest of our business should pick up in 2027 and beyond. For specifics, a subsea well tied back to an existing platform may have roughly a nine-month lead time. An entirely new greenfield project in a new exploration area might be closer to three years between the start of exploration and first production. It is a broad spectrum depending upon the activity. Operator: Our next question comes from an analyst with Capital. Your line is now open. Analyst: Thank you, and good morning, and nice quarter. Can you update us on the OES contract resets in the U.S.? Christopher S. Bradshaw: Good morning, and thanks for the question. Here in the U.S., effective at the beginning of this year, we have reset our largest OES contract in the U.S. Gulf. There are others that will reset over the course of this year. More broadly across our global portfolio, we expect by the end of this calendar year that essentially all of our legacy OES contracts will have reset. We will have the benefit of that this year and, of course, more of a full-year benefit in 2027 and beyond. Analyst: And can you elaborate on the specific operational and financial considerations that led to the decision to retire the S-76 helicopters earlier than expected? Jennifer Dawn Whalen: This decision was primarily based on operational considerations, including repairs and maintenance coverage with the OEM and our ability to procure parts and inventory needed to support the fleet. It has a small installed base, and it has been difficult to continue to keep those lines supported. To meet our customers’ needs, we have made the change. Operator: Our next question comes from Steven Silver from Arx Research. Your line is now open. Steven Silver: Thanks for taking my question. It is an interesting concept laying out these megatrends that Bristow Group Inc. might be in position to participate in over the coming years. Can you discuss timing of the opportunities and how you are balancing them with the continued tight equipment supply and the ever-changing geopolitical landscape? Christopher S. Bradshaw: From a timing standpoint, these are already tangible in many ways. For example, there is progress being made on projects in the advanced air mobility initiatives. Energy security is very tangible for everyone right now, and the importance of where your resources and supply are coming from is front and center. Around defense spending and government opportunity, this is also very tangible given headlines and developments globally and the conversations we are having with both existing and potential customers about new ways to support them. We expect traction and momentum to increase in the latter part of this year, and we see this as a multiyear opportunity set—quite durable in terms of opportunities to continue to grow the business. In the context of the tight supply market, that will always be a challenge in meeting increased demand. Thankfully, we are well positioned as the largest operator in the space with the largest global fleet. That presents both challenges and opportunities to optimize the portfolio—where the assets are and whether they are generating the best return potential. We also have a competitive advantage in our financial flexibility, a differentiator versus competitors. We can bring in aircraft on lease or purchase them when that makes more sense. Being the biggest operator for most of our key OEMs on the vertical aircraft side, we are as well, if not better, positioned than anyone to capitalize on that. Operator: This concludes our question and answer session. I will now turn the call back over to Christopher S. Bradshaw for closing remarks. Christopher S. Bradshaw: Thank you, Michael. Thanks, everyone, for your time. I look forward to updating you again next quarter. In the meantime, stay safe and well. Operator: This concludes today's call. You may now disconnect at any time.
Operator: Good day, everyone. And welcome to EOG Resources, Inc. First Quarter 2026 Earnings Results Conference Call. As a reminder, this call is being recorded. For opening remarks and introductions, I will turn the call over to EOG Resources, Inc.'s Vice President of Investor Relations, Pearce Hammond. Please go ahead, sir. Pearce Hammond: Thank you, Cindy, and good morning, and thank you for joining us for the EOG Resources, Inc. First Quarter 2026 Earnings Conference Call. An updated investor presentation has been posted to the Investor section of our website, and we will reference certain slides during today's discussion. A replay of this call will be available on our website beginning later today. As a reminder, this conference call includes forward-looking statements. Factors that could cause our actual results to differ materially from those in our forward-looking statements have been outlined in the earnings release and EOG Resources, Inc.'s SEC filings. This conference call may also contain certain historical and forward-looking non-GAAP financial measures. Definitions and reconciliation schedules for these non-GAAP measures and related discussion can be found on the Investor Relations section of EOG Resources, Inc.'s website. In addition, any reserve estimates on this conference call may include estimated potential reserves as well as estimated resource potential not necessarily calculated in accordance with the SEC's reserve reporting guidelines. Participating on the call this morning are Ezra Y. Yacob, Chairman and Chief Executive Officer; Jeffrey R. Leitzell, Chief Operating Officer; Ann D. Janssen, Chief Financial Officer; and Keith P. Trasko, Senior Vice President, Exploration and Production. I will now turn the call over to Ezra Y. Yacob. Ezra Y. Yacob: Good morning, and thank you for joining us. EOG Resources, Inc. is off to an exceptional start in 2026. Our track record of consistent, high-quality execution continues to set us apart, delivering strong operational performance across our foundational assets while steadily advancing our emerging plays and exploration opportunities. The first quarter was a clear extension of that momentum. We exceeded expectations across key operating and financial metrics; production volumes, total per-unit cash operating costs, and DD&A all outperformed guidance midpoints, driving robust financial results. We generated $1.8 billion in adjusted net income and $1.5 billion in free cash flow. Consistent with our commitment to disciplined capital allocation and enhancing shareholder value, we returned nearly $950 million during the quarter through our regular dividend and opportunistic share repurchases. In today's macro environment, EOG Resources, Inc. is well positioned in realizing the benefits of decisions we made during a more challenging commodity price backdrop. Those actions were deliberate and are paying off. For example, we strengthened our portfolio through the acquisition of nCino, increasing our oil production by approximately 10%, and we complemented that with a strategic bolt-on acquisition in the Eagle Ford. We also enhanced our market exposure by securing LNG contracts linked to JKM and Brent, positioning us to capture premium pricing in global markets. Additionally, we expanded our international footprint with high-quality concessions in the UAE and Bahrain, opportunities that would be difficult to replicate in the current price environment. Finally, we continue to deepen our vertical integration across critical services. This differentiated approach further improves efficiencies, lowers costs, and strengthens execution across our operations. As a testament to investing capital at a disciplined pace, between 2022—which was the last period of very robust oil prices—and 2026, where we are in a similar oil price environment, we have added nearly 100 thousand barrels per day of oil, over 140 thousand barrels per day of NGLs, and nearly 1.6 billion cubic feet per day of gas to EOG Resources, Inc.'s net production. We did this while generating an average ROCE of 27%, returning approximately $20 billion to shareholders, and maintaining a pristine balance sheet. EOG Resources, Inc. continues to take a consistent approach to capital allocation in the current environment. Given robust oil prices and softness in natural gas, we have refined our plan for the balance of 2026. We are increasing oil and NGL production while maintaining our $6.5 billion capital budget by reallocating capital from gas to oil-weighted assets. This is a disciplined and pragmatic rebalancing that underscores the value and flexibility of our multi-basin portfolio. Our 2026 program includes production growth, domestic and international exploration, and a peer-leading regular dividend with a breakeven oil price below $50 WTI, leaving ample room for additional cash return to shareholders under current strip prices. This revised plan strikes the right balance between near-term free cash flow generation and long-term value creation, while preserving the strength of our balance sheet. Turning to the macro backdrop, the conflict involving Iran is the most significant development impacting our business and the broader energy markets. Disruptions to crude supply and flows through the Strait of Hormuz are estimated to remove approximately 900 million barrels from global markets through June 2026. Even in a scenario where the conflict is resolved relatively quickly, rebuilding global inventories back to five-year average levels will provide ongoing support for oil prices. Additionally, we expect the post-conflict outlook to include replenishing strategic petroleum reserves, limited remaining global spare capacity, and a higher geopolitical risk premium. Together, these dynamics point to a constructive oil price environment with geopolitical developments likely to continue driving periods of upside volatility. On natural gas, near-term pressure remains with Lower 48 storage levels above the five-year average. However, our medium- to long-term outlook remains positive. U.S. natural gas benefits from two durable structural tailwinds: rising LNG feed gas demand and increasing electricity consumption. We expect U.S. natural gas demand to grow at a 3% to 5% compound annual growth rate through the end of the decade and believe the previously forecasted potential for global LNG oversupply has been significantly reduced with the damage to LNG infrastructure abroad. Our investments in building a premium gas position to complement our oil business have us well positioned to supply these expanding markets. And while EOG Resources, Inc.'s share price has increased following the onset of the conflict, the move in oil prices has been even more pronounced. As a result, we continue to believe EOG Resources, Inc. represents a compelling investment opportunity for several reasons. First, we have a high-return domestic and international asset base with deep, long-duration inventory. Across our multi-basin portfolio, we estimate approximately 12 billion barrels of oil equivalent of resource potential generating greater than a 100% direct after-tax rate of return at $55 WTI and $3 Henry Hub. Our disciplined capital investment allows us to pace development appropriately and direct capital towards the highest-return opportunities across the portfolio. Second, we bring differentiated exploration capabilities and approximately 25 years of unconventional experience, an advantage we have consistently leveraged to identify and capture opportunities ahead of the market. Third, we have a demonstrated track record as a low-cost, highly efficient operator supported by strong technical expertise and operational execution. In the past year alone, we reduced average well cost by 7% and operating costs by 4%. Fourth, we generate durable free cash flow and consistently deliver a peer-leading return on capital employed. Fifth, we remain committed to a sustainable and growing regular dividend, complemented by meaningful additional cash returns. Notably, we have never reduced nor suspended our regular dividend in 28 years. Finally, our pristine balance sheet provides resilience and strategic flexibility through commodity cycles. All of this is underpinned by EOG Resources, Inc.'s distinctive culture: a decentralized, collaborative operating model that fosters innovation and drives performance at the asset level. In summary, we are off to a strong start in 2026 and are well positioned to execute in the current macro environment. We remain focused on delivering sustainable free cash flow, maintaining operational excellence, and creating long-term value for our shareholders. Now, I will turn it over to Ann D. Janssen for details on our financial performance. Ann D. Janssen: Thank you, Ezra. EOG Resources, Inc. delivered another quarter of outstanding financial performance, once again demonstrating the power of our consistent approach to capital allocation: invest with discipline, return cash, and maintain a pristine balance sheet. In the first quarter, we generated adjusted earnings per share of $3.41 and adjusted cash flow from operations per share of $5.85, building free cash flow of $1.5 billion. During the first quarter, we returned approximately $950 million to shareholders, nearly $550 million through our regular dividend and approximately $400 million in share repurchases. With $2.9 billion remaining under our current share repurchase authorization at March 31, we have substantial capacity for continued opportunistic buybacks. Our financial position remains exceptional. We ended the first quarter with over $3.8 billion in cash, an increase of approximately $450 million since year-end 2025, and net debt of $4.1 billion. Our leverage target, which is maintaining total debt at less than one times EBITDA at bottom cycle prices of $45 WTI and $2.50 Henry Hub, remains among the most stringent in the energy sector. This provides both downside protection during challenging periods and the financial flexibility to invest strategically through commodity cycles. Turning to 2026, our low-cost operations and financial strength allow us to be unhedged, providing shareholders full exposure to higher oil prices. At current strip pricing and using guidance midpoints, our 2026 plan generates a record $8.5 billion in free cash flow. Given the substantial increase in oil prices since late February, and the subsequent increase in our free cash flow, we expect to return at least 70% of free cash flow this year, which would represent a record annual cash return to shareholders. The foundation of our cash return remains our regular dividend. Historically, we supplement the regular dividend with share buybacks or special dividends. Over the past three years, we have favored share buybacks as our primary supplemental return mechanism as we believe the shares are attractively valued and we like the connection between repurchasing stock and dividend increases. We are committed to executing buybacks opportunistically. If market conditions warrant, we could build some cash on the balance sheet to provide future flexibility to maximize long-term value creation. Our track record speaks for itself. Whether through buybacks, special dividends, strategic bolt-on acquisitions, or infrastructure investments, we have consistently deployed capital to enhance shareholder value. EOG Resources, Inc.'s financial foundation has never been stronger. We are generating significant free cash flow, returning meaningful cash to shareholders, and maintaining financial flexibility to capitalize on opportunities as they arise. This combination of operational excellence and financial discipline positions us exceptionally well for long-term value creation. With that, I will turn it over to Jeffrey R. Leitzell for our operating results. Jeffrey R. Leitzell: Thanks, Ann. I would first like to thank all of our employees for their outstanding performance and efficient operational execution in the first quarter. Our quarterly volumes, total per-unit cash operating costs, and DD&A beat guidance midpoints. This was accomplished during the quarter with a significant winter storm event that impacted numerous operating areas and caused substantial third-party downtime. With the benefit of EOG Resources, Inc.