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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.
Operator: Hello, and welcome to Exelon Corporation's First Quarter Earnings Call. My name is Michelle, and I will be your event specialist today. All lines have been placed on mute to prevent any background noise. Please note that today's webcast is being recorded. During the presentation, we will have a question and answer session. You can ask questions by pressing star 11 on your telephone keypad. If you would like to view the presentation in full screen view, click the full screen button by hovering your computer mouse cursor over the PowerPoint screen. Press the escape key on your keyboard to return to the original view. And finally, should you need technical assistance, as a best practice, we suggest you first refresh your browser. If that does not resolve the issue, please click on the help option in the upper right-hand corner of your screen for online troubleshooting. It is now my pleasure to turn today's program over to Ryan Brown, vice president of investor relations. The floor is yours. Ryan Brown: Great. Thank you, Michelle. Good morning, everyone. Thank you for joining us for the 2026 first quarter earnings call. Leading the call today are Calvin G. Butler, Exelon Corporation's President and Chief Executive Officer, and Jeanne M. Jones, Exelon Corporation's Chief Financial Officer. Other members of Exelon Corporation's senior management team are also with us today and will be available to answer your questions following our prepared remarks. Today's presentation, along with our earnings release and other financial information, can be found on the Investor Relations section of Exelon Corporation's website. We would also like to remind you that today's presentation and the associated earnings release materials contain forward-looking statements which are subject to risks and uncertainties. You can find the cautionary statements on these risks on Slide 2 of today's presentation or in our SEC filings. In addition, today's presentation includes references to adjusted operating earnings and other non-GAAP measures. Reconciliations between these measures and the nearest equivalent GAAP measures can be found in the appendix of our presentation and in our earnings release. It is now my pleasure to turn the call over to Calvin G. Butler, Exelon Corporation's President and CEO. Calvin G. Butler: Thank you, Ryan, and good morning, everyone. We appreciate you joining us for our first quarter earnings call. Our message today is straightforward. 2026 performance remains on track, both financially and operationally, and with a disciplined, adaptable platform, you can continue to depend on Exelon Corporation to navigate change and deliver on our commitments. This morning, we reported adjusted operating earnings of $0.91 per share, exceeding expectations, with outperformance driven primarily by net favorable weather and timing-related items. We are also affirming our 2026 operating earnings guidance of $2.81 to $2.91 per share. Reliability and operational performance continue to set the standard for the industry, even as our system faced several high-wind storm events this spring. All utilities sustained top-quartile reliability performance, with ComEd in the top decile. Our men and women on the ground continue to deliver: responding safely, restoring service quickly, and keeping customers connected. This quarter also included several important regulatory and legislative developments, most notably in Pennsylvania and Maryland. At PICO, we made the decision to withdraw the recently filed electric and gas rate cases. This was a deliberate, timing-based decision grounded in customer affordability considerations and informed by stakeholder feedback. Importantly, this decision does not change our commitment to safety, reliability, or long-term infrastructure investment. It demonstrates our ability to adjust timing and reallocate capital while maintaining the balance between near-term affordability and long-term system needs. Maintaining that balance requires difficult prioritization decisions and the strong ongoing stakeholder partnerships you have come to expect from Exelon Corporation. Looking ahead, we welcome continued close collaboration with all stakeholders across Pennsylvania as we reprioritize certain investments without compromising safety or reliability in the near term. Before I move on, I also want to highlight a recent leadership update at PICO. Dave Vajos, previously CEO of PICO, has transitioned into an advisory role reporting to me. Michael A. Innocenzo has stepped in as an interim President and CEO while continuing to serve as Exelon Corporation's Chief Operating Officer. Michael A. Innocenzo previously served as President and CEO of PECO from 2018 to 2024 and brings deep operational experience, long-standing relationships across Pennsylvania, and a strong understanding of PICO's system, workforce, and stakeholders. This transition ensures continuity and stability at PICO as we remain focused on operational excellence, affordability, and reliable service for our customers. Turning to Maryland, the Utility Relief Act has passed the legislature and is awaiting Governor Moore's signature. We know the governor and state leaders share our focus on affordability. However, the legislation does not address the growing imbalance between energy demand and supply. Residential supply costs in the Mid-Atlantic have increased by up to 80% or more over the past five years. Without addressing supply constraints, affordability challenges will persist. Addressing this challenge requires a combination of incremental transmission investment, continued reforms at PJM, and, critically, the addition of new generation. We are leaning into areas where we have a clear mandate today, like transmission, while also advancing solutions in areas where we currently cannot participate, including utility-owned generation. For example, HB 1561 in Maryland was designed to establish a clear path for utility-owned backstop, particularly storage and renewable resources. Given the structural imbalance between supply and demand in the state and Maryland's heavy reliance on imports from neighboring markets, this approach would have meaningfully enhanced energy security and resilience and ultimately avoided the risk of blackouts, which in 2024 PJM suggested could happen as soon as 2028 due to lack of supply. In short, affordability and reliability must go hand in hand. We remain committed to working constructively with stakeholders to deliver near-term customer relief while supporting the long-term investments required to keep energy safe, reliable, and affordable. As such, we have taken a hard look at our plan and made deliberate adjustments. Let me be clear. This is a different plan for a different moment. We are pulling back on certain projects, reprioritizing capital across our portfolio, and delivering $350 million of incremental O&M savings in 2027 tied to work we will no longer pursue. We are actively reshaping the business to best meet the needs of our customers while delivering on the Exelon Corporation promise to keep energy bills as low as possible. This includes accelerating the use of new technologies, focusing investment on the highest-impact opportunities, and maintaining disciplined cost control. Business as usual is not an option. The energy market has shifted dramatically with significant load growth and a lack of supply to meet the evolving needs of our customers and communities at a reasonable price. While we remain confident in the value of our work and investments, this moment requires us to adapt, to be agile, and to make changes thoughtfully and purposefully. Our core mission—commitment to safety, reliability, ethics and compliance, and service to our customers—is not changing. Now, Jeanne will walk through the details in a moment. But with these actions in place, we are reaffirming our 2026 adjusted operating earnings guidance of $2.81 to $2.91 per share and our long-term operating earnings growth outlook from 2025 to 2029 near the top end of the 5% to 7% range. This is our platform at work. Size, scale, diversification, and discipline translate directly into execution. As we adjust our plan to reflect current realities, we are also leaning into areas where we see strong visibility and clear need—most notably, in transmission. Our scale, multistate footprint, and deep operational expertise allow us to step forward where reliability and resiliency investments are increasingly needed, especially as load growth and system complexity continue to accelerate. We have seen that play out in recent periods through our success across multiple competitive and reliability-driven processes. That momentum continues. In February, we submitted competitive bids for two Illinois transmission opportunities within the MISO Tranche 2.1 window, representing approximately $1.9 billion of total transmission capital spend pursued jointly with Infinergy. While it is too early to comment on potential outcomes, these projects underscore our disciplined approach—deploying capital where RTOs have identified clear need, strong execution visibility, and attractive risk-adjusted returns. You should expect Exelon Corporation to continue engaging competitively and with discipline in future transmission windows across PJM and other ISOs, including two additional bids expected later this month. However, affordability and energy security cannot be solved by transmission alone. Additional generation is critical. We continue to work closely with federal officials, PJM, and state leaders to address elevated supply costs and emerging reliability challenges across the system. Let me reiterate. You cannot have a conversation about affordability without addressing the underlying shortage of generation. We support measures that bring new generation forward while avoiding market designs that result in unnecessary or excessive payments at the customer's expense. That is why we have been focused on ensuring our data center pipeline is increasingly backed by FERC-approved Transmission Security Agreements, which have now secured approximately $1 billion of collateral. Real affordability depends on careful design, from load forecasting and cost allocation to how new resources are integrated into the market framework. There is more work ahead as implementation details continue to take shape, and our team remains closely engaged with PJM, regulators, and policymakers to ensure outcomes that protect customers and support a reliable, affordable system. As we said before, addressing these challenges will require an all-of-the-above approach, including utility-led solutions, demand-side alternatives, and merchant investment. While we do not control the supply side, we remain intensely focused on reducing the cost we can control and on actively advocating on behalf of our customers. In the past year alone, we have delivered approximately $1 billion in customer savings through a combination of actions, including our award-winning programs that connect customers to assistance, our industry-leading customer relief fund, a recently approved gas supply settlement, and disciplined cost management that kept costs nearly flat driven by operational efficiencies. We have delivered this $1 billion while also providing best-in-industry reliability. In contrast, over the last two years, customers have paid $32 billion to generators for capacity in PJM, while supply has declined by 1.2 gigawatts over that same period—meaning customers paid more and received less. The time for action is now. PJM has been warning about 2028 reliability risk since 2024. We are halfway there, and there has been no meaningful progress on new supply. While recent activity in the PJM interconnection queue is encouraging, it is not enough for projects to simply be in the queue. We need to ensure they are built and come online in time to meaningfully address this reliability need. Had utilities been allowed to build generation for the 2028/2029 planning year, we would be in a materially stronger position today. As we have highlighted before, Charles River Associates estimated that utility-supported generation could have saved PJM customers between $9.6 billion and $20 billion in the 2028/2029 delivery year while reducing outage risk from energy shortages by approximately 85%. Our customers simply cannot afford to wait any longer. With that, I will turn it over to Jeanne to walk through our financial performance and provide additional details on our rate case activity. Jeanne? Jeanne M. Jones: Thank you, Calvin, and good morning, everyone. In addition to our first quarter financial update and progress on our 2026 regulatory activity, today I will review several disclosure updates that reinforce our confidence in our path to adjusted operating earnings growth near the top end of the 5% to 7% range, beginning on Slide 5. We recognize that balancing affordability with safety and reliability is critically important, and we remain actively engaged in solutions that put customers first. Our customers are served by some of the most reliable utilities in the nation, and continued investment is essential to maintaining that performance in the near term while supporting long-term economic growth. Our revised four-year capital plan reflects these priorities by rebalancing investment, enabling us to invest nearly $10 billion in 2026 and a total of $41.7 billion over the next four years for the benefit of our customers. This reflects $1.1 billion of project deferrals and reductions in PICO and BGE distribution, coupled with $1.5 billion of incremental transmission investment to support project realignment and the interconnection of data center customers that have signed Transmission Security Agreements. Despite the rebalance of capital, we are maintaining a revised annualized rate base growth of 7.9% over the next four years, reflecting the substantial and accelerating transmission growth opportunities we are experiencing across our service territory. The need for additional transmission infrastructure is real, and we are witnessing this growth firsthand, driven by reliability requirements and large load interconnections. We now anticipate transmission rate base growing at 16% through 2029 and are maintaining our previous upside guidance of $12 billion to $17 billion, which does not include our recent competitive transmission bids in MISO or potential solar or storage opportunities. Having executed within 2% of our plan since 2023, we remain confident in our ability to deliver this next phase of growth through disciplined execution, advancing important economic and energy priorities while keeping customer affordability front and center through a continued focus on cost management. We are confident in our ability to drive expense growth well below inflation. In addition to nearly flat expense growth from 2024 to 2026, we are now targeting no more than 2% adjusted O&M growth through 2029. We remain committed to managing the portfolio as one Exelon Corporation and are leveraging our dedicated team to identify another $350 million of savings in 2027. Our revised plan incorporates cost reductions achieved through accelerating AI and technology transformation, prioritizing IT projects with the greatest customer and operational impact, focusing our community investments, reducing use of outside contractors, implementing a managed hiring process, and offering a targeted voluntary separation program later this year. We also continue to rely on a balanced funding strategy to support this execution. We are committed to ensuring that we maintain financial flexibility and strong credit metrics over the guidance period, targeting approximately 14% at Moody's and S&P. Turning to Slide 6, we present our quarter-over-quarter adjusted operating earnings block. Exelon Corporation earned $0.91 per share in 2026, compared to $0.92 per share in the same period in 2025. Earnings are lower in the first quarter relative to the same period last year primarily driven by $0.07 of new distribution and transmission rates, net of depreciation and AFUDC, and $0.01 of favorable weather at PICO. This favorability was offset by $0.04 of ComEd timing due to revenue shaping in 2025, $0.02 of higher interest expense at corporate and PICO, $0.01 of higher credit loss expense at BGE, and $0.01 attributable to the recognition of Pepco Maryland's N Y P reconciliation, for which a final order was received in March. These results are slightly ahead of our indications on the fourth quarter call, primarily due to favorable weather and timing-related items. Looking ahead to next quarter, we expect second quarter earnings to be approximately 15% of the midpoint of our projected full-year earnings guidance range, which contemplates normal weather and storm activity and anticipated revenue shaping and timing for the quarter. In combination with Q1 results, this would result in recognizing 47% of projected full-year earnings in the first half of the year, in line with seasonal shaping in prior years and allowing us to remain on track for full-year operating earnings of $2.81 to $2.91 per share, with the goal to be at the midpoint or better. Turning to Slide 7, we highlight our regulatory activity in 2026. Starting with the Pepco Maryland base rate case, where we have filed a notice with the Maryland Public Service Commission to pursue the traditional base rate case we had filed last fall, requesting a revenue requirement of $119.9 million, which primarily seeks recovery of critical infrastructure investments and incremental financing costs associated with rising interest rates. These investments support system reliability, capacity, and long-term growth for our customers, including projects such as the White Flint substation in Montgomery County, which expanded capacity to meet current and future energy needs, reduced outage risk and maintenance needs through removal of more than 16 miles of overhead lines, and strengthened system resilience through underground supply lines and modern equipment. Collectively, this and other investments contributed to Pepco achieving the lowest outage duration in the state. Evidentiary hearings were held last week, and a final order is expected in August. In Delaware, Delmarva Power's electric base rate case continues to progress on schedule, with intervenor testimony due in October. The requested revenue increase allows us to better support our customers through targeted programs and essential investments. This includes a new income-based rate and reliability projects such as Basin Road, where two transformers originally installed in 1967 were replaced and now reliably serve over 2,500 customers, including Wilmington Airport, the Delaware National Guard, and surrounding communities. DPL expects to be able to implement interim rates in effect in July. Finally, on Slide 8, I will conclude with a review and update of our balance sheet activity. We continued to take advantage of favorable market conditions early in the year and have made substantial progress toward our 2026 capital needs. We have completed approximately 43%, or $2.3 billion, of our planned long-term debt financing, successfully executing all expected debt transactions both at corporate and Pepco Holdings for the year and materially de-risking our go-forward financing plan. The strong investor demand and attractive pricing for our debt securities continue to be a testament to the strength of our balance sheet and to our value proposition, positioning us well in service to our customers. We also continue to execute our pre-issuance hedging strategy to further protect us from interest rate volatility. Through 2029, we expect to fund the revised $47.17 billion capital plan with about $21.8 billion of internally generated cash flow, $13.1 billion of debt at the utilities, and $3.4 billion of holding company debt. The balance will be funded with $3.4 billion of equity—approximately 40% of our incremental capital plan from last year's plan and representing less than 2% of Exelon Corporation's annual market cap. We have already made progress on approximately 37% of these equity needs, with all of our $850 million in equity needs for 2026 and over $400 million in 2027 priced using forward contracts under our ATM. Maintaining a strong balance sheet remains core to our strategy. We continue to identify opportunities to mitigate risk in our plan and expect to maintain financial flexibility above our downgrade thresholds, targeting credit metrics of 14% over the planning period. We remain confident in our ability to deliver value for our customers and our shareholders. Thank you. I will now turn the call back to Calvin for his closing remarks. Calvin G. Butler: Thank you, Jeanne. I will close on Slide 9 by reinforcing what matters most as we move forward. Our priorities are clear and unchanged. We are executing our capital plan with discipline, delivering strong operational performance, advancing affordability through prudent investment, and pursuing growth where it strengthens the system and creates long-term value. That discipline is supported by a platform built to perform. Our scale, diversified footprint, and capital flexibility allow us to adapt as conditions evolve without losing focus or momentum. In 2026, we expect to deploy approximately $10 billion of capital for the benefit of our customers, earn a consolidated 9% to 10% ROE, and deliver operating earnings of $2.81 to $2.91 per share with a goal of achieving midpoint or better, while maintaining a strong and resilient balance sheet. The infrastructure we operate is foundational to the communities and economies we serve. We take that responsibility seriously, and we meet it every day through consistent execution, high operational standards, and a clear focus on the people who rely on us. Before I close, I also want to recognize the work of our employees across the company. Balancing long-term infrastructure needs with customer affordability is not easy. It requires judgment and discipline at every step. That work extends beyond prioritizing the right investment. It includes constructive regulatory engagement, partnership with local communities, and advocacy for policies that promote affordability and reliability, even when they are not popular. I am proud of how our teams manage this balance. Their focus on execution, affordability, and customer outcomes is exactly what allows Exelon Corporation to deliver today while positioning us for the future. The world around us continues to change, but our approach remains consistent. We remain focused, disciplined, accountable, and confident in our ability to deliver. We will now open the call for questions. Operator: Thank you. If you would like to ask a question, simply press star 11 on your telephone keypad. Our first question comes from Shahriar Pourreza with Wells Fargo. Your line is open. Shahriar Pourreza: Good morning, Calvin. I wanted to start with Pennsylvania. It seems like it is the noisiest in the country right now. What are you getting from Governor Shapiro to make withdrawing the case and weathering this environment worth it? The gas utilities seem to be okay. One of your peers has a black box settlement that should get approved. The move is a bit conflicting. What is it about this case that spooks stakeholders versus your other peers? How should we be thinking about the trade-offs here in the state from your move? Thanks. Calvin G. Butler: Thank you for asking the question. Let me begin by saying