-owned and operated infield gathering systems, the use of in-house production optimizers, area-specific control rooms, and our diverse marketing strategy, our teams were able to manage remote operations and minimize downtime during this event. These efforts have allowed us to get off to a strong start in 2026, and because of that, I would like to recognize our field teams for all their hard work and dedication. For the full year 2026, we are increasing oil production guidance by 2 thousand barrels per day and NGL production guidance by 6 thousand barrels per day while keeping total capital expenditures flat at $6.5 billion. The added oil and NGL volumes are driven by reallocating capital across the portfolio rather than increased activity levels. From a development standpoint, we are moderating near-term drilling and completions activity at Dorado in response to current gas prices. Dorado remains a large-scale, high-quality dry gas resource, and we continue to invest in this foundational asset at a pace to balance short- and long-term free cash flow, grow into emerging North American gas demand, and leverage our technical learnings and infrastructure to continue lowering breakevens and expand margins. Capital is being reallocated to our foundational oil plays to leverage current market conditions. This initiative underscores the strength of our multi-basin portfolio, which allows us to continually optimize capital allocation as commodity cycles evolve. This reallocation is weighted towards 2026 while maintaining capital discipline and preserving long-term value across the portfolio. Turning to costs, we have not seen any significant inflation with our services or cost increases on high-quality rigs or frac spreads. For 2026, approximately 50% of our well costs are already locked in, and we continue to rebid service to maintain pricing discipline. While some vendors have added fuel surcharges, our exposure to higher diesel prices is structurally lower than many peers. Approximately 70% of our drilling rigs can run on natural gas, and 100% of our frac fleets are e-frac or dual-fuel capable, both able to be powered by our low-cost fuel gas. This significantly mitigates exposure from rising diesel prices. On the operating cost side, the impact from higher diesel prices has been minor. Overall, we are insulated from a number of these potential inflationary pressures through our contracting strategy and self-sourced materials vertical integration. Long-term, staggered contracts limit exposure to spot market volatility, while our ability to source key inputs directly and leverage integrated infrastructure reduces risk to higher prices. Collectively, these actions allow us to maintain capital efficiency, drive execution, and focus on sustainable cost reductions, and are complemented through utilizing data and technology to reduce time on location. All of this delivered significant results across our portfolio in the quarter. First, on drilled feet per day, we realized the following increases in 2026 versus the full-year 2025 average: in the Utica, we increased by 22%; the Powder River Basin increased by 13%; and the Eagle Ford increased by 12%. We continue to make significant strides in capital through lateral length optimization, resulting in fewer vertical wellbores to drill, more productive time both on surface and downhole, as well as a reduced surface footprint. In addition, EOG Resources, Inc.'s internal drilling motor program acts as a force multiplier on these longer laterals, improving downhole drilling performance and giving us the confidence to continue extending laterals across the portfolio. We are focused on drilling two- to three-mile laterals in the Delaware Basin and three- to four-mile laterals in the Utica and Eagle Ford plays. Second, our completions teams are continuing to increase stimulation efficiency. Each of our foundational plays has increased completed feet per day, led by the Eagle Ford and Delaware Basin, at 12% and 17% increases during the first quarter, respectively. One major factor that has allowed us to accomplish these results is an increase in our maximum pumping rate capacity by approximately 20% per frac fleet since 2023. This has not only allowed our technical teams to decrease their total pump times but also allowed our engineers the flexibility to tailor each high-intensity completion design around the unique geological characteristics of every target. Additionally, our teams are applying real-time geology, drilling, and completions data to improve well performance across the portfolio through innovative completions and targeting strategies. For example, our Western Eagle Ford wells are benefiting from larger frac job designs, and we are seeing positive results in the Utica from staggering our landing zones. Third, I would like to highlight our Janus Natural Gas Processing Plant in the Delaware Basin. Since November 2025, this plant has averaged 300 million standard cubic feet per day of processing, representing 94% plant utilization. Janus had a record month in March 2026 with 100% utilization and 300 million standard cubic feet per day of processing. Strong operations at Janus help us reduce Delaware Basin GP&T costs while highlighting the advantage of strategic infrastructure investments. Delivering this level of consistent performance is impressive and is a testament to the execution of the teams on the ground. This is another example of EOG Resources, Inc.'s operational excellence delivering financial results. Lastly, our marketing strategy—built on flexibility, diversification, and control—continues to deliver significant value. A key and growing aspect to this is our access to international markets and exposure to premium pricing. On the crude side, we have access to 250 thousand barrels per day of export capacity out of Corpus Christi. We leverage this capacity to reach international markets, and it gives us the flexibility to price crude on a domestic-based or Brent-linked price. Regarding LNG gas supply agreements, our Cheniere contract expanded from 140 thousand BTUs per day to 280 thousand BTUs per day during 2026. An additional 140 thousand BTUs will start in the second quarter of this year, bringing us to the full 420 thousand BTUs per day. These volumes are linked to JKM or Henry Hub pricing at EOG Resources, Inc.'s election on a monthly basis. We also supply 300 thousand BTUs per day of LNG feed gas at Henry Hub-linked pricing. Together, these contracts highlight that our marketing strategy is a competitive advantage and demonstrate how targeted international pricing exposure is driving premium realizations and incremental value across both crude and natural gas. After a strong first quarter, EOG Resources, Inc. is well positioned to execute on its full-year plan, and we are excited about our operational team's ability to drive value through the cycles. Now here is Ezra to wrap up. Ezra Y. Yacob: Thanks, Jeff. I would like to note the following important takeaways. First, we have started 2026 with strong momentum and execution across the business. Second, capital discipline is a core pillar of our value proposition. We have updated our 2026 plan to increase oil production while keeping capital spending unchanged. Our portfolio is performing, our balance sheet is resilient, and our capital allocation remains firmly anchored in returns and shareholder value. Third, we expect to continue to deliver in 2026 and beyond for our investors. In a macro environment that demands both agility and rigor, we are well positioned not just to navigate volatility, but to capitalize on it. Our disciplined approach to investment across our foundational and emerging assets continues to grow the free cash flow potential of the company both in the short and long term. Overall, our success is grounded in our commitment to capital discipline, operational excellence, and sustainability, underpinned by our culture. Thanks for listening. Now we will go to Q&A. Operator: Thank you. The question and answer session will be conducted electronically. Please do so by pressing the star key followed by the digit one. If you are using a speakerphone, you are allowed one question and one follow-up. We will take as many questions as time permits. Once again, star one. Our first question comes from Arun Jayaram of JPMorgan Securities LLC. Go ahead, please. Arun Jayaram: Yes, good morning. First question is on marketing. You raised your full-year oil guidance by $3.25 a barrel. Can you remind us of the pricing mechanism on those waterborne barrels out of Corpus as well as the potential uplift you anticipate from the Cheniere marketing agreement as you are reaching 420 thousand BTUs in 2Q? Jeffrey R. Leitzell: Yes, Arun, thanks for the question. First off, on the waterborne volumes that you talked about, as I mentioned in my opening comments, we have about 250 thousand barrels per day of export capacity. Those barrels can be linked either to domestic pricing or Brent-linked pricing. We basically sell those cargo by cargo, on an each-ship basis. There has been a lot of price volatility recently with the conflict, so we have been able to sell numerous cargoes at attractive pricing. It has really been paying dividends to have that export capacity to diversify our marketing on the oil side. Over on the JKM side, when you look at LNG, you are starting to see a little bit of the benefit from that JKM linkage, but you are also seeing some of the volatility in the market that is counteracting that, so there is a little bit of noise. As you know, we came into the year producing 140 thousand MMBtu into that Cheniere contract. We increased that another 140 thousand in the middle of the first quarter, so you are not seeing the full realization flow through, and then we will have the additional 140 thousand come in during the second quarter, and you will continue to see it build into our overall guidance as you move forward. The other thing I would note on the actual price realization for gas is that although we have pretty minimal exposure in the Permian to Waha—less than 7%—you do see a little bit of an effect on the realization for the first quarter, especially with some of the lower pricing over there. I do not think you will see that alleviate until probably the last quarter, whenever we start bringing on some more egress in the Permian Basin and bring on that 4 million to 5 million a day of capacity. All in all, we are extremely happy with our overall international exposure. It is a great piece to diversify our overall marketing strategy, and especially at times of volatility, I think our teams are doing a great job taking advantage of it. Arun Jayaram: Great. And my follow-up is on the Middle East exploration program. I was wondering if you could provide a little bit of an update on what is going on on the ground and how, Ezra, you think about capital allocation given the geopolitical risk situation, although you could argue if the UAE does leave OPEC that perhaps provides a potential tailwind to growth. And perhaps you could give us a sense of when EOG Resources, Inc. may be in a position to share initial results either from Bahrain or UAE on your exploration program? Ezra Y. Yacob: Yes, Arun, good morning. There is a lot there, so let me unpack some of it and maybe I will let Keith P. Trasko address the current operations piece. On the UAE’s decision to leave OPEC, it does not really have any change or impact for EOG Resources, Inc. We just recently began operations in the country, so we have not felt any impact, and going forward, we certainly do not expect to. I think it shows some of the positive steps the UAE is taking within their country. From our perspective, our intention has always been that if the plays are successful, returns are going to drive the investment and growth in the oil play more so than any type of production quotas. As far as continued capital allocation given the geopolitical risk, longer term it is still early in the conflict to be making those types of decisions. During the exploration phase, we entered this trying to do a couple of different things—certainly evaluating the subsurface potential of the fields. We certainly wanted to evaluate the surface and operating environment: can we get access to high-quality equipment, can we build scale there, and things of that nature? We are