what a difference a year makes. In all seriousness, Pennsylvania has always been a jurisdiction in which we leaned in and had a strong regulatory backdrop and strong relationships, and we continue to have those. Our decision to withdraw the Pennsylvania filing was based on conversations we had with a variety of stakeholders. Those stakeholders said, if we could partner with them to address the affordability issue and lean in, timing is not the best right now. We are assessing our future rate case filings in Pennsylvania, all geared to having a strong infrastructure to provide safe, reliable service. I am not conflating this with any other cases that have been filed by others. We did what is best for Exelon Corporation and PICO specifically at this time. We believe PICO needs to make investments in the future, and we will do so, but we will work collaboratively with all stakeholders to make sure it is a prudent decision and timed appropriately to move forward. Shahriar Pourreza: Hopefully that created the goodwill you needed. On conversations around supporting supply-side solutions and long-term resource adequacy agreements—movement with House Bill 1272 or Senate Bill 897—what should we think about for catalyst and timing? Could this happen before or after the election? Is Pennsylvania waiting for PJM answers from FERC or the RBA process first? How should we think about resource adequacy and the bills that are out there, in light of you just pulling a rate case and creating, hopefully, some goodwill? Thanks. Calvin G. Butler: You go right to the core issue. We are not going to adequately address affordability without addressing the supply issue, and that is our conversation not just in Pennsylvania, but across all jurisdictions. When you see us show up in an advocacy position for bills that allow utilities to get new generation built, that is what it is all about. Recognizing also that Pennsylvania is in an election year with a divided government, getting anything done this year is a long shot, but it is necessary to continue to advocate for utility-owned generation and new generation in the state and across the Mid-Atlantic specifically. If you do not do that, the same issue we are talking about today we will be talking about in the next three to five years. You cannot talk affordability without talking the supply stack. Period. It has to be a holistic approach, and the bills you mentioned go directly to that issue. We will continue to partner with other utilities and stakeholders in the state to address it. Operator: Thank you. Our next question comes from Steven Fleishman with Wolfe. Your line is open. Ryan Brown: Morning, Steve. Steven Fleishman: Hi, good morning. Thanks. Following up on Pennsylvania, you did not really mention the governor's letter. It seemed like a more adverse regulatory structure. Was that part of what you were hearing when you pulled the case, and how should we think about that when you ultimately do file a case? Calvin G. Butler: Thank you, Steve. The governor's letter centered on affordability. He brought up three specific points: making sure that utilities are going after the most cost-effective forms of capital, transparency in ratemaking, and what he termed justifiable returns. It was nothing we had not already heard in our conversations with them, and he put it out to the entire energy portfolio within Pennsylvania—all the utilities—and said future rate cases and discussions need to be centered on these three principles. We have no concern with that. There is a nine-month regulatory process within Pennsylvania, and we will continue to operate transparently and work with the commission and the governor and his team to ensure understanding of the what and the why—why the investments we are making add value in safe, reliable, and resilient service to Pennsylvanians, and what we are doing on the front end to control our costs. We are pulling $350 million of cost out of our business. That goes directly to the governor's message on justifiable returns and doing our part to keep costs as low as possible. We were doing it before, and we will do it into the future. At the same time, we know economic development and job creation are important to him, and there is no better partner than PICO has been in Pennsylvania for decades. These are the very issues we are talking about today and will talk about in the future. Steven Fleishman: Thanks for that. On PJM issues and the need for more generation, one recent thing was the Crane restart and that even when you have something coming back, it is potentially not interconnected until 2031. Are there things that can be done by PJM or transmission owners to deal with the interconnection timeline and get it done quicker? Calvin G. Butler: Thank you, Steve. We have been on top of that issue, partnering with PJM to see what we can do—different routes, what we can do to really secure them and get them on sooner. The reality is we have a concern with the entire reliability and resiliency of the system. I will ask Colette Honorable to provide input. Colette Honorable: Thanks for the question about the interconnection queue. As you know, PJM has been evaluating how best to progress the interconnection queue and last week announced that 811 new generation projects capable of generating 220 gigawatts of electricity have applied to interconnect to the grid. We have also seen that PJM has reopened the queue, and we applaud PJM for that action because we understand all too well—as we hear from our customers—that we need to move that backlog and get the supply through the queue. We also need to address reliability challenges. While we are encouraged that there are over 800 projects in the queue, we know that there is still more work to be done because only 19% of the projects in the queue reach operation. We also know 54 gigawatts have been cleared through the interconnection process but are delayed by siting, permitting, and supply chain issues. Most of all, to your question, we need new supply. We are pleased to see new leadership at PJM with David Mills, and we are hopeful that he can help move this along. Steven Fleishman: Last one. The transmission CapEx increase you did—if you did not lower distribution, would that have happened anyway? Is there more coming from the data centers, or are you managing within a total capital level you were trying to maintain? Jeanne M. Jones: It is work that we saw on the horizon. We have always spoken to the diversification of our portfolio and not one project being greater than 3%. Having those projects available to pull in within the planning period is a benefit of Exelon Corporation's diversified capital portfolio. We can pivot as needed. Our $12 billion to $17 billion of opportunities outside the planning period did not change—that range is still very robust, driven by the same four or five themes. We will continue to manage the portfolio. As Calvin said, this is the plan for this moment. We did pull back on distribution, but there is a cost to investing and a cost to not investing. There is critical work we still need to do in those states, but this is the right plan for now. Through our strong operations on the distribution side, we saved our customers $1 billion in avoided outage costs in 2025 alone. The investment needs to be done, but we will evaluate and adjust, leveraging the size, scale, and diversified portfolio of Exelon Corporation. Steven Fleishman: Got it. Thanks for taking all my questions. Appreciate it. Calvin G. Butler: Thank you, Steve. Operator: Our next question comes from Nicholas Campanella with Barclays. Your line is open. Ryan Brown: Good morning, Nick. Nicholas Campanella: Good morning, team. Thanks for taking the time. One follow-up on the letter, if I can. There was a proposal around the return that would point to a lower ROE and potentially lower equity cap, depending on the mechanics. Those would be significantly below state averages across the U.S. and have already raised the company's implied cost of capital. Can you talk to the risk of it going there? My understanding is you do have a GRC penciled into this plan—can you confirm that? Do you have a view on whether that would require legislation to go that way, or is this something the PSC at its discretion could do? Jeanne M. Jones: On ROEs, capital structure, and transparency on investments, we believe Pennsylvania has a robust regulatory process that allows us to build an evidentiary record that brings in all forms of debate and justifies what is a fair and reasonable return. That is the right place to have that conversation. Even in a settlement, you still have to justify your returns using capital asset pricing models or other approaches based on publicly available, real data—which is what the governor is asking us to pull in—to determine a justifiable return. A financially sound utility needs justifiable returns commensurate with the risk taken by the regulated utility. The capital structure has to balance the right risks to maintain appropriate credit ratings that drive lower cost of financing for our customers. We will leverage that process to build the record that results in the right economics for a financially sound utility that can continue to invest to create economic development, drive jobs, and avoid the significant costs associated with not investing. Nicholas Campanella: Thank you. You introduced some O&M rationalization in the plan and are working toward identifying more. How much is sustainable versus one-time and can be recaptured through a rate case proceeding? Calvin G. Butler: We are going to run our business in the most efficient manner. When we talk about pulling out $350 million in cost, it is largely driven by work we are not going to do. If we are not going to do certain projects, we will pull those costs out and manage accordingly. If opportunities arise in the future to bring back certain avenues of investment, we will evaluate them. But we will always maintain and run a very efficient business. We approach these as sustainable cost savings through 2029. We will not make decisions that sacrifice reliability and safety. These savings are geared toward overall efficiency. Certain op codes will need to make deeper provisions because if you are not investing, you must adjust. That is how we are approaching it. Nicholas Campanella: One more. You continue to be on stable outlook to my understanding. What feedback are you getting from the agencies through what has transpired in Pennsylvania? Jeanne M. Jones: We have had a lot of discussions with the agencies. PICO was already on negative outlook and is under review for downgrade. The combination of continuing to invest and the regulatory climate factors in, and we will continue to work through that. We want to maintain stronger credit ratings to lower financing costs. From an Exelon Corporation perspective, Pennsylvania is one piece. We manage this as a portfolio. Our diversified platform, our ability to pivot around different projects and still deliver, and importantly, our ability to maintain that target of 14% are key. Having cushion to downgrade thresholds is a testament to how we put a safe, reliable grid and balance sheet at the forefront of our decisions, allowing us to deliver for customers and shareholders. Jeanne M. Jones: Thank you, Nick. Operator: Thank you. Our next question comes from Paul Zimbardo with Jefferies. Your line is open. Ryan Brown: Good morning, Paul. Paul Andrew Zimbardo: Hi. Good morning, team. First, it is nice to see the swift adjustments. I know those are not easy decisions. It sounds like more intensity in your prepared remarks quarter over quarter, Calvin. Is there a point where you need to take matters into your own hands and pursue more contracted generation opportunities and advocate for bigger changes with the state and PJM? How do you gauge where you are on shifting toward being more proactive to the extent you can versus waiting for PJM? Calvin G. Butler: Thank you, and thank you as always for the questions. We are taking things into our own hands. Our transmission organization, led by Kusami, is going after competitive transmission bids—two to date. We are also looking at partnerships to build generation and contract for generation. We are doing those things now. As a company, we will talk about them when they are done or when we have something signed and ready to deliver. When I tell you something, we are going to deliver. The intensity comes from our job to run this business. When we say we are taking $350 million of cost out this year and delivered $1 billion in savings for our customers, that reflects a thoughtful process that impacts people and livelihoods. Fewer contractors, programs that impact employees—we do not take that lightly. It is up to us to ensure a stable environment for our 20,000-plus employees while delivering value to our communities. Are we being proactive? Absolutely. We will talk to you about those actions when the plans are baked. Speculation does not deliver results. We are committed to our earnings results through 2029. If that was to adjust, we will be the first to tell you the what and the why. We are being very intentional about our focus based on changing market dynamics. Across PJM, the first thing governors or commissions talk about is affordability. We are listening and addressing it. Paul Andrew Zimbardo: Pulling it together between net higher earnings from shifting to transmission and the cost control—does this build more contingency into the plan, or are you in the same place as before, given the reconfiguration of rate case timings as well? Jeanne M. Jones: This gets us back to plan, Paul. As always, we factor in risks and opportunities and give you a plan that accommodates a variety of scenarios. This is about getting back to the plan we shared earlier, but it is a different plan for this moment. As a management team, that is what you want us to do—pivot, leverage the portfolio of Exelon Corporation, still deliver, and do it in a way that contemplates a variety of outcomes. Paul Andrew Zimbardo: Thank you, team. Good luck. Calvin G. Butler: Thank you, Paul. Operator: At this time, I would like to turn the conference back over to Calvin G. Butler for closing remarks. Calvin G. Butler: Thank you, Michelle. Let me begin by thanking everyone once again for joining our Q1 earnings call. I hope what you have taken away today is the power of Exelon Corporation at work. Our diversified platform and committed men and women reaffirm what we said we are going to do each and every day. We appreciate your continued interest and support, and we hope to see many of you in the months ahead. That concludes our call. Operator: Thanks to all our participants for joining us today. This concludes our presentation. You may now disconnect. Have a good day.
Operator: Hello, everyone. Thank you for joining us, and welcome to the Mayville Engineering Company, Inc. first quarter 2026 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. We will now hand the conference over to Stefan Neely with Balum Advisors. Please go ahead. Thank you, operator. Stefan Neely: On behalf of our entire team, I would like to welcome you to our first quarter 2026 results conference call. Leading the call today is Mayville Engineering Company, Inc.'s President and CEO, Jag Reddy, and Rochelle Lair, Chief Financial Officer. Today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to update our forward-looking statements. Further, this call will include the discussion of certain non-GAAP financial measures. Reconciliation of these measures to the closest GAAP financial measure is included in our quarterly earnings press release, which is available at mecinc.com. Following our prepared remarks, we will open the line for questions. With that, I would like to turn the call over to Jag. Jagadeesh A. Reddy: Thank you, Stefan, and good morning, everyone. Our first quarter results exceeded our expectations, driven by strong top-line momentum in our data center and critical power end market. At the same time, the first quarter reflected an ongoing transition across the business. Our teams remained focused on positioning resources, completing tooling requirements, and preparing for the launch of numerous data center and critical power programs throughout 2026. During this transition, we continue to incur and retain variable costs as we position the business for successful program execution. As a result, our margins remained pressured during the first quarter. That said, performance improved late in the quarter as several data center and critical power programs transitioned from the launch phase into full production. We expect that momentum to continue building through the second quarter, which reinforces our confidence in the sequential improvement reflected in our financial guidance. While many of our data center and critical power programs have yet to launch or are still in the early stages of ramp, execution to date has been strong. This reflects the upfront time, planning, and resources we have invested to ensure a smooth and repeatable onboarding process across our legacy manufacturing footprint. As additional programs enter production, we are seeing consistent improvement in operating leverage and fixed cost absorption driven by better asset utilization across our manufacturing network. Importantly, the strength we are seeing in data center and critical power continues to contrast with mixed conditions across our legacy end markets. While each market has its own dynamics, we have not yet seen clear indications of a broad-based or material recovery in legacy customer demand. Starting with commercial vehicles, demand continued to soften in the first quarter. Net sales declined approximately 24% year over year as North American Class 8 production reached a low point in the current cycle. In its most recent report, ACT again revised its full-year 2026 outlook upward, now projecting a 9.2% increase in Class 8 production. This improved outlook reflects greater clarity around the 2027 EPA emissions standards, anticipated prebuy activity, and strong Class 8 orders earlier in the year. That said, current OEM production levels remained largely consistent over the past six months and do not yet indicate a meaningful cyclical recovery. Combined with elevated fuel cost and recent tariff policy changes, our near-term view of this market remains cautious pending a material improvement in OEM activity. In construction and access, revenue increased approximately 3% year over year in the quarter, which was ahead of our expectations. Performance was supported by continued strength in nonresidential activity, although demand remains more customer specific than broad based. In powersports, net sales increased approximately 5% year over year, driven primarily by incremental volumes from discrete short-cycle customer programs. This was partially offset by continued softness among legacy ATV, UTV, and motorcycle OEMs, as well as lower sales within the marine propulsion market. Within data center and critical power, we delivered organic growth of approximately 71% year over year, supported by growth from legacy OEM customers and early project launches tied to AccuFab-related cross-selling opportunities. Overall, demand from OEM customers in the data center and critical power market remains strong. Our qualified opportunity pipeline exceeds $125 million, and the value of projects scheduled to launch in 2026 is approximately $50 million to $60 million. Combined with continued growth from our legacy OEM customers, we continue to expect data center and critical power to represent more than 20% of our revenue in 2026. Customer demand in this end market remains robust, and we continue to evaluate the right approach to balancing the needs of our legacy customers while meeting accelerating demand in this rapidly evolving space. As data center infrastructure advances, customers are increasingly seeking adaptable solutions that address their evolving needs and enable faster speed to market. These shifts are redefining how customers approach large-scale deployments and their selection of partners. As we move into the second half of the year, and with the potential for recovery across certain legacy end markets, we are actively managing capacity and prioritization to support long-term diversified and profitable growth. Before turning the call over to Rochelle, I want to highlight several areas of commercial momentum that reinforce our confidence in the growth trajectory for 2026 and beyond. Across all of our end markets, customer engagement and bidding activity remains strong. During the first quarter, we secured approximately $50 million in new project awards with data center and critical power customers. This amount surpasses the total awards we secured in this end market during the second half of last year. For the full year 2026, we currently expect total bookings across all of our end markets to exceed $150 million, supporting profitable growth as our legacy markets move toward a cyclical recovery exiting 2026. Within our legacy end markets, share gains continued with commercial vehicles customers as they launch new products ahead of the 2027 EPA regulation changes. These awards support future growth and are expected to enter production in late 2026 and 2027. In addition, new contract wins supporting legacy military vehicle platforms were secured during the quarter. This provides stability to our core base military revenues. Within the data center and critical power market, approximately $50 million of awards secured in the first quarter were primarily driven by demand from new customers in this end market. As these customers scale their programs, the intent is to serve as a long-term strategic metal fabrication partner. The awarded scopes of work span power distribution units, static transfer switches, and switchgear. Turning to capital allocation, our priorities are disciplined and well balanced. In the near term, we are deploying capital in a targeted manner to support existing project commitments and the evolving needs of our data center and critical power OEM customers, including investments in equipment and capacity. At the same time, we remain focused on prudent balance sheet management and reducing debt. Longer term, the focus remains on strengthening the balance sheet and maintaining sustainable financial flexibility. Our long-term net leverage target remains 2.5x, and we expect to make steady progress towards this objective through earnings growth, consistent cash generation, and disciplined capital deployment. Importantly, the demand environment in data center and critical power is creating a meaningful opportunity to invest organically in the business and expand our capacity. In certain areas, customer demand is already exceeding our current available capacity, and we believe targeted investments in equipment, automation, and operating capabilities can deliver attractive returns while enhancing our ability to serve this fast-growing end market. Although we are still assessing the full scope of this opportunity and the related capital requirements, we expect growth capital investment to increase above the $5 million to $10 million level we have historically averaged. In 2026, that investment will remain focused on supporting current program launches and selectively expanding capacity where visibility, customer demand, and return thresholds are strongest. Over time, we believe this market may support a broader and highly attractive organic investment opportunity. As always, we will