also looking during the exploration phase to evaluate the geopolitics, the sanctity of contracts, our partners, things of that nature. With great confidence here during this conflict, we have definitely landed with strong partnerships with both ADNOC and BAPCO. There has been very clear communication and straightforward alignment on our operations, and that really gives us pretty good confidence going forward. It actually gives me confidence in the way that we approach or look at the potential for other international opportunities. Keith P. Trasko: On the operations side, we are closely monitoring the situation in both Bahrain and the UAE. It is pretty dynamic. We have some employees that remain in the region while others have been repositioned. Since the program is still in the exploration phase, our 2026 plan for Bahrain and UAE was designed with a lot of flexibility. On the timeline side, both projects are moving forward in line with our expectations for exploration plays. The near-term timeline has slipped slightly from the start of the year, so we anticipate having results in the second half of this year, and we will provide additional updates if there are material changes. Over the longer term, we remain very excited. We entered the UAE and Bahrain because we saw compelling subsurface opportunities, positive production results from prior horizontal development, and strong partners in both countries. In Bahrain, you have a tight gas sand. In the UAE, you have a carbonate mudrock; we are very used to dealing with those types of rocks. We believe they will benefit significantly from the drilling and completions technologies that we employ in our domestic unconventional plays every day. In the current exploration phase, we are gathering data on long-term well costs, evaluating our ability to access high-performing service equipment, and we started exploration activity with limited operations in both countries last year. Our goal remains to leverage our core competencies in onshore unconventional development to unlock resources competitive with the domestic portfolio. Operator: Our next question comes from Stephen I. Richardson of Evercore. Go ahead, please. Stephen I. Richardson: Hi, good morning. Ezra, it sounds like the decision to pivot a little bit more towards liquids is more to do with the opportunity of liquids than it is a change in your longer-term view in gas. Maybe you could talk about the value of keeping the capital flat and making that adjustment within the portfolio, and then what it does sound like you are thinking—that this is a longer-term impact to market, which I think we would agree with. So how does that set you up for 2027 and beyond from a liquids and potentially oil growth perspective? Ezra Y. Yacob: Yes, Steve, great question and good morning. I would start with the decision on the capital reallocation this year. It really is just looking at where the dynamics have played out and what has happened since the beginning of the year. There has been a dramatic upset on the liquids side, on the oil side, and you have seen a dramatic response in the oil price. Conversely, on the natural gas side, inventory levels—after starting the year off pretty strong supporting price—have climbed above the five-year average, and gas prices have pulled back a bit. For us, it is a pretty simple calculation of reallocating some of the activity in Dorado to some of our more oil-weighted assets, not just for returns, but quite frankly, there is a call across the globe right now for increased oil supply, and so that is what we are doing. In Dorado, we have made fantastic progress. We have reduced our well costs with our target down below $700 per foot, and we feel confident that we can hit that this year. As you know, we have a low breakeven price of about $1.40 per Mcf. The advantage of having a multi-basin portfolio with both geographic and product diversity is that we have the flexibility to move capital allocation around throughout the years if you see something as dramatic as we have this year. For 2027, this does set us up better to grow liquids—these maneuvers that we have done now—to grow liquids, maybe a little more oil, a little more aggressive in 2027. But really, it is too early to get there. We need to continue to see how the conflict proceeds. That is why we are confident in our plan today to maintain our capital budget because we want to see how these things start to play out a little bit longer. We are not quite there yet as far as making a call on picking up rigs or frac fleets and investing longer term. Just this morning, over the last 10 to 12 hours, you can see how volatile the situation remains. While we do think longer term this sets up an environment where there is a much higher floor for oil price than where we entered the year, we would like to have better line of sight and understand that a little bit more before we took any additional steps forward. Stephen I. Richardson: That is great. Very clear. Maybe I could also ask on the buyback. It looks like you stepped up on the buyback pretty significantly in the month of April here, and that is despite, I think we would agree, that oil price is above a view of mid-cycle when you just mentioned some of the volatility. I think Ann mentioned this in her script, but can you talk a little bit about how tactical you are willing to be around the buyback and how you think about that relative to the value of just a ratable program throughout the year? Because obviously there is a ton of volatility in the commodity and your stock price as we look forward. Ann D. Janssen: Yes. Good morning, Steve. Through the first four months of 2026, we have seen exceptional value in our stock, and that has been reflected in the buyback activity you referenced. It has put us in a good position to return at least 70% of annual free cash flow back to our shareholders this year. As reported in the first quarter, we repurchased 3.2 million shares. To dissect that a little, we did have some limitations on buybacks during the fourth-quarter earnings period because for the first two months of 2026, we were operating under the parameters of a 10b5-1, so the majority of those 3.2 million shares were repurchased in March. Then we leaned in, and from April 1 to April 28, we repurchased approximately 2.3 million additional shares. That is really a testament to us continuing to see a lot of value in our stock driven by tremendous positive momentum we see within the company. We believe those buybacks support sustainable growth of our regular dividend. Finally, if you look at the energy weighting in the S&P 500, despite the increase in stock prices, it is still very low at approximately 3.5%. You can also see free cash flow yields in the energy sector are close to historic highs. We have allocated over $7.1 billion to repurchases since we first started buying back stock in 2023, and that has allowed us to reduce our share count by more than 10% at compelling prices. That disciplined approach focuses on being opportunistic and positions us to create meaningful value for our shareholders, and we remain confident continued improvement in our business and growing intrinsic value will provide additional opportunities for us to buy back our stock going forward. Operator: The next question comes from Joshua Silverstein of UBS. Go ahead, please. Joshua Silverstein: Just a question on the shifting activity. I was curious about the decision process as to how you reallocated amongst the three different basins there. Why 10 more in the Utica versus five in the Delaware versus, say, 15 all in the Utica or Delaware? I was curious if there was something that drove this or if it was based on what you could do with the existing rigs and frac crews there? Thanks. Jeffrey R. Leitzell: Hey, Josh. Thanks for the question. There is nothing to read into there at all. It really just happens to be what flexibility we have in our activity schedules at this point in the year across all the assets. A couple of things I would state: in the Utica, where we are increasing 10, we have seen some of the easiest drilling in the company, and we have talked about that very openly, with really solid efficiency gains even in the first quarter where we increased our drilled feet per day by 22% versus 2025. Seeing outstanding results there has allowed us to build our working DUC count a little more than some of the other plays. In the Delaware, everything is going outstanding as well. We tend to be a little bit more efficient on the completion side there because we have full super-zipper operation across our fleets along with all of our sand logistics in place, so you really do not have delays there. We also saw a 17% increase in the first quarter on completed lateral feet per day, which was keeping the DUC count a little tighter. That is all it is—just the mechanics of how things were moving, the timelines we had between our rigs and completion fleets in each one of the divisions, and how it made sense to allocate that capital and keep each division healthy so we can keep improving each one. Joshua Silverstein: Got it. Thanks for that. And then I know you have not added any additional CapEx for exploration for this year, but I am curious with the additional cash you will now be building if there are new prospects you are teeing up for exploration for next year, both domestically and internationally. I know you guys are always out looking for new areas to go in—some resource upside. So curious for an update there. Thanks. Keith P. Trasko: Yes. We have a number of exploration plays, both domestic and on the international side. In fact, I would say maybe even more on the domestic side than international. Our teams are always utilizing data from our successful plays to revisit basins, look at new basins, and see what could be unlocked with the new technology we have applied to other plays and with the lower costs of today than in the years that the basin was first looked at. We are always on the lookout for what can make our inventory better. I cannot comment on specifics, but as you know, exploration has always been our preferred method of adding low-cost reserves. You look at DoradoCo, you look at Dorado, you look at our Utica first-movers, Trinidad exploration; even the Encino acquisition was born of organic exploration from the years prior. We expect all our asset teams to be exploring for inventory additions and/or something transformative. We have several prospects and leasing campaigns, and when we are ready to comment on specifics of a given program, we do so. Exploration is a big way that we deliver value to shareholders. Operator: The next question comes from Scott Michael Hanold of RBC. Go ahead, please. Scott Michael Hanold: Yes, thanks. If I could return to the shareholder return discussion, I am not sure if this is for Ann or Ezra, but could you give us a view of how you think about variable dividends? I know there have been a number of your peers who have shelved that concept. If your stock price does go at a point, do you still see variables having some value? And secondly, on shareholder returns, is there the ability or desire for you to push to, say, a 90% to 100% return versus the base 70% level like you have done in past quarters? Ezra Y. Yacob: Good morning, Scott. Thanks for the question. On the special dividend piece, that is still in our mix. We have been clear that the foundation of our cash return to shareholders is the regular dividend. That is the one that we love—sustainably growing that regular dividend. We think it sends a message of discipline to our investors; it shows increasing confidence in capital efficiency going forward. When we first started doing additional cash return three and a half to four years ago, we leaned in on special dividends a bit more than buybacks. We have always said that, in general, we are pretty agnostic to how we return that additional cash to shareholders, but we are committed, as far as buybacks go, to being opportunistic. We have really shifted in the last few years. Over just over three years now, we have shown a track record of consistently being in the market every day looking for opportunities. So opportunistic—not necessarily just holding out for a dramatic black swan event—but really looking at where we can create value for shareholders through the cycle. I think we have done a great job with that. We are also very cognizant not to let this program become procyclical, and that is one reason why we have that 70% minimum return commitment. Going to a 90% to 100% return at these elevated prices—I would not say nothing is impossible, but I would highlight that we would like to build a little more cash on the balance sheet in this part of the upcycle and prepare for a potential future pullback in prices where we could continue our track record of positive countercyclical investment. Some of the things I mentioned earlier—investment in the Janus processing plant, the Encino acquisition, the bolt-on in the Eagle Ford, some of our marketing agreements—are really when we create significant value for shareholders: being able to have the balance sheet to zig when maybe others are zagging. Scott Michael Hanold: Appreciate that context. My follow-up is on the premium pricing in the contracts. You all obviously have been a step ahead of other companies with signing these agreements and benefiting right now. As you look ahead, is there further opportunity to build on that, or are these more countercyclical decisions? Jeffrey R. Leitzell: Yes, Scott. Our marketing team looks day in and day out for new opportunities, new outlets, and diversifying the portfolio we have—both domestically, where we have emerging plays and are in new areas, and internationally. We are constantly adding new markets and trying to minimize differentials to maximize netbacks. On the international side, we have great exposure with our LNG agreements, as we have talked about, getting close to 1 Bcf a day. We continue to look for unique ways to price gas going offshore to try to take volatility out and get a premium price. As we have talked about, the Cheniere agreement is kind of a sweetheart deal, so it is tough to get those kinds of terms. But we are still in the