pursue that opportunity within a disciplined capital allocation framework, balancing growth investment with deleveraging, cash flow generation, and balance sheet optionality. In closing, I am encouraged by the discipline and execution our team has demonstrated so far this year. As we navigate this next phase of growth, our focus is on prioritizing operational agility, efficient program execution, and improved cash flow conversion as volumes ramp. We believe that consistent disciplined execution over the coming quarters will position Mayville Engineering Company, Inc. to deliver stronger operating performance and create a solid foundation for sustainable growth. With that, I would like to turn the call over to Rochelle. Rachele Marie Lehr: Thank you, Jag, and good morning, everyone. Total sales for the first quarter increased 6.8% year over year to $144.8 million. Excluding the impact of the AccuFab acquisition, organic net sales declined by 8.2% compared to the prior-year period. Our manufacturing margin was 7% for the quarter compared to 11.3% for the prior-year period. The decrease in our manufacturing margin was due to $1.2 million of data center and critical power-related project launch costs, nonrecurring restructuring costs, and lower volumes in our legacy end markets. These factors were partially offset by the higher-margin sales contribution from the AccuFab acquisition. Other selling, general, and administrative expenses were $9.2 million, or 6.3% of net sales for the quarter, as compared to $8.7 million, or 6.4% of net sales for the same prior-year period. The increase in these expenses primarily reflects incremental SG&A expense associated with the AccuFab acquisition. Interest expense was $3.7 million for the quarter as compared to $1.6 million in the prior-year period. The increase was driven by higher borrowings resulting from the AccuFab acquisition, which was completed during the third quarter of last year. Adjusted EBITDA margin was 4.5% for the quarter, compared to 9% in the prior-year period. The decrease reflects lower legacy end market volumes and $1.2 million of project launch costs, partially offset by the benefit of the AccuFab acquisition. During the quarter, we also continued to execute our previously announced footprint optimization actions, including the consolidation of four warehouse locations and one manufacturing facility. We expect these actions to generate annualized savings of approximately $1 million to $2 million and they are already contemplated within our full-year outlook. Turning now to our cash flow and the balance sheet. Free cash flow during the quarter was a use of $6.9 million as compared to $5.4 million provided in the prior-year period. The year-over-year decrease was primarily driven by lower operating cash flow as a result of reduced profitability, together with a $1.2 million increase in capital expenditures. The increase in capital spending was primarily related to equipment investments supporting the launch of new data center and critical power programs. At the end of the first quarter, our net debt was $219.2 million, up from $80.4 million at the end of 2025. Our increased debt resulted in our bank covenant net leverage ratio of 4.4x as of March 31. Now turning to a review of our outlook for the second quarter and the full year. For the second quarter of 2026, we currently expect net sales of between $145 million and $155 million and adjusted EBITDA of between $10 million and $13 million. Our second quarter outlook reflects continued launch-related costs and margin pressure early in the quarter, with improvement expected as the quarter progresses and additional data center and critical power programs move into full production. For the full year, we refined our financial guidance by raising the low end of our previously announced guidance while maintaining the high end of the range. We now expect net sales of between $590 million and $620 million, adjusted EBITDA between $52 million and $60 million, and free cash flow of between $25 million and $35 million. This outlook reflects a full year of AccuFab ownership, $50 million to $60 million of incremental cross-selling revenue, and a gradual improvement in legacy end market demand primarily in the second half of the year. In summary, our first quarter results were consistent with the operating conditions we outlined coming into the year. While profitability and cash flow were affected by launch-related costs and continued softness in legacy markets, those pressures are temporary and remain embedded within our outlook. As production levels increase and utilization improves, we expect better absorption, stronger margin conversion, and improved cash generation over the remainder of the year. With continued working capital discipline and targeted capital spending, we believe we are positioned to support growth while also making measurable progress on deleveraging. With that, we are ready to open the line for questions. Thank you. 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 standby while we compile the Q&A roster. Your first question comes from the line of Michael Shlisky with D.A. Davidson. Your line is open. Please go ahead. Michael Shlisky: Yes, hi. Good morning. Thanks for taking my questions. I wanted to ask maybe a two-part question about the non-data center end markets and legacy end markets here, and your commentary in the slides. The ag market you were saying was going to be down mid-teens, and now you are saying it is flat. So my question is whether that change in outlook from down mid-teens to flat is due to how you feel about the very end of the year and what OEMs are telling you about ramping up for 2027, asking suppliers like Mayville Engineering Company, Inc. to build stuff in late 2026. If that is the first part of the question, then on the construction and access side, I have sensed so far this early season that most construction companies, including the largest ones, are taking their outlooks up, mostly construction equipment OEMs. You took your outlook here down from last quarter. So I am curious whether there is some kind of a year-end dynamic where they are asking you to slow down in advance of some challenges they might be seeing in 2027. Just some more detail about both those end markets would be appreciated. Jagadeesh A. Reddy: First of all, Mike, on the ag market, we are seeing good strength in the small ag turf care segment. We are approximately 45%/55% mix between large ag and small ag. So the small ag and turf care segment strength is offsetting the declines in the large ag segment. That is the reason for our change in our outlook for the ag segment. On construction and access, again, as you recall, we are approximately 45%/55% heavy construction versus access. Our heavy construction segment continues to show a good amount of strength driven by nonresidential demand, some of it driven by data center buildout as well. But in the access segment, we anticipated, coming out of last quarter’s earnings call, the access segment to accelerate this year. So far, we have not seen that. Hence, our change in our assumptions for the construction and access segment to be flat versus slightly up. Michael Shlisky: Turning to data center, I would like to get a feel for more detail as to how you are looking to accommodate some of the demand that has been rolling in or some of the quoting you have been doing. I think you mentioned elsewhere in the business you closed some footprint, so I want to make sure you have a plan. Do you plan to open brand-new footprint at this point, given the level of demand, or are you still looking to convert existing buildings to data center? Just some more detail as to how this might all play out, and the investments that you are making now. Are those in people or in machines to accommodate some of that near-term demand? Jagadeesh A. Reddy: Let me address that, Mike. We announced closure of four locations. Those are mostly warehouses that we consolidated into our manufacturing sites. That was the restructuring we announced last year in the second half, and we just wrapped those up. We are not in the process of closing any manufacturing footprint. We have converted approximately six plants, going to potentially a seventh plant as well, to data center manufacturing. So we are retooling between six and seven plants as we speak to produce data center products. We continue to add capital as needed in these locations and to offset existing manufacturing assets to take on additional data center volumes. We do see significant growth in the data center volumes. Every quarter, as you all have seen, we continue to step up our cross-selling synergies. Pre-acquisition closing, we were in the single digits; now we are up to $50 million to $60 million of cross-selling synergies in 2026 alone. I continue to be very bullish on data center volumes. At the same time, we have not exited any of our legacy customer programs. We continue to be able to support our legacy customers with their volumes. As we talk about multiple end markets, we really have not seen broad-based recovery in our legacy end markets, so at this stage, we are able to support our legacy customers as they continue to ramp and also take on incremental data center volumes in these seven locations. Michael Shlisky: A lot of headlines and stories about changes in the Section 232 tariffs and cost of steel and other metals. Could you outline how any of this might be impacting you directly over the last few months? Are you a beneficiary since you are almost entirely U.S. based? Are you seeing some customers, old and new, coming to you to say, how can you help us best structure ourselves for these tariffs? Jagadeesh A. Reddy: 100% of our steel is procured from domestic sources. That way, we have been reasonably insulated from supply challenges. We pass on any increases in steel prices to our customers, so I would say that it has not impacted us. At the same time, approximately 30% to 40% of our aluminum is imported from Canada, and we are trying to mitigate that, but it is challenging. The rest of our aluminum is sourced domestically. We are able to support many of our aluminum customers with their demand and needs. We are seeing some challenges where some of our customers are going on allocation with other suppliers on aluminum. Fortunately, we are in a good position to continue to support our customers as their demand increases or they switch from another supplier that is unable to supply aluminum to Mayville Engineering Company, Inc. In general, on tariff impacts, I would say that we have not been either positively or negatively impacted. You have seen some of our customers and their competitors publicly talk about it. It has not really impacted our mix so far. Operator: Your next question comes from the line of Ross Sparendlik with William Blair. Your line is open. Please go ahead. Ross Riley Sparenblek: Hey, good morning. Rachele Marie Lehr: Morning, Ross. Jagadeesh A. Reddy: Sounds like you guys have been busy with the problems I have here. Ross Riley Sparenblek: Maybe starting with the new customer wins and continued momentum in data centers in the first quarter. Anything one-time in nature to call out, or are you sensing that customer buying patterns have started to change here within the data centers power market? Jagadeesh A. Reddy: Good question, Ross. In the data center market, some of the significant wins we had in Q1 actually came from two brand-new customers to Mayville Engineering Company, Inc. and AccuFab. We never did business with them pre-AccuFab. Those two customers significantly contributed to the wins in Q1. We expect those two customers in particular to continue to grow with us as the year progresses and into the future. We are seeing a significant switch in our data center OEM customer purchasing behavior where, similar to our legacy end markets, many of these customers are looking to completely outsource fabrication and step up their manufacturing process to someone like Mayville Engineering Company, Inc. Think about our legacy customers in ag or construction or commercial vehicles — over the decades, they exited fab operations to suppliers like us. We are seeing a similar process happening, slowly but steadily, in data center and critical power customers. We see that as a long-term secular tailwind for the fabrication industry, and being the largest fabricator in North America, we are able to offer significant capacity to these OEMs and capture a significant portion of that outsourcing that is starting in this industry. All of those are positives and tailwinds for the industry and for Mayville Engineering Company, Inc. going into the future. Ross Riley Sparenblek: When we think about the larger potential OEM customers out there within data centers, can you give us a sense of where your penetration rate is as you think about the pipeline of opportunities and who you are speaking with? Jagadeesh A. Reddy: Our penetration at this point, taking the top 10 potential or existing customers, is low single digits or less. We are sub-5% penetration, and hence my optimism for the industry and for our customers is that as we go into the rest of this year or the second half, we continue to get significant inquiries. We continue to qualify these opportunities. Even after raising our cross-selling synergies for the year, our qualified pipeline remains really strong and gives me a lot of comfort that this is a multiyear secular growth opportunity for Mayville Engineering Company, Inc. Ross Riley Sparenblek: It sounds like the whole market is heading for a capacity squeeze. If the broader end markets start to recover here, how do you feel like you are positioned to handle legacy customers? Jagadeesh A. Reddy: Our intent is to continue to serve our longstanding legacy customers as they build out their volumes into the second half and into 2027. We are constantly evaluating plant by plant, manufacturing operation by manufacturing operation, and continue to see where we have to offset some capital to increase capacity. Some of my comments in our prepared remarks allude to the fact that we are looking at, potentially in the long run, a significant organic investment opportunity as we think about expanding capacity for data center customers while continuing to serve our legacy customers. Ross Riley Sparenblek: Would that imply the optionality at Hazel Park? I believe you still have additional square footage there. Jagadeesh A. Reddy: Absolutely. That has been a long time coming, the Hazel Park story. We just put approximately $55 million of data center products into Hazel Park in Q1 and Q2. We are ramping approximately $55 million worth of data center products in Hazel Park. We think we can fill up Hazel Park, and we have always said that. The current space we have — not the sublease space — supports $100 million worth of capacity. What we do need is some capital assets to continue to go in because the mix of operations for data centers is slightly different than our legacy customer products. With all of that, we continue to be bullish on Hazel Park being filled up in the next year or so. Ross Riley Sparenblek: Very nice quarter, all things considered. I will pass along. Jagadeesh A. Reddy: Thank you, Ross. Operator: Your next question comes from the line of Greg Palm with Craig-Hallum. Your line is open. Please go ahead. Jagadeesh A. Reddy: Good morning, Greg. Greg Palm: Thanks. Can you talk about how some of these early launches in data center and critical power are going, just in light of the comments last quarter? It seems like everything is on track, and you are starting to see the margin improvements. What else is top of mind as we launch more of these projects this quarter and in the second half? Rachele Marie Lehr: As we pointed out in the prepared remarks, we invested in these product launch costs and we spent about $1.2 million in Q1 and in Q4, and those were to be ahead of these launches. We see that continuing into Q2, but then after that, as we hit full run-rate production levels, we are seeing improvement. In fact, in Q1, as we exited the quarter, we saw that improvement happen as we had several programs hit full production run rate. We are very optimistic that we made those investments and did the right thing to create an effective onboarding program so that as we do new programs and new launches, we know what the upfront investment is, and then when we hit full run-rate production levels, we are back to the margin levels of the overall end market. Greg Palm: On the existing customers in data centers, what are you seeing in terms of order progression? Are orders getting larger because they are outsourcing more business to you, or because they are winning a lot more business themselves? It feels like you are going to have a big ramp from existing customers and will be layering on brand-new customers as well, which presumably would follow a similar path of accelerated activity. Walk us through those dynamics. Jagadeesh A. Reddy: You are asking in the context of data center customers, existing versus new. That is right. As I mentioned, we brought on two brand-new customers to Mayville Engineering Company, Inc. since the acquisition closed. We expect a couple more brand-new customers that are in the works to become our customers later this year. Outside of those brand-new logos, AccuFab’s legacy data center customers continue to ramp significantly. That has been another tailwind. I shared examples in the past about volumes doubling, tripling, quadrupling on products that AccuFab historically manufactured for some of these customers as they win significant new projects and volumes for their own product lines. Hence, those legacy customers are looking at their own footprint and resources and making choices around outsourcing additional work to suppliers like us. So there is new customer growth, existing customer volume growth, and existing customer market share gains. That is how I would position the growth we are seeing in this end market. Greg Palm: I want to follow up on a comment about Hazel Park. I think you said you could generate $100 million out of that facility, specifically related to data center. Is that correct? Jagadeesh A. Reddy: No. That is the total capacity. Historically, we have always thought of Hazel Park being a $100 million plant. As I just said, we put $55 million worth of data center work into that plant. We still have another $15 million to $20 million of legacy customer work in that plant today. You can do the math and say, can we put another $25 million of data center work into Hazel Park? Absolutely. That is what we are trying to do. Greg Palm: Last question from me is about the full-year guide. Backing into the second half, it implies an EBITDA run rate on a quarterly basis that is pretty close to $20 million. We would already be at low double-digit margins in the second half if that is the case. I assume next year, as volumes recover further and mix gets more positive from data centers, it would support even higher margins. It is a big step-up in both absolute EBITDA and margins that is being considered for the second half of this year. Rachele Marie Lehr: When you look at our legacy business, you can look back to 2024 when we were hitting roughly $600 million in that base business alone. Our margins were at that point well in excess of where we are today. We are on our way towards that 15% plus that we would like to be long term. You throw in 20% plus in the data center and critical power, which is 20% margins, and yes, we see a clear path to that 50/15% plus as we move into the future. Greg Palm: Thanks. Jagadeesh A. Reddy: Thanks, Greg. Operator: As a reminder, if you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, please press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Your next question comes from Edward Randolph Jackson with Northland Securities. Your line is open. Please go ahead. Edward Randolph Jackson: Thank you very much. Congrats on the quarter. Jagadeesh A. Reddy: Good morning, Ted. Edward Randolph Jackson: I want to touch on the second quarter guidance. You are looking for a midpoint of $150 million. It is comfortably above the consensus view. The legacy markets themselves, at least in the first part of this year, are underperforming, with a better outlook maybe in some of them as you get to the second half. To hit the midpoint, that would tell me that perhaps you are going to see more business coming out of the data center and power side of things than perhaps you thought going into the year. Do you see that business being able to hit your 20% of revenue target in the second quarter alone? Rachele Marie Lehr: In the second quarter alone, no. We still really look at that being second half of the year when it is going to hit those levels and actually almost outperform at that point. In Q2, we will still be launching programs and probably will not hit full-run production rates until late in Q2. So really, it is a second-half focus for data center and critical power being at full production run rates. Edward Randolph Jackson: What is a full production run rate for data center and critical power? Jagadeesh A. Reddy: We have always targeted, and publicly commented, that our ambition is to be at 25% of our total volumes in the data center and critical power end market. I do see that target within our reach on an exit run rate for 2026 and certainly for 2027. Edward Randolph Jackson: Shifting back into the second quarter, is there any particular legacy market that you are expecting to have some kind of bulge in terms of ability to generate some revenue that then falls away? Powersports comes to mind because you have had some performance there, but you keep highlighting it has been driven by very project-oriented stuff, and it is not long-tailed customer wins. I am trying to understand how to get to the $150 million if it is not coming from a faster ramp in the data center and power market. Jagadeesh A. Reddy: We looked at commercial vehicles ramping starting in May. May and June could have a slightly higher commercial vehicle run rate as our OEMs ramp. Powersports is probably not the end market that I would expect to help us in Q2. We continue to see significant outsourcing to Asia from our powersports customers. The discrete programs we talked about were specific aluminum-related projects. As we had the materials and the capacity, we took on some quick-run projects that will exit in Q2. That is not a long-term run-rate type of business in powersports that is going to help us in Q2. Edward Randolph Jackson: Shifting over to capacity, you have one of the better problems that a manufacturing company can have, which is demand pushing you to capacity constraints. Given your current footprint and the potential for a lot of your legacy to turn around at the same time that the data center market is coming, how much revenue do you think you could run through your existing footprint, and what does it take to do it? At your current level, where could you take your revenue run rate to, and then, all else being equal with the same footprint, how could you take your revenue higher over the steps? Jagadeesh A. Reddy: I will give you a couple of numbers, Ted. As we look at our current capacity and current programs that we have won and those of our legacy customers, we are going to top out, with no further investments, around $850 million in revenue. What that means is we have to continue to invest. Given the mix differences between data center products and our legacy products, we will potentially run out of capacity after $850 million of revenue. More importantly, we probably have to think about an organic investment somewhere on the Eastern Seaboard, where we are currently running out of capacity for data center customers. We have capacity in the Midwest, but some of the products we are manufacturing for some data center customers are large in volume and significantly expensive to ship across the country. That is something that we are evaluating. We are at the early stages of that analysis: how to fill existing capacity first, the timeline by which we will run out of our existing capacity, and how we expand our capacity organically. Edward Randolph Jackson: That $850 million run rate without further investment — is that running the same shift counts, or are you getting there by adding shifts? Jagadeesh A. Reddy: We are feverishly adding people and shifts to our plants in the last four to five months. Some of our plants are running seven days a week. Some are running full 24 hours and five days a week. We are running 10% to 12% overtime in many of our plants right now and continuing to hire in many plants that are seeing volume growth, particularly driven by data center customers. Edward Randolph Jackson: It seems like the problems that you are solving are a lot of fun. It is pretty exciting to see what is in front of you. I will get out of the line. Thanks again for taking the questions, and congrats on the results. Jagadeesh A. Reddy: Thank you, Ted. Operator: There are no further questions. Oh, apologies. Your next question comes from the line of Andrew Kaplowitz with Citibank. Your line is open. Please go ahead. Natalia Bak: Hi, good morning. This is Natalia on behalf of Andy Kaplowitz. Jagadeesh A. Reddy: Morning, Natalia. Natalia Bak: As you continue to highlight strong momentum within data center and critical power, yet your broader other end market outlook is flat for FY 2026, can you help us unpack what areas within that category are offsetting the data center and critical power-related strength? I think you mentioned on your side there is modest activity from those growth initiatives. Jagadeesh A. Reddy: As we mentioned earlier, Natalia, ag is flat, construction and access is flat. Powersports we actually think will be a headwind for us in the second half and into 2027. Our commercial vehicle market — our current forecast guidance assumes a 240 thousand unit build for the year. That is higher than what we started the year with, but at the same time it is lower than what ACT is projecting today. We have not seen that ramp yet. We are in the window right now. We should see that in May and June going into Q3 with our commercial vehicle customers. That is giving us a bit of a pause in terms of legacy end markets all in, while we see strength in our data center and critical power market. Natalia Bak: I appreciate that, but I was curious about your “other” end market on your slide with the outlook. Rachele Marie Lehr: I think the biggest thing here is as we have been growing in data center and critical power, we have really been focused on growth initiatives there. “Other” is things that come in more as one-off pieces of business or different opportunities. Our extrusion business has a lot in here, but the extrusion business we are winning is actually data center and critical power classified. So we are seeing a big piece of what maybe would have been growth in extrusion here in “other” be extrusion growth in data center and critical power. Some of this is really reclassification from “other” into data center and critical power. Natalia Bak: Got it. Makes sense. Much appreciated. One last question: margins are still under pressure and leverage is elevated. What gives you confidence that Mayville Engineering Company, Inc. can generate sufficient free cash flow to both delever and continue investing in these growth initiatives? Rachele Marie Lehr: We are focused on delevering. That has been something that we have a proven track record of doing as we do acquisitions. There is a 12- to 18-month time of absorbing the acquisition and then working to pay that down. What we see as the true opportunity is as we move into the second half of this year and have both strong sales for data center and critical power at higher margin, plus some expectation of the commercial vehicle market coming back in the second half, we will be able to generate additional cash flow to focus on delevering, with the goal of being below 3x as we exit this year. It is very second-half weighted, but with what we are seeing with the launches and the confidence we gained exiting Q1 — sales coming to fruition and the margin and results associated with it — we feel good about it. Natalia Bak: Great. Thank you so much. Operator: We have a question from Greg Palm with Craig-Hallum. Your line is open. Please go ahead. Greg Palm: Thanks. I thought this one would have gotten asked, so since I am back in the queue, I will ask it now. As it relates to commercial vehicle, I understand and can appreciate your conservatism. Let us assume, hypothetically, that the build rate or the production increase ends up being at the 9% rate or something in the high single digits for fiscal 2026. Is there a reason why your segment results would deviate significantly from that? Jagadeesh A. Reddy: They should not, Greg. If the market actually builds up that 9% plus build rate — and let me remind you that the 9% is retail sales, which is how ACT would report, and that is pretty close to the build rates anyway — but if it is approximately 9% build rate, we should see a very similar tailwind for our segment revenue. Greg Palm: Going back to data centers, are most of the awards or contracts you are seeing today more project-based with a definitive timeline, and are there potential discussions to enter into more long-term frame agreements or multiyear capacity arrangements? Jagadeesh A. Reddy: Since the acquisition, a significant portion of our wins have been for long-running products. These customers continue to offer into various data center projects. I can only think of maybe one program where it was one customer-specific program, a small program. Generally speaking, these are long-tail, long-run product lines where we are winning. At the same time, we are beginning conversations with these customers regarding potential capacity reservations and potential long-term agreements. Those are the conversations our teams are beginning to have with our data center and critical power customers. Greg Palm: Appreciate the color. Jagadeesh A. Reddy: Thank you, Greg. Operator: And this concludes today’s Q&A session. I will now turn the call back to Jag Reddy for closing remarks. Jagadeesh A. Reddy: Before we conclude, I want to again thank our team members for their continued strong focus and execution, and our shareholders for their ongoing support. While we recognize the near-term challenges in several of our legacy markets, we are confident in the progress we are making to position Mayville Engineering Company, Inc. for durable, high-margin growth in the years ahead. We look forward to sharing our continued progress with you. Thank you for joining us today. Operator: This concludes today’s call. Thank you for attending. You may now disconnect.
Operator: Hello, everyone. Thank you for joining us and welcome to Agilon Health, Inc. First Quarter 2026 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Evan Smith. Please go ahead. Evan Smith: Thank you, Operator. Good afternoon, and welcome to the call. With me are Executive Chairman, Ronald Williams and our CFO, Jeffrey Alan Schwaneke. Following our prepared remarks, we will conduct a Q&A session. Before we begin, I would like to remind you that our remarks and responses to questions may include forward-looking statements. Actual results may differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with our business. These risks and uncertainties are discussed in our SEC filings. Please note that we assume no obligation to update any forward-looking statements. Additionally, certain financial measures we will discuss in this call are non-GAAP financial measures. Non-GAAP measures are supplemental and not substitutes for GAAP results. However, we believe that providing these non-GAAP measures helps investors gain a better and more complete understanding of our financial results and are consistent with how management views our financial results. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures is available in the earnings press release and Form 8-Ks filed with the SEC today. With that, let me turn the call over to Ronald Williams. Ronald Williams: Thank you, Evan, and good afternoon, everyone. In 2026, we remain focused on disciplined execution and building a durable foundation for sustainable long-term performance. We are advancing the same strategy and mission—empowering best-in-class physicians through long-term partnerships to deliver high-quality, cost-effective patient care that delivers value for all of our stakeholders. In 2025, we made meaningful progress across all of our initiatives, which has translated into strong first quarter performance and increased expectations for our full-year 2026 outlook. As we announced last week, we are excited to welcome Tim O'Rourke as our new CEO beginning tomorrow, May 7, 2026. Tim brings significant experience across the payer and provider space with a deep understanding of what is needed to succeed in value-based care. Tim is fully committed to furthering our mission and strategy to continue driving improvement in Agilon Health, Inc.'s performance for all of our stakeholders. In the first quarter, we delivered results that were above our expectations. Our performance demonstrates operational discipline, the strength of our long-term physician partnerships, and early benefits from the strategic decisions we made last year. Operationally, we are building upon several key initiatives you have heard me discuss before: the enhanced data pipeline and improved actuarial visibility enabling earlier identification and validation of trends; continued advancement of our clinical and quality programs, with our congestive heart failure program now scaled broadly across the network; and ongoing execution of disciplined payer contracting and operating expense optimization focused on profitability and sustainability. Each of these efforts is designed to improve predictability and alignment with our physician partners, reduce variability, and support durable margin expansion over time. With the enhanced data pipeline, we now have more timely direct payer data feeds with validated and highly correlated member-level clinical and claims data, as well as member-level risk scores, on approximately 85% of our members. The increased visibility and alignment of our financial and operational data enable us to more quickly identify and drive improvements. As Jeffrey Alan Schwaneke will discuss in more detail, this has enabled us to increase our revenue and adjusted EBITDA expectations in part due to better progress on the validation of our burden of illness initiatives. Going forward, we will continue to enhance the data pipeline to support clinically actionable insights, as well as improved network design and care model innovation. In combination with our physician reviewers, we are integrating generative AI-based insights directly into clinical workflows to drive more informed physician decision-making at the point of care, and we are seeing encouraging results. This capability is helping physicians intervene at the most appropriate points of care earlier. We are continuing to increase our focus on high-risk patients, an increasingly important focus for all constituents in the Medicare space. We have grown the richness of our member-level data and are now aligning it better with PCP actions. This is helping physicians improve the quality of their intervention with higher-risk patients, identifying gaps in care, and leveraging industry-standard guideline-directed clinical pathways. Greater access to timely and high-integrity data has also improved the quality of our forecasting, as demonstrated in the ongoing development of our 2025 cost trends. We have favorable medical cost trend development from 2025 and are seeing slight moderation within inpatient census so far in 2026. With that said, given it is early in the year, we believe it remains prudent to maintain our net cost trend outlook of approximately 7% for full-year 2026. Our full-risk total care model is delivering clinical and quality outcomes and driving strong patient and PCP net promoter scores while demonstrating the ability to effectively manage utilization and medical cost trend. Next, let me discuss clinical and quality programs, focusing primarily on our clinical execution which is a core driver for our model. As a reminder, the congestive heart failure, or CHF, program remains the most mature pathway deployed across 90% of our markets. Let me start with why this program is important to patients. Approximately 40% to 50% of patients nationally are diagnosed at the time of first admission to the hospital. That means missed opportunities for earlier detection, leading to less than ideal care and unnecessary hospital costs. The second thing we know about heart failure is that less than 10% of patients are actually on the right therapies. Through a proactive and guideline-directed approach, our physician partners have been able to shift CHF diagnosis to earlier in the care continuum, with inpatient first diagnosis rates improving from approximately 25% to less than 5%. So less than 5% of heart failure diagnoses are now in the inpatient setting. Additionally, we are expanding our pharmacy-integrated management approach for heart failure patients across the network and observing positive trends in guideline-directed therapy rates, which we expect to improve functional outcomes for patients and prevent downstream complications of disease that lead to admissions. Current results reflect the combination of our early detection and diagnosis, supported by in-office or increased access to diagnostics, structured and physician-supported clinical protocols, and ongoing patient engagement, including virtual pharmacy support. These pathways are increasingly informed by AI-driven risk stratification and early detection models, enabling more proactive intervention with this high-risk population. We plan to utilize this evidence-based approach by rapidly scaling COPD and broader lung health pathways through 2026. The initial focus for these programs will be earlier identification of COPD, expanded lung cancer screenings, and increased use of advanced diagnostics by our physician groups, each of which is designed to drive earlier intervention, improve treatment adherence, or prevent avoidable complications and hospitalizations. In addition, we are seeing good engagement as we continue to roll out the dementia program in conjunction with our physician partners. Increased health care costs and the burden on caregivers are being driven by the approximately 50% of dementia patients across the broad population that go undiagnosed, increasing both health care costs and the burden on caregivers. We are working with partners to deploy enhanced caregiver models, structured early-stage pathways, and virtual diagnostics. Moving to our quality and STARS performance, Agilon Health, Inc.'s STARS performance is a result of a highly integrated quality operating model that combines data infrastructure, physician engagement, and payer alignment. Operationally, quality performance starts with our ability to identify care gaps early and deliver actionable insights directly to our physician partners. Because we are working closely with our physician partners, quality measures are embedded into their everyday clinical workflow. Our partners and their care teams have clear visibility into their performance and the actions needed to efficiently close care gaps for their patients. Looking ahead, we expect to see continued opportunity to expand our performance through deeper data integration and earlier intervention, leveraging analytics to identify patients at risk of missing key quality measures earlier in the measurement year. Ultimately, our approach is about building durable infrastructure that supports physicians in delivering high-quality care that is aligned with key objectives of the Medicare Advantage Program while ensuring performance is accurately measured and rewarded. Now let me move on to ACO REACH. As evidenced in the quarter's results, we continue to demonstrate the strength of our model and the ability to deliver superior performance across both Medicare fee-for-service programs and Medicare Advantage. In addition, we are pleased that CMS took a pragmatic approach to addressing fraudulent claims related to urinary catheter and suspect skin substitute claims for 2025. Finally, we have finalized 2026 payer contracts, which Jeffrey Alan Schwaneke will discuss in a moment. We are beginning our 2027 payer contracting process, and we plan to take the same disciplined and partnership-oriented approach with our payers, focused on shared profitability and durable margin expansion. In closing, we have had a strong start to 2026 and feel good about the progress we are making. We are seeing it across all areas that matter: payer contracting, burden of illness, clinical and quality initiatives, and cost discipline. First, the work we have done with our physician partners around burden of illness initiatives and clinical pathways is starting to show up more clearly in our clinical results and financial performance. Second, our AI-enabled technology platform and enhanced data capabilities are deployed in very close proximity to the physician, allowing us to identify opportunities earlier, act faster, and manage performance with greater precision. We are beginning to see the benefits of AI more deeply integrated into both physician and operational workflows. Third, the discipline we applied, particularly around payer contracting and cost structure, is starting to come through. We are raising our outlook for financial performance this year due to the early impact of these initiatives and remain confident in the long-term strength of our unique partnership model. With that, I will turn the call over to Jeffrey Alan Schwaneke to go through the financials. Jeffrey Alan Schwaneke: Thank you, Ronald, and good afternoon. As Ronald mentioned, we are very pleased that we exceeded our guidance for the quarter and are increasing our expectations for the full year. The positive results and increase to our full-year guidance were driven by the strategic actions we took throughout 2025 and the continued strong work of our physician partners across the country. These include the significant improvement in our data visibility and estimation process, execution of our clinical and quality programs across our network, cost management, and disciplined payer contracting, all of which were focused on improving our operations and creating a strong foundation for durable and predictable performance this year and beyond. During our call today, I will cover three key areas of our financials. First, I will discuss our financial performance for the first quarter. Second, I will provide an update on cost and macroeconomic trends, including the recently announced final rate notice for 2027. And finally, I will discuss our second quarter and revised full-year 2026 outlook along with key assumptions we have made. Moving to our financial performance for 2026, we exceeded the top end of our guidance range for total revenue, medical margin, and adjusted EBITDA. The performance in the quarter was driven by higher-than-expected revenue from risk adjustment, an additional full-risk contract with a new payer in an existing market, and strong performance in ACO REACH. Starting with membership, Medicare Advantage membership at the end of the quarter was 426,000, compared to 491,000 in Q1 2025. Our ACO REACH membership for Q1 was 110,000 members, compared to 114,000 in the same period of 2025. As a reminder, Medicare Advantage membership was affected by our measured approach to growth, previously disclosed market exits which were finalized as of 01/01/2026, and payer exits in certain markets which were a result of our discipline and profitability-focused contracting efforts. Additionally, a subset of our members are under care coordination fees. These contracts are primarily net neutral to Agilon Health, Inc. with financial opportunity based upon strong quality and cost performance. Next, revenue for the first quarter was approximately $1.42 billion compared to $1.53 billion in the same period of 2025. Our year-over-year revenue decrease is driven by the membership decline I just mentioned, partially offset by more constructive rates for 2026 from both the CMS benchmark and favorable payer contracting benefits, as well as increased revenue from higher estimated risk scores from our previous expectations. Revenue for the first quarter was higher than our expectations, driven by the execution of an additional full-risk contract in an existing market and the estimated benefit of higher-than-expected risk scores. Using the enhanced data pipeline, for a meaningful portion of our membership we calculated member-level risk scores for the midyear data period. This enhanced data is based on claims data as well as MAO-004 and MMR data that our payer partners receive from CMS. These data files are both claims and plan-submitted encounters that are accepted for risk adjustment. As a reminder, we did not have this increased visibility into member-level clinical and claims data as well as member-level risk scores until the pipeline went live at the end of 2025. Our revised estimate for the increase in risk scores over 2025 for the full year is now 1.5%, which is above our previous estimate of 0.4% for the full year 2026, both net of the V28 impact. This was driven by the improvement in our data and forecasting capabilities as well as the operational process improvements we put in place over the past 18 months. Moving on to medical expense, the cost trends for 2025 continue to develop favorably, further demonstrating our ability to effectively manage medical costs. The full-year 2025 cost trend is now estimated at 6.2%, down from the 6.5% we estimated when we reported our 2025 full-year results. The favorable development for 2025 medical expense was offset by additional reserves related to Part D costs for 2025 which, as a reminder, are recorded net in premium revenue. Given the lack of data for 2025 Part D costs, we continue to take a prudent approach to Part D reserving as we will not get final reconciliations of the cost typically until the third quarter of this year. Given we have limited paid claims visibility for 2026, we recorded a cost trend of 7.4% for the quarter. I would note that based on our census data, cost trends remain in line with what has been mentioned nationally by our payer partners and others. However, given our limited paid claims visibility early in the year, we took what we believe is a conservative approach in the quarter. Medical margin for the first quarter was $149 million compared to $128 million in 2025, which exceeded the high end of guidance. This was driven by higher revenue, as I previously discussed, and lower overall medical expenses in the quarter. ACO REACH adjusted EBITDA for the first quarter was $27 million and ahead of our expectations by approximately $5 million. The favorable performance was primarily driven