market and looking at opportunities. With the size of the company we are now, we have a lot of scale in all these basins and internationally. With how low-cost we are, we are able to keep operations moving with consistent activity. That is an advantage to us in negotiations, along with our balance sheet—which counterparties know will be resilient through cycles—and we can lean on that. That tends to help in negotiations to get us better pricing. Our goal is to continue to improve our overall price realization and maximize netbacks, and we will continue to look for ways to do that. Operator: Our next question comes from Phillip J. Jungwirth of BMO. Go ahead, please. Phillip J. Jungwirth: We are coming up on almost a year since you announced the nCino acquisition. One of the things you noted at the time was EOG Resources, Inc.’s volatile oil wells being 8% to 10% more productive than Encino. I know we have talked a lot about lower well costs, but hoping you could update us on what you are seeing on the productivity side now that you have some EOG-drilled and completed wells on. And then also, could you expand on that staggered lateral comment that you had earlier and what exactly you are doing here? Keith P. Trasko: Morning. On the productivity side in the Utica, we are treating it all as one asset now. We see really consistent productivity in the program year over year. I would say we are even a little surprised to the upside in some of the step-out areas. On the staggering targets that Jeff mentioned, we have been testing that, especially in the north where you have a thicker section. We have been seeing good results. Our goal is always to increase recovery of each acre and each section, and we will take those learnings, integrate them with our detailed geologic mapping, and see where in the play we can apply it. Over the long term, there are a lot of opportunities to apply learnings from how Encino did things through to our other analog plays within the company to continue to improve well performance. Phillip J. Jungwirth: Okay, great. And then you also mentioned that Eagle Ford bolt-on earlier in the prepared remarks. You have done a really good job improving returns in the Western Eagle Ford through efficiencies, long laterals—four milers. It is an area we have not seen much industry consolidation. Based on the synergies you have realized in the Utica, does this make you more encouraged about pursuing additional bolt-ons in the Eagle Ford or elsewhere, given you can bring superior operating and marketing capabilities that can create value? Ezra Y. Yacob: Thanks, Philip. It is a good question. We always knew before doing the nCino acquisition that we should have an advantage in a lot of areas—assets we might be able to improve with our operations, cost structure, and marketing, like you mentioned. The challenge has always been getting these deals done at a price that allows the all-in returns to really compete. Anytime you are buying anything with a lot of production, that weighs on the returns profile of the overall project, so the upside really needs to be there to counteract a typical 10% to 12% bid-ask spread. That is always the challenge. Cyclically, like you pointed out, last year we were able to get a couple of deals done. The first was Encino, obviously with a lot of production, but Keith just talked about a tremendous amount of upside. We really got to prove to ourselves exactly what you are asking: that scale, our knowledge base, and our database from outside a single basin—and bringing data from other basins—can add tremendous value. We saw great margin expansion and great improvement on the well productivity side and, as you pointed out, on the well cost side. The other one we did was in the Eagle Ford. That was kind of a needle in a haystack. It essentially had zero production—very, very low production—and we were surrounding that acreage. It fit in like a jigsaw puzzle piece. It was fantastic for us. We immediately got the production that was there into some of our infrastructure. We immediately started to extend some laterals we were drilling surrounding the acreage onto the acreage, and very quickly, within this first year that we have had that bolt-on in our portfolio, we have already drilled a number of high-return wells on it. You are right—it has gone a long way toward telling us that continuing countercyclically and focusing on returns is a winning strategy for us when it comes to either bolt-ons or potential deals that come with a bit of production as well. Operator: The next question comes from Doug Leggate of Wolfe Research. Go ahead, please. Doug Leggate: Ezra, I wonder if I can go back to the liquids pivot, and I just wanted to understand a little bit more what you are actually doing there. Have you physically reallocated equipment, or was this—forgive me—a classic EOG beat-and-raise? What have you actually done differently? The reason I ask is, if you flex things that quickly, how do you maintain efficiency? I am wondering if this was underlying production and productivity beats that were going to happen anyway. Jeffrey R. Leitzell: Hey, Doug. The first thing I would say with the actual productivity raise for the year is that we did have a beat in the first quarter. Other than that, we are reacting to what we are seeing from a price standpoint and making very modest adjustments to the activity schedule around the portfolio—just shifting investment from gas to oil. What that really means is we are taking a little bit of capital out of Dorado. It is not a whole lot. We are going to drop them down to just less than a frac fleet, so they will still have plenty of activity to focus on the asset, continue to move it forward, and progress it. The only thing is the exit rate now in Dorado will drop a little bit; it will go from a Bcf target to just over 800 million a day. We actually do have a rig down there that is going to go up and drill just a couple of DUCs in San Antonio, actually. We are reallocating the rest of the capital to add five net completions in the Delaware Basin and then the 10 net in the Utica, which is very small and within rounding. Five wells in the Delaware are just additions to a package—it is not really any additional equipment. In the Utica, it is similar—where the rig has gotten out in front, it is just a couple of packages of DUC inventory. A lot of it, as I said, is due to the great performance and consistent efficiency, which has allowed us to do the raise on the whole year within the same CapEx of $6.5 billion. As we stated, it will add 2 thousand barrels per day on the year for oil and 6 thousand barrels per day on the NGL side. We keep hitting on it, but it is one of the benefits of having this multi-basin portfolio. We have multiple high-return assets across the company that all compete for capital, and it gives us a lot of flexibility to alter our plan in real time very quickly without much disturbance—and maximize shareholder value through the cycles. Doug Leggate: I appreciate that, Jeff. Ezra, maybe for you then—specifically, my follow-up is basically not a capital return question necessarily; it is more of a philosophical question. Remarkably, your yield is now higher than ExxonMobil, and we tend to think of them as using buybacks to manage their dividend burden. You have also got a pristine balance sheet. How do you think about that split between allowing the dividend burden to move up versus the risk—as you pointed out—of procyclical buybacks? And maybe as an add-on to that, are you prepared to let your balance sheet go back to net debt zero? Maybe you could touch on those issues. Ezra Y. Yacob: Those are good questions. On net debt zero, I would not say it is a target for us, but you clearly saw that we have been there before. I would not mind getting there again. With the 70% minimum commitment we have in place, it would be difficult to get there this year, but potentially in the next couple of years. One of the things to keep in mind is that we think having a pristine balance sheet is a competitive advantage. It allows you to move from a position of strength, and that includes cash on the balance sheet. With regards to the dividend, hopefully the dividend yield will move the other way and get lower. The way we think about share repurchases—this has been a bit of a learning experience—it is straightforward math that when you are buying back stock, that reduces your absolute dividend commitment. Having been in the market buying back stock for three years, we really have good experience with that, and we love it. Going back to Scott’s question, maybe we are not quite as agnostic anymore on special dividends versus stock buybacks because we do see the ongoing benefit and the correlation with our ability to continue to increase the regular dividend. The regular dividend is now about $4.80 annualized per share, and it has a yield that is competitive across the broad market. Over the three years we have been buying back stock—during a softer part of the cycle—we have a compound annual growth rate on the dividend of about 9%. That is something we are proud of and continue to look forward to discussing with the Board. Our dividend increases should reflect growth, margin expansion, and the ongoing capital efficiency of the company, and any share repurchases obviously help that as well. Operator: Next question comes from Analyst at Truist. Go ahead, please. Analyst: Thanks, Cindy. Good morning, everyone. Thanks for the time and prepared remarks. Ezra, I was hoping you could go back to your views on the macro. It certainly seems like maybe your bias, once all this ends, is mid-cycle oil is maybe higher than what we all anticipated prior to the Iran conflict. Can you talk a little bit about how this could change how you allocate capital on a go-forward basis? I am curious how you think about more growth in a supportive oil price environment and how you allocate across oil versus gas? Ezra Y. Yacob: That is a good question. I would say we are a little bit more bullish going forward. It might be a bit of semantics, but I am not sure we would say the mid-cycle price has changed dramatically. I would frame it as: for the next few years, we think we are going to be in an environment above mid-cycle prices. Historically, this is a cyclical business. When you look back at five-, 10-, 15-year runs, WTI usually ends up in the mid-$60s—around $65. The point now is that with inventory levels where they have gotten down to, it is going to take quite a while to get inventories back up to the five-year average. That would assume barrels flow pretty easily through the Strait of Hormuz, the committed SPR releases hit the market, and investment in the U.S. and non-OPEC is above where it was when we entered 2026. What does that mean for us? We put out a three-year scenario at the beginning of this year that contemplated an environment based on fundamentals where we were investing to grow the business on the oil side at about low single digits. If there was a real call going forward supported by fundamentals on shale, we could increase maybe to mid-single digits. Honestly, that low single-digit plan is a very compelling scenario. It is not guidance; it is a scenario. It delivers, on a conservative $60 to $80 WTI range, a 15% to 25% ROCE, $12 billion to $24 billion in free cash flow, and a compound annual growth rate of free cash flow of 6% plus. That is straight free cash flow, not per share—so any additional buybacks obviously increase that. The big takeaway is even at the same strip price as the past three years, our go-forward scenario would increase cumulative free cash flow by about 20% over the past three years. Leaning in a little more aggressively into growth not only needs to be supported by fundamentals, but we also need to be mindful of the cost environment. We do not want to lean into a higher-cost environment just to grow production if you are running into inflationary headwinds. Increasing inventory levels back to the five-year average is best for consumers and energy affordability, but to do it at an appropriate cost. We will be very thoughtful and deliberate before we did something like that. Analyst: Thanks, Ezra. That is really helpful. I will leave it there since we are at the hour. Really appreciate the time. Ezra Y. Yacob: Thank you. Operator: This concludes our question and answer session. I would like to turn the conference back over to Ezra Y. Yacob for any closing remarks. Ezra Y. Yacob: I would just like to say that we appreciate everyone's time today. Thank you to our shareholders for your support and special thanks to our employees for delivering another exceptional quarter. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good afternoon, and welcome to Gold.com, Inc.’s conference call for the fiscal third quarter ended 03/31/2026. My name is Matthew, and I will be your operator this afternoon. Before this call, Gold.com, Inc. issued its results for the fiscal third quarter 2026 in a press release, which is available in the Investor Relations section of the company’s website at www.gold.com. You can find the link to the Investor Relations section at the top of the home page. Joining us for today’s call are Gold.com, Inc. CEO, Gregory Roberts; President, Thor Gjerdrum; and CFO, Cary Dickson. Following their remarks, we will open the call for your questions. Then, before we conclude the call, I will provide the necessary cautions regarding the forward-looking statements made by management during the call. I would like to remind everyone that this call is being recorded and will be made available for replay via a link available in the Investor Relations section of Gold.com, Inc.’s website. I would now like to turn the call over to Gold.com, Inc. CEO, Gregory Roberts. Sir, please proceed. Gregory Roberts: Thank you, Matt, and good afternoon, everyone. Thanks again for joining our call today. Our third quarter results reflect the strength of our fully integrated platform and our ability to capitalize on strong market conditions. As I noted on our last call, we were beginning to see a meaningful shift in market dynamics, and that momentum carried over favorably into this quarter. During the quarter, we experienced an unprecedented surge in activity across both our wholesale sales and our ancillary services as well as our direct-to-consumer segments. Market participants across the spectrum, from individual investors to institutional buyers, moved aggressively to increase exposure to precious metals. This environment created a highly dynamic two-way market with elevated levels of both buying and selling activity, which allowed us to efficiently deploy inventory and capitalize on favorable trading opportunities. The pace and magnitude of the movement was extraordinary. We saw one of the most volatile spot price environments in recent history, which drove significant transaction velocity across our platform. Operationally, our teams executed extremely well under these conditions. The rapid spike in demand challenged systemwide capacity, and we were positioned to respond by quickly scaling inventory and production levels at our mints as we leveraged our balance sheet. This resulted in record financial performance, including over $10 billion in revenue, over $175 million in gross profit, and $59.5 million in net income for the quarter. Our direct-to-consumer segment led the way during the quarter, reflecting strong customer engagement, higher order values, and increased transactional activity across our platforms. JMB outperformed and delivered record profitability. Our wholesale sales and ancillary services segment also delivered significant quarter-over-quarter improvement following the more challenging market conditions we experienced last fall. The favorable market conditions we experienced this quarter were also global, with LPM continuing to build momentum across Asia and benefiting from heightened regional demand and increased trading activity. Activity began to moderate toward the end of the quarter, as is typical following periods of heightened volatility. We are now seeing a more normalized environment. While geopolitical dynamics remain an important factor influencing demand, overall market conditions remain constructive; we believe the underlying drivers for precious metals investments remain firmly in place. We also benefited as last quarter’s backwardation moved into contango. We remain focused on driving synergies across our business units and maximizing at every level. Our acquisition of Monnex during the quarter is already delivering strong returns, and the addition of Sunshine Mint to our portfolio will meaningfully expand our production capabilities going forward. As previously disclosed, in February 2026 we entered into a securities purchase agreement with an affiliate of Tether Global Investment Fund whereby Tether agreed to purchase an aggregate of 3 million 370 thousand 787 shares of Gold.com, Inc.’s common stock at a price of $44.50 per share. The first tranche of the shares was purchased on 02/06/2026, corresponding to 2 million 840 thousand 449 shares for an aggregate purchase price of $126.4 million. Following receipt of regulatory clearance, the second tranche of 530 thousand 338 shares was purchased on 05/05/2026 for an aggregate purchase price of $23.6 million. This strategic equity investment further enhanced our overall capital and liquidity position. It is a powerful validation of our vertically integrated model. During the quarter, we also entered into storage, metal leasing, and trading agreements with Tether and their affiliates, and purchased $20 million of Tether’s gold-backed stablecoin XAUT. We believe this partnership represents a meaningful step forward in aligning our physical precious metals platform with emerging digital asset ecosystems, and we are encouraged by the early progress we have made. I will now turn the call over to our CFO, Cary Dickson, who will provide an overview of our financial performance. Then our President, Thor Gjerdrum, will discuss key operating metrics. After that, I will provide further insights into the business, our growth strategy, and we will take questions. Cary, please proceed. Thank you, and good afternoon to everybody. Cary Dickson: Our revenues for fiscal Q3 2026 increased 244% to $10.3 billion from $3.0 billion in Q3 of last year. Excluding an increase of $4.3 billion of forward sales, our revenues increased $2.9 billion, or 187%, due to higher average selling prices of gold and silver as well as increased gold and silver ounces sold. For the nine-month period, our revenues increased 142% to $20.5 billion from $8.4 billion in the same year-ago period. Excluding an increase of $7.4 billion of forward sales, our revenues increased $4.6 billion, or 95%, due to higher average selling prices of gold and silver as well as increased gold and silver ounces sold. Revenues also increased in both the three- and nine-month periods due to the acquisitions of SGI, Pinehurst, and AMS in late fiscal 2025 and Monnex in fiscal 2026. Gross profit for Q3 2026 increased 331% to $176 million, or 1.7% of revenue, from $41 million, or 1.3% of revenue, in Q3 of last year. The increase was due to higher gross profit in both our wholesale sales and ancillary services segment and our direct-to-consumer segment, including the acquisitions of SGI, Pinehurst, AMS, and Monnex, which were not fully included in the same year-ago period. For the nine-month period, gross profit increased 165% to $342 million, or 1.6% of revenue, from $129.2 million, or 1.53% of revenue, in the same year-ago period. The increase was due to higher gross profit in both our wholesale sales and ancillary services segment and the direct-to-consumer segment, including the acquisitions of SGI, Pinehurst, AMS, and Monnex, which were not fully included in the same year-ago period. SG&A expenses for fiscal Q3 2026 increased 134% to $78 million from $33 million in Q3 of last year. The change was primarily due to an increase in compensation expense, including performance-based accruals; higher advertising costs of $7 million; increased insurance costs of $4 million; higher bank service and credit card fees of $1.9 million; and an increase in facilities expense of a little over $1 million. SG&A expense for the three months ended 03/31/2026 included $33 million of expenses from SGI, Pinehurst, AMS, and Monnex, which were not included in the same year-ago period as they were not consolidated subsidiaries for the full year. Excluding the increase from these newly acquired subsidiaries, SG&A increased $11.6 million. In essence, 75% of our overall increase in SG&A period over period related to the acquisitions of our new subsidiaries. For the nine-month period, SG&A expense increased 130% to $197 million from $85 million in the same year-ago period. The increase was primarily driven by higher compensation expense, including performance-based accruals of $68 million, higher advertising costs of $17 million, an increase in consulting and professional fees to $7 million, an increase in insurance cost of $6.1 million, and an increase in banking service and credit card fees of $4.5 million. SG&A expenses for the nine months ended 03/31/2026 included $93 million of expenses from SGI, Pinehurst, AMS, and Monnex, which were not included in the same year-ago period as they were not consolidated for the full period. Excluding the increase from these newly acquired subsidiaries, SG&A increased $18 million year over year. In essence, 84% of our overall increase in SG&A period over period related to the acquisition of these new subsidiaries. Depreciation and amortization expense for fiscal Q3 2026 increased 88% to $9.4 million from $5.0 million in the same year-ago period. The change was predominantly due to a $4.6 million increase in amortization expense relating to intangible assets acquired through our acquisitions of SGI, Pinehurst, AMS, and Monnex, and a $1.5 million increase in depreciation expense, partially offset by a $1.6 million decrease in intangible asset amortization from JMB and Silver Gold Bull. For the nine-month period, depreciation and amortization expense increased 72% to $24.6 million from $14.3 million in the same year-ago period. The change was primarily due to a $10 million increase in amortization expense related to intangible assets acquired through our acquisitions of SGI, Pinehurst, AMS, and Monnex, and a 600 thousand dollar increase in depreciation expense, partially offset by a $5 million decrease in intangible asset amortization from JMB and SGB. Interest income for Q3 2026 increased 1% to $6.8 million from $6.7 million in the same year-ago period. The aggregate increase in interest income was due to an increase in interest income earned by our secured lending segment of 500 thousand dollars, partially offset by a decrease of the same amount in our finance product income category. For the nine-month period, interest income decreased 12% to $18.2 million from $20.6 million in the same year-ago period. The aggregate decrease in interest income was due to a decrease in other financing income of $2.6 million, offset by an increase in interest income earned by our secured lending segment of 200 thousand dollars. Interest expense for fiscal Q3 2026 increased 47% to $19 million from $13 million in Q3 of last year. The increase is primarily due to higher interest and fees of $3 million related to product financing arrangements, an increase of $2.6 million related to precious metal leases, and an increase of 300 thousand dollars associated with our trading credit facility. For the nine-month period, interest expense increased 44% to $47.9 million from $33 million in the same year-ago period. The increase is primarily due to higher interest and fees of $7.2 million related to product financing arrangements, an increase of $5.8 million related to precious metal leases, and an increase of $1 million associated with our trading credit facility. Earnings from equity method investments in Q3 increased to $2.3 million from a loss of 200 thousand dollars in the same year-ago quarter. For the nine-month period, earnings from equity method investments increased to $2.4 million from a loss of $2.1 million in the same year-ago period. The increase in both periods was due to increased earnings of our equity method investees. Net income attributable to the company for Q3 2026 totaled $60 million, or $2.09 per diluted share, compared to a net loss of $8 million, or $0.36 per diluted share, in the same year-ago quarter. For the nine-month period, net income attributable to the company totaled $70 million, or $2.65 per diluted share, compared to $7 million, or $0.29 per diluted share, in the same year-ago period. Adjusted net income before provision for income taxes, a non-GAAP financial measure which excludes depreciation, amortization, acquisition costs, and contingent consideration fair value adjustments, for Q3 totaled $87 million, an increase of $81 million compared to $5.7 million in the same year-ago quarter. Adjusted net income before provision for income taxes for the nine-month period totaled $115 million, an increase of $81 million, or 240%, compared to $33.9 million in the same year-ago period. EBITDA, another non-GAAP liquidity measure, for Q3 2026 totaled $103.4 million, an increase of $102 million compared to $1.3 million in the same year-ago quarter. EBITDA for the nine-month period totaled $151.6 million, an increase of $116 million, or 329%, compared to $35 million in the same year-ago period. Now turning to our balance sheet. We maintain a strong liquidity position supported by expanding financing capacity, including increased precious metal lease facilities and the recently completed Tether equity and financing investments to date. At quarter end, we had $143.0 million of cash compared to $77.7 million at the end of fiscal 2025. Our non-restricted inventories totaled $1.319 billion as of 03/31/2026 compared to $794 million as of the end of fiscal 2025. Gold.com, Inc.’s board of directors has declared a quarterly cash dividend of $0.00 per share, maintaining the company’s current dividend program. The dividend is payable in June to stockholders of record as of 05/20/2026. That completes my financial summary. I will turn the call over to Thor, who will provide an update on our key operating metrics. Thor, thank you. Thor Gjerdrum: Looking at our key operating metrics for 2026, we sold 538 thousand ounces of gold in Q3 fiscal 2026, which is up 25% from Q3 of last year and down 1% from the prior quarter. For the nine-month period, we sold approximately 1.5 million ounces of gold, which is up 17% from the same year-ago period. We sold 34.6 million ounces of silver in Q3 fiscal 2026, which is up 120% from Q3 of last year and up 86% from the prior quarter. For the nine-month period, we sold 63.6 million ounces of silver, which is up 10% from the same year-ago period. The number of new customers in the DTC segment—which is defined as the number of customers that have registered, set up a new account, or made a purchase for the first time during the period—was 292 thousand 800 in Q3 fiscal 2026, which is down 68% from Q3 of last year and up 205% from last quarter. For the three months ended 03/31/2026, approximately 58% of the new customers were attributable to the acquisition of Monnex. For the three months ended 03/31/2025, approximately 93% of the new customers were attributable to the acquisitions of Pinehurst and SGI. For the nine-month period, the number of new customers in the DTC segment was 458 thousand 300, which decreased 55% from 1 million 20 thousand 300 new customers in the same year-ago period. Approximately 37% of the new customers for the nine months ended 03/31/2026 were attributable to the acquisition of Monnex. Approximately 82% of the new customers for the nine months ended 03/31/2025 were attributable to the acquisitions of SGI and Pinehurst. The number of total customers in the DTC segment at the end of the third quarter was approximately 4.7 million, which is a 40% increase from the prior year. Changes in customer base metrics were primarily due to the acquisitions of AMS and Monnex, which were not included in the same year-ago period, as well as organic growth of our JMB customer base. Finally, the number of secured loans at March totaled 337, a decrease of 31% from 03/31/2025 and a decrease of 5% from December. The dollar value of our loan portfolio as of 03/31/2026 