by CMS's removal of fraudulent urinary catheter and suspect skin substitute costs from our 2025 performance and the corresponding benchmark changes. Adjusted EBITDA was $54 million as compared to $21 million in the same period of the prior year. The favorable overall performance reflects higher medical margin, OpEx discipline, and the favorable ACO REACH performance I previously highlighted. As Ronald mentioned, ACO REACH results underscore our confidence in our model and the potential for driving continued value creation as we look forward to the advancement of both the MSSP and CMS LEAD model in 2027. On the balance sheet, we ended the quarter with [inaudible] in cash and marketable securities and $47 million of off-balance sheet cash held by our ACO entities. Year-end cash position is still expected to be at least $125 million. Last, we executed a reverse stock split at the end of the quarter. Additional details can be found on our investor website. Now moving to guidance. We are revising our full-year 2026 guide to reflect the strength of the first quarter results, including better-than-expected revenue associated with higher estimated risk scores for the year, and the first quarter performance in ACO REACH. In addition, as previously mentioned, it also includes a new full-risk contract signed in Q1 2026 in an existing market with a new payer. Our confidence remains rooted in the same key tenets we have previously outlined, including operating execution across clinical and quality programs; improved data visibility and forecasting capabilities related to the enhanced data pipeline; payer contracting improvements, which emphasize profitability for both medical margin and cash flow; and a conservative cost trend assumption supported by factors previously mentioned. Utilizing the midpoint of guidance ranges provided within our earnings release, we now expect revenue of approximately $5.7 billion, medical margin of approximately $375 million in 2026, and adjusted EBITDA of approximately $25 million. As I indicated, while 2025 saw favorable claims development, we continue to be prudent in our reserving and are maintaining our full-year net cost trend outlook of 7%. Focusing on the second quarter and utilizing the midpoint of guidance ranges, we expect revenue of $1.45 billion, medical margin of $123 million, and adjusted EBITDA of $20 million. I will close by saying that we are very pleased with our first quarter performance, including delivering strong positive adjusted EBITDA. The enhanced data and reserving models are improving our visibility to claims and revenue trends. We have executed on our strategic transformation and continue to drive improved performance across all aspects of the business. As Ronald mentioned, we also remain optimistic about our runway for continued improvement beyond 2026 based on the continued execution across our initiatives and the final 2027 rate notice. With respect to the final rate notice for 2027, we believe our starting point across our markets is in line with the 5.33% effective growth rate CMS noted, with additional opportunities based on our BOI, quality, and contracting efforts. Based on our model review across the business, we believe we have minimal exposure to unlinked chart reviews, and with respect to the 1.12% normalization factor, I will remind everyone that we have been able to more than offset the V28 hurdle over the past couple of years. Further supporting our potential will be continued discipline around payer contracting, implementation of programs to lower overall medical costs, and further driving operating efficiencies. The team will remain focused on minimizing risk related to Part D, emphasizing our quality initiatives, and balancing payer priorities with our own profitability. And last, we believe CMS continues to demonstrate their support for full-risk value-based care models focused on clinical and quality programs that drive improved outcomes, reduce cost, and enhance member satisfaction, and, therefore, we remain optimistic about the potential for Agilon Health, Inc. With that, Operator, let us move to the Q&A portion of the call. Operator: We will now open the call for questions. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, 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 Jailendra Singh with Truist Securities. Your line is now open. Please go ahead. Jailendra Singh: Thank you, and thanks for taking my questions. I want to ask about ACO REACH EBITDA—kind of nice number there, $26.5 million—but you are maintaining the guidance for full year at $25 million to $30 million for the full year. Why are you not expecting any further contribution for that business for the rest of the year? And then my follow-up: you talked about AI helping you to capture more efficiencies in the provider operational workflow and admin. The efficiencies you are seeing right now—should we think of those as incremental to the OpEx benefit of $35 million you have talked about for 2026, or is that already reflected in your guidance? Jeffrey Alan Schwaneke: The $5 million benefit that we saw, we increased that in the guide for the year for the REACH program. But the $5 million benefit that we saw in the quarter was really related to 2025 performance, and it was associated with the suspect skin substitutes and the urinary catheters. CMS decided to back those out of the cost for 2025, and so we got a pickup there. It is a little early in the year for us to adjust REACH performance beyond that at this point in time. On AI, I would bifurcate the programs. One is OpEx efficiencies; the other would impact more above the line—medical cost and revenue. We have mentioned the AI-driven risk stratification, which really looks at medical costs. We also use AI in our suspecting algorithms on the revenue side. So I would say limited early impact on the OpEx line, more significant on both the revenue and medical cost line, with value showing up later in health care cycles. Operator: Your next question comes from the line of Matthew Dineen Shea with Needham. Your line is now open. Please go ahead. Matthew Dineen Shea: Nice to hear about the scaling clinical programs. At a conference a couple months ago, you had talked about by end of Q2 expecting to get 50% to 70%+ of markets live on dementia and COPD pathways. Is that still the right way to think about the rollout? And on the financial side, how long does it take to generate benefit from these programs—does scaling COPD and dementia add benefit to 2026 profitability, or is that more of a 2027 benefit? Jeffrey Alan Schwaneke: I would say yes on the COPD and dementia rollout, and yes again that it could add value in 2026. However, it has to show up in the claims, and that takes time. We initiated the heart failure program a year ago; it is our most mature program, and we are seeing the benefit of that today with improved member outcomes. We are excited about rolling out the other programs and continuing to focus on additional clinical programs going forward. Ronald Williams: The only point I would add is how our physicians feel about being actively engaged in these clinical pathways. They see this as part of the reason they went to medical school—to improve the quality of people's lives. The ability to identify conditions earlier and get people on the right therapies not only avoids unnecessary hospitalization but, most importantly, improves patients' lives. They feel very positive about that. Operator: Your next question comes from the line of Analyst with Deutsche Bank. Your line is now open. Please go ahead. Analyst: I was wondering if you would talk about your conversations with your ACO REACH clients about how they are thinking about the LEAD program for next year. Are you expecting to see the same level of participation, and do you expect your economics to look the same? Jeffrey Alan Schwaneke: The details of the LEAD program just came out. We are analyzing that information and determining which path is best between LEAD or MSSP. The good news is we have participated in MSSP and REACH and have been very successful. We think we can be successful in both programs moving forward, and they will be positive contributors to financial performance in 2027 and beyond. It is a little early, but we are having conversations and running the calculations to figure out the best path. Analyst: As you think about the improvement in the guidance in 2026, do you feel like the results are something that can be built on for 2027, or is there a risk of a reset as you go into contracting? Jeffrey Alan Schwaneke: It is a foundation that can be built on. That is what we have been focused on over the last 18 months—driving toward profitability. We will take that same lens into 2027 contract negotiations, which are in active discussions now, for all the reasons Ronald previously mentioned. It is a solid foundation to build off. Operator: Your next question comes from the line of Stephen Baxter with Wells Fargo. Your line is now open. Please go ahead. Stephen Baxter: I want to make sure we understand all the sources of medical margin upside in the quarter versus your guidance. I think you sized the full-year expected benefit from the higher risk scores at the one level—on a quarterly basis something like $14 million to $15 million of additional medical margin. When we look at the balance of the beat, which I think was closer to $35 million, trying to make sure we have all the pieces there. You had a benefit from PYD, but you are also saying you are booking cost trends to guidance levels versus modeling any improvement. Can you clarify? Jeffrey Alan Schwaneke: For Q1, bridging to the prior guide mid for medical margin, the variance is roughly $26 million. There are a couple of components. The risk adjustment update is about $50 million for the full year; obviously, we would get roughly half of that in the first half, so a piece hits Q1. We also mentioned the new contract. Although we modeled it as breakeven margin for the year, given seasonality there would be margin on that contract in Q1. Those are the two primary items impacting margin versus the prior midpoint. On 2027 contracting objectives, our perspective has not changed. Percent of premium is at the top of the list, continued reduction of Part D exposure—we are at less than 15% exposure this year and would like to see that go down more—plus capture corridors and carving out items outside our control like supplemental benefits. The same levers we discussed a year ago are what we are focused on for 2027. It is early in the contracting cycle, but conversations with payers are productive and supportive of our model. Operator: Your next question comes from the line of Luismario Higuera with Citigroup. Your line is now open. Please go ahead. Luismario Higuera: Last quarter you said there was $15 million of new geography entry expenses. I know some are for current providers, but some would be for possible investments for additional growth. Can you provide an update on that? And are you able to break out the 7.4% cost trend embedded in guidance—any particular categories expected to drive much of that, and what would give you comfort to revise that down? Jeffrey Alan Schwaneke: On geo entry in the guide for the full year, those costs are generally in line with expectations in the first quarter—nothing out of the ordinary. To clarify on trend, the 7.4% is what we recorded in Q1 given limited paid claims visibility early in the year. For the full year, our guidance is 7% net. With limited data in Q1, what we are seeing continues the theme of escalated Part B costs and inpatient costs. That has been a common theme over the last year. As we get more data, we will reassess, but it is consistent with national commentary. Operator: Your next question comes from the line of Amir Farahani with Evercore. Your line is now open. Please go ahead. Amir Farahani: You previously discussed roughly 50 bps of tailwind from improved payer bids. How is that tracking year-to-date? And with the 2027 bidding season around the corner, what are you hearing from payer partners in terms of benefit design and premiums, and how might that impact next year? Ronald Williams: The messages we are hearing are a strong focus on margin improvement. We expect their bids, product positioning—everything—is about restoring to what they view as reasonable margins, which we think is good for us. Jeffrey Alan Schwaneke: On the benefit from payer contracting, the number we quoted in the initial guide was roughly $127 million for the full year. Those contracts were executed, so that benefit is flowing through in the first quarter. Amir Farahani: As a follow-up, on group MA mix, several payers flagged recovery in MA margin in 2026. Are you targeting structurally better economics in your book, and is that upside captured? Jeffrey Alan Schwaneke: Our group mix is roughly unchanged from last year—very consistent. Negotiations and the quoted contracting benefit are inclusive of that mix. Operator: Your next question comes from the line of Jack Garner Slevin with Jefferies. Your line is now open. Please go ahead. Jack Garner Slevin: To clean up the upside in the quarter, just to be clear—there was no PYD recognized in Q1? And on the favorable 2025 development, was that a continuation of outlier cases abating from late 3Q? Jeffrey Alan Schwaneke: The prior-year development is in the 10-Q medical cost roll-forward—roughly $12 million for the quarter related to 2025 dates of service. There was effectively no flow-through because during the quarter we added additional reserves to Part D. In 2025, 30% of our members had that risk, and we have limited information until final reconciliation in the third quarter of 2026. Part D is recorded in revenue for us, so the good news on the medical expense line from PYD was offset by a reduction in revenue representing Part D. Jack Garner Slevin: On 2027, last quarter you suggested you could expand margins even considering the advance notice, given BOI improvements. Given the more positive numbers now, has anything changed in your confidence for 2027 on the core business? Jeffrey Alan Schwaneke: The main change is our performance this quarter on risk adjustment. We now have more confidence going forward. This year we said we would outperform the final year of V28; now we have more confidence that it will be even higher. That gives us more confidence in 2027 and beyond to offset the 1.12 normalization factor. We do not believe we have material exposure to disallowed sources of diagnosis given our model’s design closely aligned with primary care physicians. For the 2027 growth rate, we are zeroing in on the 5.33% effective growth rate. Operator: Your next question comes from the line of Ryan M. Langston with TD Cowen. Your line is now open. Please go ahead. Ryan M. Langston: On the new full-risk contract with the new payer, what was attractive about that contract? Is this generally members you had before who switched to this payer, or a new cohort? And what was the pickup in guidance from this contract? Jeffrey Alan Schwaneke: It is in a market with an existing physician group, and it is a new contract with a payer. We modeled it at roughly $200 million in revenue and roughly breakeven margin for the year. For us, it is an opportunity for multi-year margin improvement, and we think we can deliver that. It is not uncommon for year zero to be modeled conservatively at breakeven. Operator: Next question comes from the line of Craig Jones with Bank of America. Your line is now open. Please go ahead. Craig Jones: You mentioned pretty much no impact from the unlinked chart reviews that we will see in 2027. CMS seems focused on leveling the playing field—looking to 2028 and beyond, what impact would you see from linked chart reviews and health risk assessments, and is there any other low-hanging fruit CMS could go after? Ronald Williams: We feel good about where we are. Our physicians see every patient, and charts are audited very carefully. That does not mean we will not have some issues, but we are much more rigorous than we believe some others have been historically. We expect CMS will continue to spend the taxpayers’ dollar wisely. Our focus on ensuring documentation is linked to real care delivered to real patients is the best approach. Operator: Your next question comes from the line of Michael Ha with Baird. Your line is now open. Please go ahead. Michael Ha: Regarding the LEAD model, as you run your calculations to determine which path to go down, how are you contemplating the eventual AI-inferred risk adjustment model that is being phased into the LEAD program? How much visibility do you have into how this AI model might impact risk adjustment? And then last quarter you mentioned the opportunity to possibly more than double payer incentive contributions in 2026, which were $25 million for 2025, and your 2026 guide conservatively assumed the same. How is that tracking, and how much visibility do you have today? Jeffrey Alan Schwaneke: There are not a lot of details on the AI-inferred risk model right now, so it is hard to model something without details. We will reassess as CMS provides more information. On payer incentives, the opportunity has roughly doubled, which underscores the importance of quality for payers. Our 2026 guide assumes a similar level of performance to 2025. It is very early, and we do not have data yet, but we feel confident we are delivering superior quality to our payer partners and members. Operator: Your next question comes from the line of Ryan Daniels with William Blair. Your line is now open. Please go ahead. Ryan Daniels: Given the operational improvements, clinical pathways, and better data feeds, when does the company consider going back on the offensive—growing the member base and reinvigorating the new partner pipeline—especially given payer demand to expand partnerships? Ronald Williams: Our partners are deeply embedded in their communities with large commercial panels, and every month people turn 65 and enter Medicare Advantage. There is embedded growth—nowhere near opening a new market—but it helps mitigate attrition. Some groups also add new physicians. Our focus right now is on in-market growth and execution. The time will come when we turn our attention to other things, but that time is not here yet. Operator: We have reached the end of the Q&A session. I will now turn the call back to Ronald Williams for closing remarks. Ronald Williams: I want to thank everyone who joined us this evening. Since stepping in as Executive Chair eight months ago, I have worked very closely with the leadership team. We have been highly focused on increasing the sense of urgency and heightening the focus on key priorities that drive improved performance for our members, our primary care partners, and payers. While the environment remains dynamic, we are confident that the actions we have taken will deepen the existing strengths of our partnership model. We think it is a very unique model because of the proximity to the physician. It gives us the ability to ensure that the suspects and things that we determine are resulting in real clinical interventions, which is extremely important to patients and to CMS. I want to close by welcoming Tim O'Rourke, our new CEO. I am thrilled to have Tim join us. He brings the right balance of understanding the payer, the provider, and the importance that primary care physicians bring to our unique delivery model. He conducted extensive due diligence, and we feel very good about having him as part of our team. Our employees have worked very hard to get us where we are, and I want to give a special thank you to everyone in Agilon Health, Inc. who helped us achieve the results we are reporting today. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the DoorDash, Inc. Q1 2026 earnings call. After today’s opening statement, we will host a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, please press 1 again. I will now hand the call over to Weston Twigg. Weston, please go ahead. Weston Twigg: Alright. Thank you, Elizabeth. Good afternoon, everyone, and thanks for joining us for our Q1 2026 earnings call. I am pleased to be joined today by Co-Founder, Chair and CEO, Tony Xu, and CFO, Ravi Inukonda. We will be making forward-looking statements during today’s call, including, without limitation, our expectations for our business, financial position, operating performance, profitability, our guidance, strategies, capital allocation approach, and the broader economic environment. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those described. Many of these uncertainties are described in our SEC filings, including our most recent Form 10-K and 10-Q. You should not rely on our forward-looking statements as predictions of future events or performance. We disclaim any obligation to update any forward-looking statements except as required by law. During this call, we will discuss certain non-GAAP financial measures. Information regarding our non-GAAP financial measures, including a reconciliation of such non-GAAP measures to the most directly comparable GAAP financial measures, may be found in our earnings release, which is available on our Investor Relations website at ir.doordash.com. These non-GAAP measures should be considered in addition to our GAAP results and are not intended to be a substitute for our GAAP results. Finally, this call is being audio webcast on our Investor Relations website. An audio replay of the call will be available on our website shortly after the call ends. Operator, I will pass it back to you, and we can take our first question. Operator: Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, please press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please standby while we compile the Q&A roster. Your first question comes from the line of Shweta Khajuria with Wolfe Research. Your line is open. Please go ahead. Shweta Khajuria: Thanks a lot for taking my questions. Let me try two, please. One is on product and the other is on partnership. So first on product, could you please talk about how you envision your product developing over the next 12 to 24 months as you integrate more of agentic and AI capability? So will we have an opportunity to communicate via voice and put a cart together and execute a transaction, even saving us more time, or better search and discovery, or whatever it may be? If you could please talk to that. And then the second one is on partnership. You announced extension and expansion of your partnership with Lyft. As you think about the greater value proposition around local commerce and becoming the operating system for local commerce, how do you think about travel as an adjacency with Uber partnering with Expedia—partnering with Airbnb and Booking.com type partnership? A value add or something else? Your thoughts on that would be great. Thanks a lot. Tony Xu: Hey, Shweta. Maybe I will take both of those and feel free to add in anything you want, Ravi. Look, on the first question with respect to product, the DoorDash, Inc. philosophy and story has always been the same here, which is we have to create the best end-to-end shopping experience. If we do that, we will continue to be the ones that innovate and lead. We will continue to deliver great results like the ones that you saw in the quarter and in the many years leading up to the results that we have just shared. There is not one way to do that. You talked a bit in your premise, Shweta, about this idea that you should be able to, with the assistance of agentic-like tools, have better discovery and search experiences, and we agree with you. I think that we absolutely will have agentic ordering experiences in which it will be a lot easier for customers to do many things that they do today with much lower friction, to discover things that they perhaps did not know existed on DoorDash, Inc., to formulate complicated queries and solve those in the best possible way. The most important thing in delivering this is making sure that we can do it not just in discovery and the upper funnel, but across the end-to-end experience. What is the point of having the best discovery experience if we cannot bring you that exact item, or if that exact item were out of stock, or it does not meet your personalized preferences, and we cannot actually solve for that need? For us, the way I think about it is there is no one trick. It is making constant and continuous improvements to the selection quality, the accuracy of the catalogs, making sure that we offer the widest choice in terms of affordability and different price points, offering the best quality of experience in speed, timeliness, and accuracy, and then, obviously, in customer support, which I think is also having an agentic revolution in itself. You will see all of these things play out in the DoorDash, Inc. product experience. The most important thing is that we have to build the best end-to-end experience. We are the only company that has the most robust catalog, much of which is actually about the physical world that does not exist in any digital repository, that cannot be scraped, and that we ourselves uniquely own access to because of all the work that we do to actually build up a repository of the physical world. That is something that we will continue to build greater and greater advantage in, especially in the world of agentic commerce. Your second question on membership and how partnerships will evolve: the way to think about it is that membership experiences and the benefits that live underneath the umbrella of membership programs only matter if they are best-of-breed experiences to customers. This is why you see different customers, for example, choose a variety of different memberships even for the same product. If you take streaming, for example, some people prefer shows of a certain format on one network, whereas others prefer shows of a different format on a different network, and that is why they end up having multiple membership programs. There are so many examples of this where being best of breed is ultimately what customers care about and why they will choose to adopt or not adopt your program. As you saw in some of the results that we discussed—record engagement in DashPass as well as our other membership programs around the world—what we are doing is building the best-of-breed product experience when it comes to eating, and increasingly in shopping as we go outside of the restaurant category. There is a long way to go. There are 20 to 25 occasions for eating alone every single week, so over 100 every single month. If you add in shopping, it is even higher than that, and on that combined sum, we are a tiny fraction of what is available and addressable, which means there is a large runway and opportunity for us to become even better in breed in terms of what we can offer. If we can keep doing that, I think we are going to be just fine. You see it in our numbers. You see it in our growth rates both in the US and outside of the US. We are gaining share virtually in every single market, and we are growing at near historical highs in pretty much all of our geographies. I think that is happening even at the scale that we have developed over the last few years because we are continuing to build the best-in-breed experiences in categories that have a very large runway for growth. Shweta Khajuria: That was great. Thank you, Tony. Operator: Your next question comes from the line of Michael Morton with MoffettNathanson. Your line is open. Please go ahead. Michael Morton: Good evening. Thank you for the question. One for Tony and then a quick one for Ravi. Kind of following up on what you were just speaking about, Tony—AI and partnerships. As the AI platforms become more capable, there is a concern from investors that personal agents could layer themselves in between the on-demand marketplaces and the consumer. I would love to know DoorDash, Inc.’s long-term strategic view on this, and if there is a risk to your business of becoming an API or logistics offering to these, and why or why not you would want to work with one of these third-party AI platforms. Then the quick one for Ravi: as you have been operating Dot for a bit now in some cities, are you willing to share any learnings about what percentage of the US delivery market you think is addressable for AVs, and then maybe thoughts on how to incentivize consumers to come out and meet the Dot, or where the opportunity costs are around cost to serve with AV? Thank you so much. Tony Xu: Yeah. Hey, Michael. I will start on your question related to agentic commerce and agents and whether or not there is any intermediation or disintermediation risk. I think what is instructive here is what we have seen historically with top-of-funnel programs. For at least a decade, you can argue companies like Google or Apple, and many other large platforms, were top-of-funnel drivers to a lot of different commerce platforms, ours included. Take, for example, Google food ordering, which allowed you to order through various Google channels—Google Maps, Google Search, and I believe a few others—where you could order restaurant delivery. That started in the mid-2010s and went for about eight years before they shut it down. From a traffic perspective, they absolutely could drive a lot more traffic than virtually anyone else could to any one of these restaurants. Yet the retention of that traffic was a fraction of what platforms like DoorDash, Inc. saw, and as a result, customers effectively moved all of their shopping experiences to DoorDash, Inc. I would argue something similar happened with Amazon where, perhaps at the beginning of the 2010s, Amazon was not a leading player in the product search category, but by the end of the 2010s, Amazon ended up owning a significant percentage of all product search terms related to commerce. You may ask why that happened and what lessons we can learn from history to instruct what is happening in this moment and in the years to come. What I would say is customers ultimately do not care about any top of funnel—DoorDash, Inc. included—or any of these agents. What they care about is whether they got the order they wanted, the item they were actually looking for, and whether they got it in the best possible experience in terms of price, speed, timeliness, and accuracy. Obviously, if something were to go wrong, was it fixed appropriately and quickly? When I look at it from the customer’s perspective, they are going to ultimately judge us on the best end-to-end experience. That is what we are focused on maniacally at DoorDash, Inc.—not just building agentic ordering experiences on DoorDash, Inc. to make discovery or search easier, but also building a catalog, a digital catalog of structured information for the physical world: collecting where every banana sits or every ripe or unripe avocado, to every size shoe in whatever color and style a customer is looking for. All of that information about the physical world—of which there are billions of items, tens of millions per city—and getting that annotated and having that unique and proprietary to DoorDash, Inc., which we do not have to share with anybody. If we can do that and improve our discovery experience over time, given the power of some of these agentic tools, I think we are going to be the best end-to-end shopping experience. Ultimately, that is how we are going to get judged. I think that is the reason why, for instance, even our restaurant delivery business, which is the oldest of the areas in which we operate, continues to grow at above historical highs, because we are constantly trying to build the best end-to-end experience and be best of breed in doing so. It does not mean we are perfect. We have a long way to go, and it is not a guarantee that we are going to be able to get there. But if we can keep executing like we have, I think the numbers will continue to speak for themselves. These top-of-funnel players will be partners of ours. They will drive a small percentage of our traffic, and a lot of that will be a choice that we will have. Ravi Inukonda: Hey, Michael. On your second point around Dot, we are very happy with the progress that we are making. Maybe I will talk a little bit about the vision. The vision for us is we are building autonomous delivery because, ultimately, we think different formats are needed for different types of delivery. That is how we build the most efficient network. We are happy to partner with others, and we are happy to build ourselves. I think there are going to be different formats both on land as well as in the air that we are working on. We are early on this journey. We are scaling. What we are trying to do is operate at scale, manufacture at scale. That is going to be important for us. We have seen good results. We have launched it in a couple of markets. Adding it down to the end customer benefit—because I think that was one part of your question—it is going to be a combination of the key things that we focus on. It is going to help us with speed. It is going to help us with quality. It is going to potentially help us with overall range of delivery. The key is the work that we are doing is starting to look good. We are early in our journey, and the overall progress we are making is going really well according to the plans that we made at the beginning of the year. Tony Xu: One thing, Michael, I will add to the autonomy story that sometimes is harder to see from the outside is that there is a pretty big difference between just shipping a vehicle or having a vehicle ready for a demonstration and a vehicle that can really operate at scale under any condition and is really battle-tested. It is kind of like saying, I can shoot a three-point shot, and so can Steph Curry, but one of us is the greatest shooter of all time, and one of us maybe hits it once in a while. This year for us, it is really climbing that curve for the autonomy program and making sure that we can harden our systems. It is not just the autonomy. It is the autonomy, the hardware, the remote operations, all the work around regulatory with the different cities so that we can do this at scale and truly be the best of breed. I believe the only way you can really do that is if you actually get in there and do all of the things yourself. That is what is happening this year with DoorDash, Inc. and also our broader autonomy program. Operator: Your next question comes from the line of Eric Sheridan with Goldman Sachs. Your line is open. Please go ahead. Eric Sheridan: Great. Thank you so much for taking the questions. As we get deeper into 2026, any updated views around either the depth or the duration of some of the strategic investments, especially in the platform, that you talked about over the last couple of earnings calls? More importantly, any updated views on how the tech replatforming might position you for different forms of innovation than you envisioned six plus months ago? Thanks so much. Ravi Inukonda: Sure, Eric. I will start, and Tony can feel free to add anything. We talked about two calls ago that we are investing $100 million back into the platform. Obviously, the largest component of that is our global tech infrastructure stack. It is going well. The biggest component is being able to design and map all the domains, which is what the team has done over the last several quarters. That part is done. Now we are focused on execution. We are starting to see production traffic go through. We are already starting to see some early benefits come through. On the cost side, which I think was the second part of your question, my view on the overall quantum of dollars that we are investing behind this has stayed the same. It is largely in line with what I had expected two quarters ago. Both the program from an execution perspective as well as a cost perspective is going well. Finally, to your point around benefits, ultimately, the benefit is going to accrue in terms of us being able to do more, us being able to release features earlier. The feature development velocity is going to improve, which will ultimately result in retention, frequency, and unit economics increasing. That was the goal for this. We are starting to see benefits, and I feel good about where the trajectory of the overall program is. Tony Xu: The two things around your second part of your question, Eric, that I would add to what Ravi said about innovation are, one, velocity and, two, quality. Velocity increases for the simple fact that instead of shipping one feature—which, if we were to do it today, we would have to ship three separate times across DoorDash, Inc., Bolt, and Deliveroo—we would only have to do that once. That is the velocity comment. The second point is around the quality in which we can see benefits. By choosing to build a new tech stack versus just replatforming a couple of different brands into the same tech stack that we currently have, you get to take the best-of-breed experiences from different brands and products and put them into a new product that all three get the benefit from. For example, one of the things that we have learned is that there are different logistics challenges in places like London or cities in Europe that are a lot smaller, tighter, and not always perfectly gridded like some cities in the United States or other parts of the world—perhaps older cities historically—not really meant for driving under any circumstance. You need different logistics approaches, and we can borrow and take the best of what we are seeing from European operations and bring those over here to the US. In the US, because we have larger physical geographies that travel longer distances and perhaps a greater retail network with a larger catalog of items, those are advances that we get to port over to Europe. That is what I mean by quality. I am pretty excited that we are on track, which is great news when you are taking on a project as large and ambitious as the one we are thinking about. We are already seeing some velocity and quality wins across all of the brands, and I think there will be a lot more to come as we actually roll this out. Ravi Inukonda: Great. Thank you. Operator: Your next question comes from the line of Youssef Squali with Truist. Your line is open. Please go ahead. Youssef Squali: Excellent. Thank you so much. Hi, guys. Maybe just following up on the prior question and looking at it more from a competitive lens. Can you talk a little bit about what you are seeing in Europe, particularly Northern Europe, with Uber becoming a little more aggressive? There is a line of thinking that maybe as you guys are going through your replatforming, it may make you potentially a little more vulnerable to competition. So maybe if you can comment on that. And then, Ravi, thank you for quantifying the support to drivers. In Q2, I think you said $50 million. Obviously, we do not know how long this thing is going to last, but is $50 million a good run rate to assume for the rest of the year, just assuming status quo on the macro environment? Thank you. Tony Xu: I can take the first question, which is around our competitive position in Europe. We have never been stronger in Europe. Deliveroo is seeing the highest growth rate it has in the past four years, and it has been reaccelerating in growth each of the months in which we have been operating it. Bolt is seeing the highest share performance in each one of the countries in which we operate. Those are outcome metrics, and candidly, they are not things that I stare at all the time. I am looking at what improvements we are actually shipping for our different audiences. If we are seeing logistics improvements, how is that translating into lower wait times at different stores, higher accuracy of picking, or faster delivery? If we can continue executing the way that we have, I think the share performance and reaccelerated growth is only going to continue. It goes to the DoorDash, Inc. story: how do you build what is best of breed? If you continue building what is best of breed, customers will continue voting with their wallets, and they are voting DoorDash, Inc. Ravi Inukonda: Hey, Youssef. On the first one, I will question your premise because if you look at the underlying consumer input metrics—whether it is users, order frequency, we talk a lot about subscription in the press release—we are seeing accelerated growth in subscription. Users are growing. We are gaining share in the majority of the markets that we are operating in. The other thing I would offer is if you actually look at the overall MAU growth in the industry, the majority of that is being driven by DoorDash, Inc. That should tell you the business is doing really well, both from a demand as well as an underlying improvement in customer metrics perspective. Your second point around the impact from a gas rewards perspective: roughly, the impact of that is about $50 million in Q2. We did have to find offsets in the business. We will push out some investments from the first half into the second half. Our goal is to make those investments in the second half of the year. On whether we are going to extend it, we have not made any decision. We will monitor the situation closely and do what is right for the business. That said, my broader view on EBITDA for the full year has not changed. The last couple of quarters, I talked about the fact that I expect overall EBITDA margins for 2026 to be slightly higher compared to 2025, excluding RUE, and RUE to produce roughly about $200 million of EBITDA. That view has remained very consistent. If we do decide to extend the gas rewards program, we will find offsets in other parts of the business in order to make sure we still feel good from a top line as well as a bottom line perspective. Youssef Squali: That is very clear. Thank you, Doug. Operator: Your next question comes from the line of Nikhil Devnani with Bernstein. Your line is open. Please go ahead. Nikhil Devnani: There. Thanks for taking the question. Tony, in a world with AI workloads and a more productive workforce, is your mental model for headcount growth and even organizational structure for DoorDash, Inc. changing at all? Tony Xu: Yeah, it is a really good question. In short, the answer is yes. The longer answer is we are trying to figure out what that really looks like because we are seeing a lot of productivity gains right now from AI. Well north of half of our code—probably closer to two-thirds of our code—is written by AI today. But that alone does not articulate how workflows and team setups ought to change. It means that we are being more productive and shipping more code, but the ultimate question I have is, are we actually delivering better outcomes for customers? At the end of the day, that is the only thing that really matters. We are in that period where we are seeing productivity gains and trying to figure out how those translate to what team setup should look like. The top priority for us right now is getting all teams onto a single tech stack. The second priority is making sure that everyone in the company—not just engineers—is as AI-capable as anyone else. Then we can start thinking about what workflows have to change to truly deliver things faster. Right now, we are delivering features faster—delivering sets, projects, and components faster—but I think the customer holds us to a higher bar: can you actually deliver outcomes much faster? That is a tricky question that all companies, ourselves included, are wrestling with right now, and we will figure it out. Ravi Inukonda: Hey, Nikhil. Very similar to what Tony talked about, we are using it across the board and seeing productivity improvements. The goal for us from a productivity improvement perspective is as it has always been: we want to do more with more. We want to drive more features. We want to do more for our audiences, and we want to do more internally as well. Ultimately, we channel productivity improvement into developing more features. If it is purely from a modeling perspective, I would expect, in the near term, OpEx to roughly be in the 2% range that I have talked about before. We are being very judicious and disciplined. The goal is to generate leverage on it, just like any other part of the P&L over time. Nikhil Devnani: That is helpful. Thanks. And, Ravi, if I could just follow up on the order growth dynamics in Q1 as well. Could you elaborate a bit on the deceleration there? Is that just weather, or are there other things you want to call out? How are you thinking about that as you think about the Q2 guidance you have given for GOV? Thank you. Ravi Inukonda: The question broadly is around consumer demand on the platform. Demand continues to be quite strong. The impact purely from a winter storm perspective is roughly about 1% on a year-over-year growth basis from a GOV standpoint. When I look at the underlying demand, it continues to be very good. We have talked about MAUs reaching an all-time high. Order frequency is growing. Subscription had a record quarter across the board—across DoorDash, Inc., Deliveroo, as well as Vault. What we are seeing is member growth has accelerated on a year-over-year basis, following the last few quarters where member growth has been quite healthy. We are seeing that from sign-up as well as overall retention. We are gaining share. New verticals are continuing to do well. We were volume share leaders in Q4, and we have continued to extend that. Across international, we touched on Deliveroo acceleration, and the rest of the international portfolio is also growing. Scooter is off to a good start. We feel good about the demand patterns that we are seeing in the business. Nikhil Devnani: Thank you. Operator: Your next question comes from the line of Deepak Mathivanan with Cantor Fitzgerald. Your line is open. Please go ahead. Deepak Mathivanan: Great. Thanks for taking the question. Tony, on groceries, in the last few months, you have got a lot of new partners. Can you talk about the trends in the business broadly—maybe in terms of penetration, how use cases have evolved, potentially some color on growth, and maybe also where the unit economics have seen the biggest gains? And then similarly, Dasher Fulfillment Service is also another big area of focus this year. Where does it currently stand, and where do you want the service to get to ultimately before it starts becoming another incremental key growth driver? Thank you so much. Tony Xu: Those are related questions, so I will start with where grocery is at today. It is pretty much at record highs for us. We became the share leaders by volume last fall or last winter, and it has continued to go in one direction. There is a lot of activity in the field. You are right, in part, because we have added a lot of grocers, and we like the trajectory of the pace we are at. We are also improving the service experience. It is not just adding more selection. I always ask myself, why is grocery not a lot bigger? Why should it not be even bigger than restaurants? It is because the online delivery experience is just not yet good enough compared to the offline experience of buying it for yourself. We are really closing that gap, and the team deserves a ton of credit for making us a lot more accurate, more affordable, making basket building a lot easier, making customer support better, making the experience easier for shoppers—literally tens of thousands of little things over the last six or seven years that are accumulating. But there are still reasons why, over time, if you truly want to marry the best possible selection—which is every store inside your neighborhood—with the best possible quality—which means you get exactly the item you order without any substitutions or changes and certainly no out-of-stocks or canceled items or orders—I think you do have to work the fulfillment problem, which is where Dasher or Dasher Fulfillment Services comes in. There, we are trying to build an inventory management and fulfillment setup with all of the grocers and retail partners that we work with. If we can do that, then finally you can unlock what is truly a magical experience where it is more similar to restaurant delivery where, yes, there might be a small premium you pay, but at least you get exactly what you ordered, which is not the experience today. In terms of where Dasher Fulfillment Services is, we are doing it with a handful of grocery and retail partners today. If you think about that journey, we are trying to work with grocers and retailers who, for decades now, are used to running their supply chain and their stores in one particular way. Now we are introducing a second way, and there are a lot of things to figure out in terms of technology, people processes, the interaction of business models, and everything in between. We see good results with a handful of partners, but in the spirit of all things at DoorDash, Inc., we really want to make sure we nail the experience before we scale it because this is quite disruptive in a positive way to the customer experience and also disruptive to how retailers are used to working and running their businesses for so many decades. We have to make sure that we get it fully right end to end. Then we can replicate the playbook. Ravi Inukonda: Deepak, on the unit economics side, we made a lot of good progress. Last call, I made the point that we expect the overall new vertical to be gross profit positive in the second half. We are trending well towards that. We have not been worried about what the profitability profile of this business looks like. It is something we understand quite well and what we need to do. It is not that there is any structural change we need to make happen. It is just continued execution on a number of lines up and down the P&L. What we are truly focused on is how we scale the business. In Q4, we talked about the fact that about 30% of our monthly active users order from categories outside of restaurants. We truly think that could be 100% over time, and that is going to come with a lot of improvements in selection, quality, and the underlying product. Looking at consumer metrics, order frequency is improving. Basket sizes for mature cohorts are continuing to improve, which means people are using us for more use cases. Over time, the underlying order rate also continues to improve. These are all good signs, which drive both growth and improvement in scale, which will ultimately drive the unit economics in the business as well. Deepak Mathivanan: Great. Thank you so much. Operator: Your next question comes from the line of Josh Beck with Raymond James. Your line is open. Please go ahead. Josh Beck: Yeah, thank you so much for taking the question. Maybe more on the cost side. Ravi, you mentioned the $50 million gross cost as you look to find relief for those investments. What are some of the big topics that you are looking to uncover there? And then, going to some of your points on new verticals, certainly a very nice watermark to achieve gross profit breakeven. To get to the next milestone, what are going to be some of the really important elements? Generically, it seems like within new verticals, advertising is a bit more of a weighting factor there. Just curious how to think about some of the important drivers beyond scaling into the second half. Ravi Inukonda: Hey, Josh. I will take the first one. Tony, why do you not take the second one? On cost and gas rewards impact on the model for the rest of the year: in Q1, we had the impact from both winter storms as well as the introduction of gas rewards. In Q2, we did extend the gas rewards program. The rough impact in Q1 was about $50 million. The projection for the impact in Q2 is also going to be about $50 million. Like I said earlier, we did find offsets in the business. It is a very dynamically managed business. We take our plans very seriously. We look at input metrics to make sure we are doing the right investments. We did have to push out some investments in H1 in order to make room for this. We are fully convicted that we are going to make these investments in the second half of the year. If we do decide to extend the program, our goal is to find offsets like we did in H1. My view on the full-year EBITDA has not changed. We have said a couple of quarters ago that overall 2026 EBITDA margin is going to be slightly higher compared to 2025, excluding room. That view still stands. I would expect second-half EBITDA to be higher than first half, and second-half EBITDA margins to be higher than the first half, largely similar to what I had expected at the beginning of the year. Overall, we look pretty good from a bottom-line perspective for the rest of the year, and demand on the platform continues to be strong as well. Tony Xu: With respect to your second question about what else we need to do to achieve higher levels of profitability within grocery, the short answer is more of the same. We are not trying to rely on any one source of revenue, like ads, to make grocery profitable. We do not need to. We believe we have created a lower cost structure that allows us to make delivery profitable, but it is just not good enough yet. From the perspective of the customer—not our P&L—we still need to be more accurate. We still need to have more items available, even from existing stores, and we need to do it at better and better price points. If we keep doing that, you already see it in our cohort behavior. It is not true across the whole business because we are still gaining a lot of new customers— in fact, we gained about one in every two new customers that comes into the industry for grocery delivery for the first time—but cohorts over time buy bigger and bigger baskets and achieve profitability milestones without any unnatural or overreliance on any one cost or revenue driver. That tells me that, at current course and speed, it will get there. The question is how to get there faster, but perhaps most importantly, how to actually unlock a much bigger industry. Grocery delivery fundamentally should be as large, if not larger than, restaurant delivery. It is just that the product is not good enough yet. We already are leading, from what we have been told by some of the top grocers in the country, in terms of quality, but we still think there are miles to go. Perhaps we brought some innovations to the market, but we think that we have to keep innovating on all things accuracy and price points, and we have some interesting ideas on how to do that. We do not have to do anything unnatural or rely at all on any single line item to make the math work. Josh Beck: Super helpful. Thanks, guys. Operator: Your next question comes from the line of Brian Nowak with Morgan Stanley. Your line is open. Please go ahead. Brian Nowak: Thanks for taking my questions, guys. I have two. The first one, Tony, in the letter you talk about making some new tools that help designers streamline the merchant onboarding process. Can you talk to us about areas you have made the most progress in bringing on new merchants and more inventory per merchant, and what are some of the technological advancements you are still looking to make to really make that easier to get more of those bananas and avocados that you talked about earlier—and even carving knives? And then, Ravi, one for you on the replatforming. You say that you have live production traffic ramping up across all three of the global marketplace brands. Does that mean that you are running all three tech stacks now, so we are burdening the P&L with the max cost, and then we should start to turn some of those off in the back half? Or how does this triple-platforming-down-to-one-platforming timeline work? Tony Xu: I will take the first one, Brian. We continue to ship a lot of different tools to make it easier to work with us, for customers to find what they are looking for, and for Dashers to perform deliveries. On the specific question with respect to the merchant tool, where I have found AI to be helpful—especially now with more powerful models that can reason in a multi-turn fashion—is that you can start looking at repetitive processes that are stitched together and actually get them done with perfect quality every single time, using just an agent. Even six to eight months ago, this was less true because you had to build a lot of backup or redundant systems to make sure agents do not go off the rails and can actually finish the task. That has happened with onboarding, for example—whether it is helping you with your menu or your catalog as a restaurant or retailer, or with your photos and your metadata and the annotation of that data. All of these are effectively repetitive tasks in which you can create agents and stitch them together to do that in a really productive way. With all things, the removal of friction increases activity, and increased activity increases the business that we get to do together. We are already seeing benefits to the P&L from some of the AI work that we are doing—some of it on our own products, like the AI ordering agent, and some on tools related to merchants, customer support, and Dashers. With respect to things we still have to do—capturing all the inventory inside a city—we are still just a tiny fraction of all items sold or even represented today on DoorDash, Inc. That is becoming more interesting as some of those items are also different when it is an in-store shopping experience. Some restaurants, for example, offer different in-store products and experiences and services that they do not offer for takeaway or in the offline world. There is a lot we have to document. The second thing we have to do is build structure and cleanliness out of what is inherently very messy and constantly changing, which is a challenge. If we can do both across every category as we march from restaurants to grocery to different categories within retail—and do that through the merchant’s channel online, the DoorDash, Inc. channel online, and the merchant’s channel offline or in-store—I think that builds a really rich dataset that is nonexistent anywhere, extremely valuable for the merchant to have a full view of all the different types of customers and occasions, and really interesting for DoorDash, Inc. to build both products as well as businesses. Ravi Inukonda: Hey, Brian. On your second question around the global tech side, two broad points, then the mechanics. The team has done an incredible job. This is a massive project. It is going according to plan. I am really happy with the progress. Even on the cost side, my view on the overall cost is very similar to what I talked about two quarters ago. So both on progress and cost, I feel very good. On the mechanics of the P&L, there is a portion of the spend which is redundant in the sense that we are going to run all three tech stacks in parallel while we are working on the new global tech stack. That is going to phase in and phase out. My expectation is the majority of that will run through 2026. Maybe some portion will bleed into early 2027, and then it will bleed out. Hopefully, that gives you the mechanics of how the rest of the P&L is going to work for the year. Brian Nowak: Thank you both. Operator: Your next question comes from the line of Justin Patterson with KeyBanc. Your line is open. Please go ahead. Justin Patterson: Great. Thank you very much. Good afternoon. I saw you recently launched workplace catering for DoorDash for Business. Can you talk more about how you are thinking about that opportunity and what you see as some of the key challenges toward scaling this? Thank you. Tony Xu: DoorDash for Business is off to a very great start, and it is something we really recently focused on in the last few years. DoorDash for Business is a suite of products—there are three. You talked about one of them, which is catering. There is also Meal Manager, and corporate solutions related to DashPass and group ordering. The idea is, if you are a company or an organization—it could be a nonprofit, a government institution, or a school—and you are serving multiple different use cases, sometimes it is a group meeting with just a few of us, sometimes you are hosting an event in which you need catering, sometimes you need individual meals as your sales teams travel to do different things or client demos. You are going to want to work with one place ideally where you can see everything in one view and offer your organization the best-in-breed selection, price, and quality. Because we offer what we believe is the best of breed in price, selection, quality, and service, DoorDash for Business is naturally growing very quickly. The biggest challenge, especially with catering, is solving the perennial hard problem of cooking for a large group of people. It sounds simple, but if you think about cooking for yourself and then adding guests, that logistics problem gets exponentially more difficult as you increase the count of guests. The challenges are numerous: kitchen capacity, menu design, staffing, logistics, operations. We have to do all of that. To truly create the industry—because the industry by itself is somewhat limited since not every restaurant is built as a manufacturing facility to cook up to the needs of a larger organization or team—it is really working hand in hand with merchants and Dashers to co-create that solution and hopefully create a very large industry. Operator: Your next question comes from the line of Lloyd Walmsley with Mizuho. Line is open. Please go ahead. Lloyd Walmsley: Thank you. Wondering if you can give us an update on what you are seeing in the ads business on a 1P basis and syndicating ads outside of Dash. And then, second one, Tony—earlier you talked about miles to go in terms of improving the user experience in grocery. Can you elaborate on some of the things you are doing—have you found any big unlocks or anticipate any big unlocks—to drive a step-function improvement in the grocery experience that can help you penetrate deeper with your customers? Thanks. Tony Xu: Sure. Maybe I can take both and feel free to add, Ravi. On the ads question, it has never gone better for us. Ads are at a record high and continue to grow extremely fast compared to any previous year. The continued strong trajectory comes from the team cracking the code not just in solving problems for SMBs—restaurants or retailers—but also larger advertisers, both in the restaurant world as well as in retail. Another unlock has been cracking the code on CPG advertisers. There is no one thing; it is a relentless checklist of making the product a lot better for advertisers and delivering on two competing objectives. One, you have to deliver the best return on ad spend for advertisers, which we do. Two, you have to deliver the best consumer experience where you do not spam people. We have a much lower ad load than some other platforms, and the teams have been working really hard to balance those two objectives. Beyond scaling some of the unlocks in ads, we are also discovering some off-site opportunities you mentioned, which include in-store activities in addition to our work buying on behalf of advertisers off of DoorDash, Inc. I think there is a very large runway for the ads business. On grocery, we have been at it for about five years now. I am, on the one hand, super proud of the team—becoming the volume leader where consumers shop as well as where new consumers find out about grocery delivery for the first time. On the other hand, I do stand by the statement that we have miles to go to build an experience that can outcompete you going into a grocery store and buying items yourself. That is still the winning product if you look at the data. That does not mean we are not growing extremely fast, making a lot of improvements, gaining share, and improving profitability while we do it. There is a lot of work to do. A lot of it has to do with continuing to build a cost structure that allows you to offer items at around the same price as in-store and delivering with perfect quality. The hardest problem to solve in grocery is that, because consumers—when we go into grocery stores—move items around, and because of how supply chains, inventory systems, and payment systems do not necessarily always talk to each other, and how grocery stores are run and were built historically and as they have moved into e-commerce, it is really hard for them to know where things are. That is still the fundamental problem to solve. We have done lots of things already in that space that we have pioneered and are proud of. There is a long way to go in scaling that work to all the stores we work with, not just the ones in which we have tested. We also have to do the next hill climb to achieve perfect quality at the prices you would expect, for every single item, every single time. Ravi Inukonda: And, Lloyd, on your first question on ads, if you are thinking about it from a flow-through perspective, it is growing and having an impact from a margin and profitability perspective. But the way we think about it is very similar to the rest of the business. An ad dollar is very similar to improvements we generate from unit economics. Ultimately, our goal as operators is to find opportunities to reinvest that back in the business to drive long-term free cash flow production. That is largely what we are doing with advertising or other efficiency that we generate in the business. Lloyd Walmsley: Alright. Thank you. Operator: Your next question comes from the line of Justin Post with Bank of America. Your line is open. Please go ahead. Justin Post: Great. Thank you. I just want to follow up on advertising. How do you think about integrating that with agentic capabilities on your own platform? And is there any way you could generate ad revenues on agentic platforms on other platforms? Thank you. Tony Xu: I will take that. Ads are just a means to connect consumers with merchants who are hoping to be discovered and making sure that you do that in the best possible way. With respect to agentic commerce, that is just one way of shopping. I do not think it will change our ability to advertise. It may increase some of the in-surface areas, but I think a lot of that remains to be seen. I do not think the ideal agentic shopping experience is just going to be a chat assistant. I think it is going to take on various forms, and we are iterating on that. With respect to what happens with ads on third-party agentic sites, I think you will have to ask them. Justin Post: Great. Thank you. Operator: And this concludes today’s Q&A session. This also concludes today’s call. Thank you for attending. You may now disconnect. Unknown Speaker: Goodbye.
Operator: Thank you for standing by, and welcome to the BillionToOne, Inc. First Quarter 2026 Earnings Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press 11 on your telephone. If your question has been answered and you would like to remove yourself from the queue, simply press 11 again. As a reminder, today's program is being recorded. And now I would like to introduce your host for today's program, David Deichler, Investor Relations. Please go ahead, sir. David Deichler: Good afternoon, everyone. Thank you for participating in today's conference call. Joining me on the call from BillionToOne, Inc., we have Oguzhan Atay, cofounder and chief executive officer, and Ross Taylor, chief financial officer. Earlier today, BillionToOne, Inc. released financial results for the first quarter ended 03/31/2026. A copy of the press release is available on the company's website. Before we begin, I want to remind you that during this call, we may make forward-looking statements within the meaning of federal securities laws. Such statements about future events may include statements about our financial outlook and performance, market size, our products and services, reimbursement coverage, future clinical performance, and other similar statements. We caution you that such statements reflect our current best judgment and actual results may differ materially from those expressed or implied in any forward-looking statements. Risk factors that may cause our results to differ are discussed in our filings with the SEC including our previously filed Annual Report on Form 10-K, our Quarterly Report on Form 10-Q, to be filed following this call, and the Current Report on Form 8-K filed today. Any forward-looking statement made during this call is made as of today, 05/06/2026. If this call is replayed or reviewed after today, the information discussed during this call may not contain current or accurate information. BillionToOne, Inc. disclaims any obligation to publicly update any forward-looking statements, whether because of new information, future events, or otherwise, except as required by law. And with that, I will turn the call over to Oguzhan. Oguzhan Atay: Thank you for joining our first quarter 2026 earnings call. I would like to start by thanking our employees who work with tremendous effort and diligence to build and deliver superior tests to our patients that improve their care and remove the fear of the unknown. Before diving into our quarterly results, I would like to remind you of our four pillars that I believe make us a different category of molecular diagnostics company. First, our revolutionary technology platform, which is enabled by our patented QCT—Quantitative Counting Template—technology, achieves single-molecule level sensitivity and precision with next-generation sequencing. With this technology, we have built unique, category-defining products in both prenatal and oncology. With our differentiated products, we have grown exponentially in the last six years, even as we reach scale, with a level of compounding that we believe is rare in our industry. But there is still so much room to grow as the opportunity of prenatal and oncology cfDNA markets can exceed $100 billion in U.S. market opportunity over time. In addition to rapid growth, we have achieved a superior gross margin profile, with margins now above 70% with still significant room for expansion through ASP growth and COGS per test reductions. Lastly, through a culture of fiscal discipline and efficient operations incorporating AI and automation, we achieved GAAP profitability and positive cash flow with less than 10% of the accumulated deficit of our public competitors. In summary, we continue to track towards our long-term goal, which has remained the same: to build a category-defining generational company and become a member of the S&P 500. Our first quarter performance was extremely strong across all four pillars. For the third quarter in a row, we delivered a rule of 100-plus, and this quarter we paired it with a level of profitability that is extremely rare for a high-growth company—yet another quarter of high growth, expanded