totaled $126 million, an increase of 46% from 03/31/2025 and an increase of 5% from 12/31/2025. That concludes my prepared remarks. I will now turn it over to Greg for closing remarks. Greg, you may be muted. Operator: Apologies. Greg, thanks, Thor and Cary. Gregory Roberts: This quarter was a clear demonstration of the strength and scalability of our fully integrated platform. We capitalized on a highly dynamic market environment, delivered solid financial results, and further strengthened our strategic and financial positioning. Our strategic focus remains on integrating and realizing cost savings and synergies from our recent acquisitions, expanding both our domestic and geographic reach, and further diversifying our customer base. With an expanded portfolio of category-leading brands and improved operational leverage, we believe Gold.com, Inc. is positioned to capture growth across multiple markets and continue to deliver long-term value for our shareholders. This concludes my prepared remarks. Operator, we can now open the line for questions. Operator: Certainly. Everyone, at this time we will be conducting a question-and-answer session. If you have any questions or comments, please press 1 on your phone at this time. We do ask that while posing your question, please pick up your handset if you are listening on speakerphone to provide optimum sound quality. Once again, if you have any questions or comments, please press 1 on your phone. Your first question is coming from Michael Baker from DA Davidson. Your line is live. Michael Baker: Great, thanks. A couple of questions. Unbelievable quarter. But Gregory, you said something about business as “normalized.” What does “normalized” mean to you? We track spreads and see they have come down so far in the June quarter versus the March quarter, but still well above where they were for much of calendar 2025. We would not consider 2025 to be normal—would you? Related to that, with the much larger platform because of all the acquisitions, even a “normal” earnings power for the company should be a lot higher than it was in the past. Is there any way to quantify what normal earnings power would be? Gregory Roberts: That is a lot. First and foremost, as we have always said, the environment is going to drive the profitability. Combined with the acquisitions that we do, clearly we are going to get different revenue streams, and the revenue streams are going to vary between the different divisions and parts of the company. I think last year was below par—below normalized—for most of calendar 2025. As we talked about on our last call, things really started to improve toward October and November, and December was pretty strong. When I said normalized, I was reflecting on how crazy and active January and February were and how March became what I would call a bit more normalized for the environment. In January and February of this quarter, we significantly outperformed what I would call normalized. There was a question on the last call—if these conditions continue, what is going to happen? I said if these conditions continue, we are going to have a great quarter. Clearly, we had a great quarter. A lot of the headwinds that we had through the fall of last year were attributed to the backwardation issues we had. We highlighted that as a major headwind on performance as it related to our cost of financing and our ability to collect contango, which is a more normalized environment. Backwardation is highly unusual. What we saw this quarter was a more normalized contango environment, which did help some of our other businesses, and that has continued in what I would call normalized conditions in March and into April, the first month of our Q4. We are still very active. Certainly, the war in Iran has caused a lot of change and disruption in overall volumes in the financial markets. Although our premiums are still quite nice, we have had a bit of volume retreat from where we were in January and February. Operator: Thank you. Your next question is coming from Thomas Forte from Maxim Group. Your line is live. Thomas Forte: Great. First off, Gregory, Cary, Thor—wow. Three questions, one at a time. First, how did the M&A enable you to capitalize on the demand versus previous spikes? Gregory Roberts: In January and February, we saw an environment where the tide rose for all of our businesses, which was great to see. Within DTC, we had a couple of overachievers, and as I mentioned earlier, JMB had a great quarter—great customer counts and premium spreads. We also saw a big uptick in our LPM business in Hong Kong and Singapore. That was new for us because we were able to see what customers in a geography we had not previously operated in were capable of. We were able to benefit from that this quarter. There were days or weeks where China in particular seemed to outperform our domestic businesses, and vice versa. It was great data for us, and we are enthusiastic about what we were able to accomplish there with that new acquisition. On the other side, the bullion business was an overachiever. Collectibles were strong in the quarter, but given the nature of that business, it did not benefit as much as bullion. Thomas Forte: Second, how, if at all, did your strategic partnership with Tether contribute to your performance? Gregory Roberts: In this particular quarter, it did contribute, but I would not say it was greatly significant. As we have onboarded Tether as a trading partner, one of the most exciting things you will see in our numbers is our storage business. With Tether’s help as well as Monnex, from 12/31/2025 to 03/31/2026 we have gone from $1.1 billion in storage to roughly double that, and where I think we are today in May is about $2.2 billion. As we said in our release related to Tether, storage is a big part of our strategic relationship with them, along with the gold leasing arrangements we have with them, which are now above what we had projected in the release. We are getting those benefits now, including in the current quarter. Thomas Forte: Lastly, can you give us your current thoughts on your one-time dividend philosophy? Gregory Roberts: We have explored special dividends in the past and rewarded shareholders when we have had a great year. We are very active right now and have a lot of opportunities in front of us. As I have said before, there are five things I look at for capital deployment: paying down debt, strategic inventory increases, acquisitions, share buybacks, and dividends. Based on the performance we are seeing from our acquisitions right now, I would continue to put acquisitions near the top of the list. We are doing a good job paying down debt and lowering interest expense. Dividends and share buybacks will continue, but I would like to see how the fourth quarter shapes up before we get too far down the road on a special dividend. Operator: Your next question is coming from Andrew Scutt from ROTH Capital Partners. Your line is live. Andrew Scutt: Hey, congrats on the really strong results, and thanks for taking my questions. First, can you help us understand the little bit over $1 billion increase in restricted inventory? And in the same vein, with the addition of Sunshine Mint, how will that help you manage your inventory going forward? Gregory Roberts: They are two different things. Regarding inventory, in January and February we had record spot prices. You had days where silver was $120 and gold was $5,500. That will naturally increase our restricted and total inventory because the spot price affects valuation—if we have the same number of ounces, we will have higher inventory dollars. We pivoted very quickly from November and early December, when holding more inventory cost us significantly due to backwardation. By mid-December and January, the environment was demanding more inventory from us to accomplish these numbers, and we pivoted. Our SilverTowne Mint ramped up and got us product when there were periods where competitors did not have product, allowing us to satisfy demand. As it relates to Sunshine, we moved from an approximate 45% ownership interest to 100%. We thank Tom Power, the founder, who has retired. It was great timing for us as we moved into a very active period. We benefited from our minority interest, and now, owning 100%, we will have greater control over what products Sunshine is making. A shout out to Jamie Meadows, our new president of minting, and Jason, the president of Sunshine. As Tom has retired, those two are going to really lead our minting operations. I am confident and looking forward to what they will do together having SilverTowne and Sunshine working with a closer relationship. Andrew Scutt: Thanks. Second, you have demonstrated an ability in the past to extract SG&A synergies from JMB and other acquisitions. As we look at recent acquisitions like Monnex and Sunshine, can you help us understand potential SG&A synergies over the next couple of quarters? Gregory Roberts: Everyone on our team is looking for SG&A synergies. We are also looking for synergies that create more gross profit across the companies. A quarter like this really throws some comparison numbers out of whack because to do $10 billion in sales, we are going to spend more money doing it. Not long ago a $5 billion year was good for us, and now we have achieved a $10 billion quarter. The variable parts of our SG&A will increase. The market environment over the next six months will dictate where we can find cost savings and optimize SG&A. We are always focused on it. Investors should recognize—and we are proud of—our ability to pivot when the market shifts to a strong tailwind, as it did this quarter. Our earnings potential, which I get asked about a lot, was illustrated by this quarter—given the environment, our acquisitions, and our ability to access capital very quickly. Operator: Thank you. Once again, everyone, if you have questions or comments, please press star then 1 on your phone. Your next question is coming from Seymour Jacobs from Jam Partners. Your line is live. Seymour Jacobs: Hey, Gregory. I have two questions. First, digging into the shift in hedging costs from negative to positive as silver went from backwardation to contango. I remember it was still really bad at the end of the year and into January—badly in backwardation and costing you money—and on the last call you quantified, generally, how much it was costing you. On this call, you are talking as if the return to contango really benefited you, but it seems to me that happened during the quarter, maybe halfway through. Is the coming quarter—the April through June quarter—effectively going to be the first full quarter where you are benefiting, or did you see the full benefit in the first quarter? Gregory Roberts: Definitely not the full benefit in Q3. You are correct that we experienced backwardation and higher lease and repo costs through the first half of the quarter. When we hit record spot prices, our transactional business was extraordinary, but we still had higher expense and the backwardation issue. Things normalized in March and definitely in April. The investment from Tether, both in the stock purchase and the leases we are transacting with them, has had a positive effect on our interest expense, our carry costs, and our ability to pay down our dollar lines. So Q4 will be the first full quarter in a while without those headwinds. Seymour Jacobs: Great. Second, on the $20 million of XAUT tied to the Tether transaction—what is the strategy and what does it lay the groundwork for? My understanding is XAUT is largely offshore with restrictions in the U.S., so I am guessing the $20 million is not just to be more long gold. Can you expand on the strategy? Gregory Roberts: I will expand a bit without giving away our launch codes. We invested $20 million in XAUT. I believe our average cost is around $4,700 spot, about where it is right now. We are unhedged on that, so we are long $20 million of gold. The exercise of opening the account and putting the plumbing in place—buying XAUT, holding it in a wallet—has been completed. We have completed onboarding with a digital bank and are working on onboarding with Tether directly. I believe there is an opportunity for us to get further involved in XAUT as part of our DTC network. There will likely be trading opportunities. The ability to trade Tether truly 24/7 at good volumes, and trade XAUT and Tether, is going to be valuable for us. We have seen the volumes and what we can expect in XAUT over weekends; there could be opportunities there. We are going down the path of a Gold.com, Inc. wallet. Giving our customers the ability to access XAUT and redeem XAUT for physical is important. The redemption feature—which is not currently in place for XAUT holders—I think is going to be a good opportunity for Gold.com, Inc. As to whether this is outside or inside the U.S. for holders of XAUT, we are still researching. At the moment, it looks like more of an international opportunity than domestic, but we are still vetting that. Seymour Jacobs: Lastly, on the rebranding to Gold.com, Inc.—we saw the launch of the unified website that feeds into all your different brands. What benefits have you seen so far on the marketing front, and what is the update on potential Gold.com, Inc.-branded financial services like a credit card? Gregory Roberts: So far, the rebranding has gone great. I am speaking to new shareholders all the time. In hindsight, it was an exceptional move and it is good for the company to get everything under one umbrella brand. We continue to work on a Gold.com, Inc. credit card to give our DTC customers an opportunity to connect even better with Gold.com, Inc. That is on the to-do list. We are not in the red zone yet, but we are on the other side of the 50. I am looking forward to that and exploring how the Gold.com, Inc. credit card may connect with other opportunities on the digital side. Operator: At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. Roberts for his closing remarks. Gregory Roberts: Thank you, Matt. Once again, as I do every quarter, I would like to thank our many shareholders and our employees. We look forward to keeping you updated on our future progress and everyone’s dedication and commitment to Gold.com, Inc.’s success. Thank you all for joining today. Operator: Thank you. Before we conclude today’s call, I would like to provide Gold.com, Inc.’s safe harbor statement that includes important cautions regarding forward-looking statements made during this call. During today’s call, there were forward-looking statements made regarding future events. Statements that relate to Gold.com, Inc.’s future plans, objectives, expectations, performance, events, and the like are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934. These include statements regarding expectations with respect to future profitability and growth, international expansion, operational enhancements, and the amount or timing of any future dividends. Future events, risks, and uncertainties, individually or in the aggregate, could cause actual results to differ materially from those expressed or implied in these statements. These include the following. With respect to proposed transactions with Spectrum Group International, the failure of parties to agree on definitive transaction documents, the failure of parties to complete the contemplated transactions within the currently expected timeline or at all, the failure to obtain necessary third-party consents or approvals, and greater-than-anticipated costs incurred to consummate the transactions. Other factors that could cause actual results to differ include the failure to execute the company’s growth strategy, including the inability to identify suitable acquisition or investment opportunities, greater-than-anticipated costs incurred to execute the strategy, government regulations that might impede growth, particularly in Asia, the inability to successfully integrate recently acquired businesses, changes in the current international political climate—which historically has favorably contributed to demand in the precious metals market but has also posed certain risks and uncertainties for the company—potential adverse effects of current problems in national and global supply chains, increased competition for the company’s higher-margin services which could depress pricing, the failure of the company’s business model to respond to changes in the market environment as anticipated, changes in consumer demand and preferences for precious metal products generally, potentially negative effects that inflationary price pressures may have on our business, the inability of the company to expand capacity at SilverTowne Mint, the failure of our investee companies to maintain or address preferences of our customer bases, general risks of doing business in the commodity markets, and the strategic business, economic, financial, political, and government risks and other risk factors described in the company’s public filings with the Securities and Exchange Commission. The company undertakes no obligation to publicly update or revise any forward-looking statements. Listeners are cautioned not to place undue reliance on these forward-looking statements. Finally, I would like to remind everyone that a recording of today’s call will be available for replay via a link in the Investors section of the company’s website. Thank you for joining us today for Gold.com, Inc.’s earnings call. You may now disconnect.
Operator: Good morning, and welcome to the J&J Snack Foods Corp. Second Quarter 2026 Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Reed Anderson with ICR. Please go ahead. Reed Anderson: Thank you, operator, and good morning, everyone. Thank you for joining the J&J Snack Foods Corp. Fiscal 2026 Second Quarter Conference Call. Before getting started, let me take a minute to read the Safe Harbor language. This call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made on this call that do not relate to matters of historical facts should be considered forward-looking statements, including statements regarding management's plans, strategies, goals, expectations, and objectives, as well as our anticipated financial performance. This includes, without limitation, our expectations with respect to the success of our cost savings initiatives, customer demand improvements, and the sales channels in which we operate. These statements are neither promises nor guarantees and involve known and unknown risks, uncertainties, and other important factors that may cause results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Risk factors and other items discussed in our Annual Report on Form 10-Ks and our other filings with the Securities and Exchange Commission could cause actual results to differ materially from those indicated by the forward-looking statements made on the call today. Any such forward-looking statements represent management's estimates as of the date of this call today, 05/06/2026. While we may elect to update forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause expectations to change. In addition, we may also reference certain non-GAAP measures on the call today, including adjusted EBITDA, adjusted operating income, or adjusted earnings per share. All of which are reconciled to the nearest GAAP measure in the company's press release, which can be found in the Investor Relations section of our website. Joining me on the call today is Daniel J. Fachner, our Chief Executive Officer, along with Shawn C. Munsell, our Chief Financial Officer. Following management's prepared remarks, we will hold the call for a question and answer session. With that, I would now like to turn the call over to Mr. Fachner. Please go ahead, Dan. Daniel J. Fachner: Good morning, everyone, and thank you for joining us today. We are excited to discuss our second quarter fiscal 2026 results. I am pleased to share continued progress this quarter on our strategic priorities. We delivered positive earnings and margin expansion despite a quarter that was impacted by demand softness amid rising fuel costs. Adjusted EBITDA increased 9.5% year-over-year to $28.7 million, and adjusted EPS increased 14.3% to $0.40, while sales declined 3.2% to $344.8 million. Foodservice sales declined 5%, with most of the decline attributed to the anticipated sales reductions in our bakery business, consistent with Q1. And while retail sales declined 4.1%, the decline was due to higher slotting fees and trade investments to support our innovation pipeline and brand share growth objectives. Frozen beverage results improved due to an increase in beverage volume and cost control. Apollo initiatives and mix improvements helped to drive gross margin expansion in the quarter. Our ability to improve earnings and margins as we reshape the portfolio demonstrates that our transformation initiatives are working. Our plant consolidations have created significant plant efficiencies, and we are on track to deliver at least $20 million of annualized Apollo savings once all initiatives are implemented. We are now focused on driving administrative and distribution cost reductions. To that end, we executed several of the administrative initiatives later in the second quarter as we reduced corporate expenses, and we expect to achieve the remaining initiatives in the third quarter. Overall, given the implementation later in the quarter, we realized just a modest level of administrative savings in the second quarter, and our distribution efficiencies initiatives will ramp up in Q3. I want to share a few other highlights from the quarter. First, an update on our innovation pipeline. It is important to note that we are still early in the process as several products begin shipping later in the quarter. However, the sell-in process has been progressing very well, and we are securing distribution across multiple retail and foodservice channels. In the quarter, we shipped over $2 million in new products, including about $0.9 million of Dippin’ Dots for retail, $0.9 million of new Dogsters ice cream products, and $0.2 million of Luigi’s Mini Pups. Our pretzel innovation shipments are ramping up now, and we expect that these new products will deliver exceptional consumer experiences and sales growth. We had another quarter of standout performance in foodservice pretzels. Sales were up $6.7 million and dollar share increased 4.3%. As in prior quarters, the primary growth driver was Bavarian-style pretzels. In retail, our Dogsters products continue to perform well. We shipped volumes up over 20% versus the prior year. Again, we are encouraged that the new Dogster sandwich will be well received by our four-legged consumers. We have entered into a new licensing partnership with the Peanuts character Snoopy, to be used in conjunction with our Dogsters brand. We are now also introducing the Dogsters product lineup to pet stores. In frozen beverage, our themed brand activation around some solid movie releases supported segment performance. Looking ahead, we are encouraged by the slate of releases for our fiscal second half. We are optimistic that movies like Super Mario Galaxy, Star Wars Mandalorian, and Toy Story 5 will support theater performance in 2026. Additionally, the ongoing ICEE test with a West Coast QSR has expanded to additional markets. We are encouraged by the progress and believe that we are nearing completion of the test phase. I am also proud to share that in honor of our nation's 250th anniversary, we are rolling out several themed products including a star-shaped SUPERPRETZEL, red and blue ICEE squeeze tubes, and red, white, and blue cups for our Luigi’s Real Italian Ice. Our financial position remains strong with a clean balance sheet. During the quarter, we repurchased $22 million of shares at an average price of $84.56, along with dividends of $15.2 million, returning over $37 million to shareholders in the quarter. With that, I will now turn the call over to Shawn to walk through the financial details. Shawn? Shawn C. Munsell: Thanks, Dan, and good morning, everyone. As Dan mentioned, we are pleased with the profitability improvements we delivered in the second quarter, reflecting continued progress on our transformation initiatives. Foodservice segment net sales declined $11.4 million, or 5%, to $214.7 million. The largest driver of the decline was the anticipated reductions in our lower-margin bake business of about $8 million. Additionally, cookie sales to a large customer declined about $4 million in the quarter due to the customer working through elevated inventory levels. We expect their orders to rebound in the third quarter. Churro sales declined about $3 million, while handheld sales declined $3.4 million. Partially offsetting these headwinds was continued strength in pretzels, which increased $6.7 million. Overall, our foodservice segment demonstrated resilience with notable bright spots and a significant improvement in profitability. Foodservice operating income increased $3.4 million to $10.9 million, largely reflecting gross margin improvements from plant consolidation and mix improvements. Retail segment net sales decreased $2.2 million, or 4.1%, to $51.6 million. Frozen novelty sales declined about $3.9 million during the quarter, which was partly offset by an increase in handheld sales. Retail sales were impacted by an increase in slotting fees of approximately $2 million to support new product innovation, along with increased trade investment primarily in frozen novelties. Retail segment operating income declined $3.9 million due to slotting fees, trade, and mix shift. Looking ahead, we intend to continue investing in trade and promotion to support our retail business in the second half. Frozen Beverage segment net sales increased $2.3 million, or 3.1%. Beverage sales grew 13%, driven by an increase in theater sales and favorable foreign exchange. A decline in service sales of $3.2 million is expected to persist due to a customer decision to insource maintenance. Despite this decision, we do not expect a meaningful margin impact as we temporarily downsize our tech network until we onboard prospective replacement business. Frozen Beverage operating income increased $2.1 million to $4.6 million. Consolidated gross margin improved 190 basis points to 28.8%, primarily reflecting Apollo initiatives and favorable mix in foodservice and frozen beverage. Operating expenses increased $7.8 million to $97.5 million, which included $6.5 million in nonrecurring items related to plant closures and other restructuring costs, of which $4.1 million was noncash. Selling and marketing expenses increased 5.5%, or $1.6 million, compared to the prior year, representing 8.7% of sales compared to 8% last year. The increase includes investments in marketing equipment and brands. Distribution expenses increased and represented 12.1% of sales compared to 11.7% in the prior-year period. Distribution costs included a $0.4 million headwind from higher fuel costs. If fuel remains at current rates, fuel costs would be expected to increase approximately $3.5 million in the second half versus the prior year if not mitigated. Administrative expenses were $21.2 million, an increase of $1.4 million, or 7.2% from the prior year, primarily due to an increase in nonrecurring charges in the quarter. The charges, which totaled $1.7 million, are primarily associated with legal expenses and other restructuring charges, including severance. Adjusted operating income was $9.6 million compared to $8.9 million in the prior year. Adjusted EBITDA increased 9.5% to $28.7 million versus $20.2 million last year. The effective tax rate was 28.1%. On a reported basis, earnings per diluted share were $0.09 compared to $0.25 last year, primarily reflecting the impact of one-time charges. On an adjusted basis, earnings per share were $0.40, a 14.3% increase from last year. Our balance sheet remains strong with approximately $31 million of cash, net of debt. We had approximately $181 million of borrowing capacity under our revolving credit agreement. During the second quarter, we generated approximately $16 million in operating cash flow and invested $16 million in capital expenditures. Over the past twelve months, we have repurchased approximately 0.705 million shares for an aggregate of $72 million. In 2026, we have returned $95 million in cash to shareholders through share buybacks and dividends. That concludes our prepared remarks, and we are now ready to take your questions. Daniel J. Fachner: Operator? Operator: We will now open the call for questions. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. At this time, we will pause momentarily to assemble our roster. Our first question today is from Jon Andersen with William Blair. Please go ahead. Jon Andersen: Hi, good morning everybody. Thanks for the questions. Daniel, you mentioned at the top of your prepared comments that in the quarter you experienced some demand softness amid rising fuel costs. I am wondering if you could talk a little bit more about maybe where you experienced that the most, and when I say where, maybe if you could discuss it in the context of categories and maybe channels, and then how you expect that to play out in the back half of the year based on what you know right now? Daniel J. Fachner: Good morning, Jon. Right. Yes. Thanks, Jon. Thanks for the question. Where you get hit the most right off the bat with fuel costs rising is in your convenience store business. That is where you feel it the most at the gas pump. The price is high when they are filling up the tank, and they decide not to go in and purchase something more. We also see that in our foodservice side of our business too. That is an area that gets hit quicker than some of the other spots. We are seeing a consumer that already has a sentiment around worries about costs rising, and then the fuel uncertainty makes it that much more live to them. Jon Andersen: Okay. Fair enough. I know you do not offer guidance per se, but if we look to the back half of the fiscal year, given that you also have quite a bit of good innovation coming or in the works or in flight right now, and it sounds like some tests may be coming to some kind of resolution—hopefully resolution—how are you thinking about growth in the back half of the year? And then I guess part of that question is also whether we need to consider the ongoing impact of SKU rationalization in bakery or just the business rationalization you are doing in the low-margin part of bakery. Does that continue at the levels you have experienced in the first half? Any thinking around that would be helpful from a modeling perspective. Thanks. Shawn C. Munsell: Sure. Daniel J. Fachner: Yes, good question, Jon. And you are right. We do not really give specific guidance in that space. What we do know is we have some planned volume reductions like what we have talked about in both Q3 and Q4. In Q3, I think that is about 3.5%; in Q4, about 2.5%, consistent with the 3% that we have talked about for the year. We also know, like I just talked about with you, we have that wary consumer sentiment with the higher oil prices, and that is bouncing around even as we speak this morning. And we also know we have some really strong benefits coming from Apollo in the second half. We saw that in the first half of the year. We saw that this quarter. I am proud of the way the teams are working towards that, and so we see that benefit. As I sit today, I would see the environment in Q3 being pretty much the same as the environment we saw in Q2. Jon Andersen: Makes sense. Maybe pivoting to Apollo and the benefits from that, could you just bring us up to speed on what the run-rate benefits are as we exited the first half—run-rate annualized benefits from Apollo—and then it sounds like you are making good progress on the next phase of benefits, administration and distribution. Where might that mean for run-rate annualized savings exiting fiscal 2026? Shawn C. Munsell: Yes, sure. I will take that. The plant savings, or the plant consolidation work, is materially complete. And if you recall, that was about $15 million worth of annualized benefits at our estimate. In the quarter, we actually achieved above $4 million in plant savings, so a bit above that run rate. The balance, that $5 million, is coming from a combination of G&A administrative savings as well as the distribution savings. On the administrative savings front, we implemented a number of initiatives later in the second quarter, so you did not really see a lot of the benefit show up in the second quarter. The remaining initiatives were actually completed in April, so we will be at the full run rate on the G&A savings, which is at least $2 million annualized. And of the $3 million of distribution cost savings, we will be ramping that up in Q3 and Q4. By the time we get to the end of Q4, we should be on the full run rate for all the initiatives. We feel good about where we are. Jon Andersen: Great. Maybe I will get one more in. It seems like you have been buying back stock a little bit more regularly. As you look ahead, and obviously supporting the dividend, as you think about returning cash to shareholders going forward, could you talk a little bit about the priorities there? Would you continue the approach you have taken over the last twelve months? Thanks. Shawn C. Munsell: Yes, sure. We continue to see compelling value in the shares. We bought back $22 million in the quarter, and I can tell you that we will continue to buy back stock. We have seen an increase, I would say, in potential M&A activity, and so that is probably going to factor into the calculus here in the back half. But our stock buyback does reflect our conviction. Jon Andersen: Thanks so much. Shawn C. Munsell: Thanks, Jon. Operator: The next question is from Todd Morrison Brooks with The Benchmark Company. Please go ahead. Todd Morrison Brooks: Hey, thanks for taking my questions, I appreciate it. Good morning, Dan. Shawn, can we lead off on oil? Because I think it touches you in multiple places, right? It is at the consumer level, it is at the raw distribution level, it is also in the packaging. So I think you gave some color on what the incremental pressure from fuel would be, the $3.5 million in the second half if we stay at current levels. But is that just on the distribution side? And then I know there is no way to really gauge the consumer demand, but how about on the packaging side? Shawn C. Munsell: Yes, it is a great question. That is just the direct fuel piece. There is some potential risk around packaging as we get later into Q3 and Q4. But the lion's share of the impact is going to be on those direct fuel costs. We have not attempted to quantify what it means from the consumer outside of the comments that Dan made earlier. But that $3.5 million is representative of the second half within distribution. Now I will say that we are taking steps to try to mitigate some of that exposure, and hopefully we get a little bit more relief than what is modeled there. Todd Morrison Brooks: That is where I wanted to go next. Is this something that you can fuel-surcharge immediately to customers? Is it something that has to be negotiated price increases at least in retail? And given the volatile nature of what we are living through now and how the markets are spiking up and down, do people want to try to price to offset this pressure yet, or do we need to have more of a permanent resolution before you try to take those actions? Daniel J. Fachner: I will take that, Todd. It is one of those things you have to watch really closely. We have some disciplines in the business on both the ICEE and Dippin’ Dots side that allow us to be able to almost take those immediately. On the foodservice side of the business and retail, it is a little bit more difficult than that. But we are meeting and talking about it, and we will take price action if need be. Todd Morrison Brooks: Perfect. If I can pivot, and you are one of the few calls I have been on this cycle that did not call out the impact from the winter weather reality that we lived within January and February in a good-sized footprint of the country. Have you sized either lost revenue from weather disruption or margin pressure or anything that you would want to share with us as we are evaluating the results? Daniel J. Fachner: There is no way in our business that weather does not impact you. We do not have a number that we have been able to put to that, Todd, but it certainly has an impact on our business, especially in some of our products that are in locations that are outside in foodservice and areas that people just cannot get to. But it certainly has an impact. We have not put a number to that, though. Todd Morrison Brooks: Great. And then if I could squeeze one more in. You talked about the West Coast ICEE test progressing, which is great to hear. Can you update us on how the Taco Bell limited time offer performed, and their thoughts on the performance and maybe where that relationship could go from here? Thanks. Daniel J. Fachner: Two questions there, I think. Let me talk about the West Coast QSR test with ICEE. We are excited about that one. It is continuing to expand. We are actually rolling out into another market right now, which is claimed to be the last test phase of this, with a potential decision to be made before we even exit summer. So we are really excited about where that one is going. The Taco Bell volume in the quarter was not as great as we originally had anticipated. There is some volume from it that will still come through in this next quarter. The relationship is strong, and we think there is an opportunity to be able to come back and do some more with that customer. Todd Morrison Brooks: Great. Thanks, Dan. Shawn C. Munsell: Thank you. Operator: The next question is from Scott Michael Marks with Jefferies. Please go ahead. Scott Michael Marks: Hey, good morning, Dan, Shawn. Thanks for taking our questions. I wanted to ask a little bit about the retail business, if I could. I know you called out some of the innovation initiatives and some of the higher trade and slotting fees associated with getting those in store. Wondering if you can help us understand demand for some of those products where they are in market, just in terms of volumes and consumer response, even beyond the trade and slotting fees that you called out. Daniel J. Fachner: It is early still. They just started to roll out in the back half of the quarter. But we are really excited about the opportunities that we have in retail. One of the things we learned last year as you get into the second quarter is you do need to up your trade spend to get your frozen novelties in place as you get into the third and fourth quarter. That was a mistake we called out last year. And so some of that trade spend that is in Q2 will benefit us now in Q3 and Q4. The slotting fees associated with some of our new products appear to be paying off. Those new products appear to be kicking off really well. We have the Dogsters brand that is doing really good. Luigi’s is rolling out Mini Pups really nicely. The Soft Sticks are doing pretty good. And then the one that we keep touting more than anything is the high-temp Dippin’ Dots, and we expect that to do really well for us as we get into the back half of the year. Scott Michael Marks: Understood. Appreciate the thoughts there. If I could shift over to the foodservice side of things, I know Shawn called out—if we put aside the bakery SKU rationalization—a few moving pieces in the quarter with, I think, cookie inventory at a certain retailer and also some weaker volumes from the Taco Bell program that you have been running. Wondering if you can help us understand how we should be thinking about cadence or trajectory for that foodservice business moving ahead, just given some of these moving parts that we saw in the quarter? Shawn C. Munsell: Yes, good question, Scott. As it relates to the cookies with the customer that had reduced its volumes because of inventory levels, we are already seeing those volumes pick up. So we do not expect that to be a headwind in upcoming quarters as it was in Q2. Pretzels continue to be strong. We did $6.7 million in pretzel sales in foodservice in the quarter. I think in the prior quarter, we were up around $4 million in foodservice pretzels, so it continues to perform well, and we are confident that we are going to continue growing that business. And I can tell you too that even though we unfortunately did not quite realize the benefits from that LTO that we were hoping, we do have a couple of initiatives in the pipeline around churros for the back half of the year that could have some promise. I will not get into any more detail on it now, but hoping that maybe with the next call, we will be able to update you. Scott Michael Marks: I appreciate the thoughts there. And maybe if I turn over to the OpEx side, you made some comments about the distribution cost and not having realized the efficiencies from Apollo in that yet. Can you help us understand, is that the main driver of distribution as a percent of sales being up on a year-over-year basis? Was there some other dynamic in the quarter that had an impact on that part of the P&L? Shawn C. Munsell: Great question. You have got about $0.4 million in fuel that we flagged. That was really all coming from the exposure in March when diesel prices started to rise. The other piece of that is we had about $0.2 million worth of higher dry ice costs, and that was weather-related, so we do not expect that to be recurring. The other piece is we did have some cost shift around between distribution and cost of sales, and so that led to about a $0.5 million increase in distribution relative to cost of sales. Scott Michael Marks: Understood. Appreciate it. I will leave it there and pass it on. Daniel J. Fachner: Thanks, Scott. Operator: This concludes our question and answer session. I would like to turn the conference back over to Daniel J. Fachner for any closing remarks. Daniel J. Fachner: Thank you, operator. In closing, I want to emphasize that our Q2 results demonstrate that our transformation project is taking hold and we can drive earnings growth despite some top-line softness. We are building momentum for sustainable growth. Our strong balance sheet provides flexibility to invest in growth opportunities while returning capital to shareholders. We remain confident in our ability to deliver the full benefits of Project Apollo and drive long-term value creation. Thank you again for your continued support, and we look forward to updating you on our progress throughout fiscal 2026. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.