margins, positive operating income, and positive cash flow. Looking at our results, pillar by pillar, in addition to expanded fetal antigen NIPT and FNAIT NIPT launches for prenatal, and PGx and CH launches for oncology that were launched in February, after the end of the quarter we launched a category-redefining prenatal test, Unity Confirm. Unity Confirm is the first noninvasive fetal cell-based confirmation assay for high-risk NIPTs. On the oncology side, our product roadmap remains on track. For our Response coverage submission, we responded to all MolDX comments, and our tumor-naive MRD launch is on track to launch by the end of this year. As we continue to launch new products, our business continues to grow, delivering consistent test volume growth of 44% year over year and total revenue growth of 84% year over year. In our third pillar, we have continued our progress with our in-network contracts. Most importantly, with a contract with Anthem, bringing our total contracted lives to 300 million in the United States. As our ASPs increased 28% year over year to $571 per test, and as we maintained our COGS at $153 per test, despite a higher proportion of oncology tests that have a higher COGS, we expanded our gross margins to 73% in Q1, a strong nine percentage point increase year over year. And finally, in our fourth pillar, as our gross margins expanded and as we operated with higher efficiency, we delivered a remarkable profitability profile in the first quarter with a 16% GAAP operating margin and 24% adjusted EBITDA margin, increasing our cash position to $537.5 million at the end of the quarter. Delving into each pillar one by one: For our first pillar, on May 1, just five days ago, at the ACOG Annual Meeting, we moved the field forward once again by launching what we believe is going to be seen as the innovation of the decade in prenatal genetics. Unity Confirm is the first and only noninvasive confirmation assay for high-risk pregnancies. It represents what many in our field have long considered the holy grail of noninvasive prenatal testing. Unity Confirm captures and sequences intact circulating fetal cells from a maternal blood sample, providing 100% fetal fraction. To put that in perspective, conventional cell-free DNA tests rely on small fractions of fetal DNA in maternal plasma. By isolating and sequencing whole fetal cells directly, Unity Confirm is in a fundamentally different category. We have launched Unity Confirm as a specialized offering, as a follow-up for high-risk pregnancies identified on our Unity Aneuploidy screen. Today, if an NIPT returns a high-risk result, the next step is invasive diagnostic testing, which is increasingly inaccessible in maternity care deserts and also carries a small miscarriage risk. The majority of patients cannot or choose not to proceed to invasive diagnostic confirmation. Unity Confirm addresses this critical clinical gap. It gives these patients and their physicians a noninvasive option. Our initial results have shown 100% concordance compared to invasive diagnostics, and we are now enrolling patients in what we believe is the largest prospective circulating fetal cell-based study ever conducted with concordance to invasive diagnostics. We also built a comprehensive launch campaign around Unity Confirm. More than 500 providers attended the launch or watched on the live stream. We believe Unity Confirm will further increase the differentiation of our Unity product offerings. Turning to our second pillar, scalable rapid growth: Our leadership in product innovation and our growing commercial team continued to drive strong test volume in the quarter. In Q1, we delivered approximately 188 thousand tests, representing 44% year-over-year growth, and strong sequential growth across both product lines, with prenatal volumes growing approximately 10% quarter over quarter and oncology volumes growing approximately 25% quarter over quarter. Importantly, on the oncology side, approximately 60% of NorthStar Select orders now opt in to CH, reflecting growing physician awareness of the importance of distinguishing tumor-derived from non–tumor-derived variants in liquid biopsy. Our total revenues in the first quarter grew even faster, achieving 84% year-over-year growth. This was driven by 44% year-over-year growth in test volume and 28% year-over-year growth in ASP. Looking at the segment detail, both prenatal and oncology contributed meaningfully to our growth. Prenatal revenue in the first quarter was $97.7 million, up 72% year over year, driven by strong volume growth, commercial execution, and additional traction driven by our fetal antigen test products launched at SMFM in February. This continues to underscore the depth of Unity’s differentiation and the durability of our prenatal growth. Oncology revenue was nearly five times over last year, reaching $10.7 million in the first quarter and an annualized revenue run rate of $43 million. The oncology ramp is being driven by increasing adoption of both NorthStar Select and NorthStar Response, the recent launches of PGx and CH, and strong execution of our oncology commercial team. We continue to see substantial opportunity ahead in oncology as we continue to grow our sales team, build clinical evidence, and pursue Medicare coverage for NorthStar Response. Before discussing ASPs and COGS, I want to highlight a major step forward this quarter. I am pleased to announce that BillionToOne, Inc. is now in network with Anthem, one of the largest health insurers in the United States. This brings our total contracted lives to approximately 300 million in the U.S., representing more than 90% of patients. Following the in-network agreement we announced last quarter with UnitedHealthcare, the addition of Anthem further strengthens our market access position. As I have noted previously, an in-network contract removes friction for both physicians and patients, increases access, and over time, results in higher and more predictable ASPs. Turning to ASPs, we continue to see growth in the first quarter, with overall ASP increasing to $571 per test, a 28% year-over-year increase and a $10 per-test sequential increase. This increase was despite the largely temporary effect of resetting of coinsurance and deductibles at the beginning of the year. We continue to expect substantial room for ASP expansion ahead, driven by additional Medicaid adoptions of our carrier panel PLA code, the continued mix shift to higher ASP oncology tests, and, in time, Medicare coverage of our NorthStar Response test. In addition to driving ASP growth, we have remained committed to our operating model of continuous improvement to reduce COGS per test. Our overall COGS per test was $153 in the first quarter, down 5% sequentially and only 1% higher year over year. This was a particularly significant achievement given two factors: first, the continued mix shift toward a higher proportion of oncology tests, which have higher COGS per test; and second, the COGS impact from recent product launches and enhancements, such as CH. While we expect to continue to see COGS per test reductions, especially in oncology, over the long term we expect overall COGS per test to increase gradually over time as our oncology business continues to grow faster. As our overall ASPs continue to increase, and our overall COGS per test remained approximately stable, our gross margin profile expanded further in the first quarter. Gross margins were 73% in Q1, representing a nine percentage point year-over-year increase from 64% in 2025 and a two percentage point sequential increase from 71% in Q4 2025. The increase was primarily driven by continued increase in prenatal ASP and significant COGS reductions in oncology. We are encouraged by the margin trajectory in both segments. While the faster growth of our oncology business can influence margins—as oncology currently has lower margins due to lower volume scale and prior to Medicare coverage of Response—we expect to maintain strong overall gross margins above 70%. Finally, our first quarter performance allowed us to continue making important strides toward our long-term goals. We delivered a 16% GAAP operating margin and a 24% adjusted EBITDA margin in Q1 while continuing to invest meaningfully in our sales force, in new product launches, and in clinical evidence generation. I would like to note again that we have achieved this profitability at a much smaller scale than our competitors while growing faster and with less than 10% of their accumulated deficits. This combination of growth and profitability speaks to the uniqueness of our technology, the differentiation of our product portfolio, and our operational discipline. With that, I will turn the call over to Ross to review our financial results and updated 2026 guidance before I conclude. Ross Taylor: Thank you, Oguzhan. As Oguzhan mentioned, in Q1 2026 we had a strong performance that combined 84% year-over-year revenue growth with a 16% operating margin and 24% adjusted EBITDA margin. Total revenue in Q1 2026 was $108.4 million compared to $59.0 million in Q1 2025, representing an increase of 84%. Both our prenatal and oncology product lines demonstrated strong growth in the quarter. Prenatal revenues, consisting of clinical testing revenues and revenues from clinical trial support and other services, increased 72% to $97.7 million in Q1. Oncology revenues increased almost 400% to $10.7 million in Q1 2026 versus Q1 of last year. Our total revenue growth was driven primarily by test volume growth across both prenatal and oncology as well as continued expansion of both our prenatal and oncology ASPs. True-up revenue was $9.2 million in Q1 2026, compared to $8.4 million in Q4 2025 and $2.9 million in Q1 2025. Excluding true-up revenue, total revenue growth in Q1 was 77% compared to the same period last year. Gross profit in Q1 2026 was $79.1 million compared to $38.0 million in Q1 2025, resulting in a gross margin of 73% in Q1 2026 versus 64% in Q1 2025. The increase in gross margins was primarily attributable to continued increases in our overall ASP. Total operating expenses were $61.2 million in Q1 2026 compared to $40.3 million in the comparable prior-year quarter, representing an increase of 52%. Within total operating expenses, R&D expense was $14.7 million in Q1 2026 compared to $10.4 million in the comparable prior-year quarter. SG&A expense was $46.6 million in Q1 2026 compared to $29.9 million in the comparable prior-year quarter. We continue to invest in our commercial team, R&D, and clinical evidence generation, yet operating expenses as a percentage of revenue declined materially. Operating income was $17.8 million in Q1 2026 compared to an operating loss of $2.3 million in Q1 2025. Our Q1 operating profit margin was 16%, representing a meaningful step up from the 11% operating margin we delivered in Q4 2025. Adjusted EBITDA in the quarter represented a 24% margin. Net income available to common shareholders was $18.0 million, or $0.34 per diluted share, in Q1 2026 compared to a net loss of $4.0 million, or $0.39 per diluted share, for the same period of 2025. Cash flow from operations minus capital expenditures was $11.0 million in Q1 2026. We are well capitalized with a very healthy balance sheet. We ended the first quarter with $537.0 million in cash and equivalents. We believe our balance sheet positions us for strong growth moving forward, particularly given our intent to continue to manage the business for profitability and positive cash flow. Finally, I will provide an update on our full-year guidance for 2026. We are raising our 2026 total revenue outlook to a range of $445 million to $465 million, representing growth of 48% to 52% compared to full-year 2025. Our new revenue guidance is a $20 million increase at both ends of the range over our previous guidance of $425 million to $445 million that we provided in early March. We are raising our guidance to reflect the strength of our business in Q1, as well as our expectation that new payer contracts will benefit our ASPs over the remainder of the year. Also, we expect to operate the business such that we will continue to generate profitability approaching current levels even with significant continued investments. I will now turn the call back to Oguzhan to conclude. Oguzhan Atay: Thank you, Ross. In summary, we are transforming health care one molecule at a time, one patient at a time. Looking ahead, my confidence is rooted in the durability and scalability of the foundation we have built. This is not a story dependent on one catalyst. It is a story of multiple reinforcing drivers working together over time. Each product that we launch makes our platform more powerful. Each study that we publish further validates the clinical utility of our technology. Each payer contract, including our landmark agreements with UnitedHealthcare and now Anthem, strengthens access and reinforces the value of our offerings. In Q1, we launched Unity Confirm, a first-of-its-kind offering that further differentiates our prenatal product portfolio. And we made important strides towards keeping our oncology product roadmap on track. We continued our strong revenue growth—84% year over year—leading to a $434 million annualized revenue run rate. We have combined this revenue growth with impressive gross margins of 73%, a nine percentage point year-over-year increase even with subscale COGS and ASPs, especially in oncology. Last but not least, we have shown that rapid growth does not have to come at the expense of profitability, achieving an impressive 16% GAAP operating margin and 24% adjusted EBITDA margin. We are powered by a team of highly motivated, mission-driven individuals who show up every day with a shared purpose to make a meaningful difference in patients' lives. That dedication is reflected in the strength of our results and continues to drive our momentum. Looking ahead, our ambition remains clear: to build a category-defining company, earn a place in the S&P 500, transform molecular diagnostics, and help reshape health care. We are pleased with our progress to start the year and look forward to updating you as the year progresses. We will now open the call for questions. Over to the operator. Operator: Our first question comes from the line of Daniel Arias from Stifel. Your question, please. Daniel Arias: Ross, maybe just to start on the guidance raise on revenues. Is there a higher volume component embedded there, or is that really just a function of ASPs? And then can you maybe just talk a little bit to volume cadence over the course of the rest of the year here? Ross Taylor: Sure, Dan. As I made some reference to in my prepared remarks, the guidance increase came from the strength we had in Q1, factoring that into the guidance, as well as an ASP lift we expect to see from several additional payer contracts we entered into since the start of 2026. So not really assuming any increase in volume compared to our prior expectations other than the good results we saw in Q1, but primarily driven by lift in ASPs and again strong performance in Q1. Just in terms of cadence for volumes in the year, I think the only real remark I would make there is we typically have a slower Q4 due to seasonality around the holidays and other factors. Other than that, I would expect a little bit of sequential growth in Q2 and Q3, but Q4 is a seasonally slower quarter for us. Daniel Arias: Okay. And then maybe on the gross margins, the step up there was pretty notable. We do not really have a mid-70s number at all in our out-year forecast. So how sustainable is that as new products come into the portfolio? At the very least, it feels like the 68%–69% assumption for this year seems low unless something is about to step down in the back half. So can you just maybe help us with that? Ross Taylor: Sure. As mentioned during our remarks, we expect 70% or better gross margin over the course of the year. There could be a little bit of quarterly volatility in that, but I would expect 70% or better gross margin is something we can sustain for this calendar year. Oguzhan Atay: I can add a little bit of commentary around that. With these contracts, especially including Anthem and UnitedHealthcare, and other contracts as well—we are signing roughly five to 10 contracts almost every month now—they are all incrementally helping our ASPs. Our prenatal, I think, is one of the most remarkable molecular diagnostics businesses in terms of gross margin. As you know, without Response Medicare coverage, oncology has lower margins, and it is growing extremely fast—25% quarter over quarter. So in the short term, there is this dynamic between faster growth of oncology and gross margins of prenatal. That is going to keep further expansion in check, but we still expect it to be above 70%. Long term, as both of these product lines mature, we expect both product portfolios to be easily above 75%. Operator: Thank you. And our next question comes from the line of Mark Massaro from BTIG. Your question, please. Mark Massaro: Congrats on the strong quarter. I wanted to ask about Unity Confirm. It seems like a pretty interesting novel product offering. Oguzhan, how do you size this market? So even starting with, I think, 3.6 million births in the U.S. roughly, how many of them do you think would be eligible to go on to Confirm? And I think you are launching this later this month. Is this something that you expect to get expanded reimbursement coverage for as an add-on? And related to that, can you speak about the clinical trial that you are enrolling? How long do you think it will take to enroll the patients in the study? Oguzhan Atay: Thank you, Mark, for the question. In terms of reimbursement or revenue additions for Unity Confirm, we expect that to be actually quite minimal, if any. The reason is that this is only going to be about 0.5% of the patients, maybe up to 1% of the patients, who would test positive on a cell-free DNA test and be eligible for this. I think the important part about Unity Confirm is that the patient is only able to get this test if they use Unity Aneuploidy. We believe that this is going to make our Aneuploidy offering strongly differentiated, and there will be an increased interest in using our Unity Aneuploidy platform over all others so that if there is a positive high-risk result, the patient only then will be eligible to get tested with Unity Confirm. Having this exclusive offering—noninvasive confirmation for these high-risk pregnancies—we believe that this is going to be another driver of volume, not in terms of the Unity Confirm volume alone, but because patients are only eligible for this if they used our Aneuploidy screening as a frontline screen to begin with. The timing for the clinical trial: it is a very large clinical trial, and invasive testing in the United States has significantly declined over time. There are not as many patients as there used to be getting invasive confirmation, which speaks to how critical this offering is and the clinical utility that it provides. But that also means that the timing of a very large clinical trial like this can easily take anywhere between one to three years. Mark Massaro: And just to confirm, will these patients be measured against both amnio and CVS? Oguzhan Atay: The clinical trial as it is designed includes both CVS and amniocentesis, but the primary endpoint, the primary utility, is against CVS because it matches with the cell type that we are measuring as well as the timeframe of the CVS that we are measuring. Mark Massaro: Perfect. And then last question for me. Nice to see Anthem come online. I think United started on April 1, if you could confirm that. And what is the go-live date of Anthem? Oguzhan Atay: United effective date was April 1. Anthem is already effective. Operator: Thank you. And our next question comes from the line of Andrew Brackmann from William Blair. Your question, please. Andrew Brackmann: I also wanted to ask on Unity Confirm. Can you maybe just sort of talk about the cell capture technology broadly? What does this technology mean to the entire prenatal genetics platform? And what are some of the future applications that this unlocks for you as you think years in advance? Oguzhan Atay: Thank you, Andrew. This has been the holy grail of prenatal testing, something that people have been working on for the last 20 years. Capturing these cells is extremely difficult. When we think about cell-free DNA testing, about 5%–10% of the DNA is of fetal origin. When we think about these trophoblasts—these fetal cells—it is truly a one-in-a-billion type of cell type. It is a more labor-intensive and more difficult process, and that is why this is positioned for confirmation of high-risk cases rather than frontline testing. But as you can imagine, one of the really big limitations of cell-free DNA testing, especially as you go into rarer conditions, was the concern around PPVs. Having a noninvasive confirmation assay actually removes that concern. From a long-term perspective, I do not see cell-based methodology as a replacement of cell-free DNA methodology—both due to cost and the labor-intensive nature of Unity Confirm or any other cell-based methodology—but it can really solve the fundamental problem with cell-free DNA testing, which is this gap between screening and diagnostics that has been increasing over time. That can really enable cell-free DNA testing to be more comprehensive and more widely adopted as well. Andrew Brackmann: Then I just wanted to ask on capital allocation priorities. I think you called out maintaining profitability while still investing pretty heavily. So I assume cash should continue to grow from here. How should we think about you using cash and capital allocation from here? Oguzhan Atay: As of right now, we do not have any specific plans about how to use the cash. We expect to maintain our profitability while investing in various different areas. Operator: Thank you. And our next question comes from the line of Subhalaxmi Nambi from Guggenheim. Your question, please. Subhalaxmi Nambi: You mentioned the MRD launch is on track. What is the next tangible catalyst we should look out for? And if it is data, do you know the forum you would share it on—either publication or conference? Oguzhan Atay: We will launch MRD with data at the time of the launch. It is not going to be ahead of the launch; it is going to be at the time of launch. I do not know whether it is going to be at a specific conference. It might be essentially a manuscript that we release. Subhalaxmi Nambi: Thank you for that. And just remind us, what is the Response versus Select ratio this quarter? And separately, ACOG guidelines were updated last week. In light of that, how has prenatal reimbursement contracting progressed so far this year, especially for expanded carrier screening and 22q? Depending on that, what are you expecting exiting 2026, and how might this shape your view for next year ASPs? Oguzhan Atay: We did not see any specific changes around coverage policies. We were able to get in network with more and more payers in Q1, and that is the primary contribution to our ASP growth right now. The Response versus Select ratio is similar; it is around two Response to one Select. Each physician uses differently. Some physicians are repeating Select and Response, so it is a one-to-one ratio. Other physicians are doing one Select and one Response to begin with, and then following up with two or three or four Response tests until they see progression, and at that point they are using a Select test. The blended average is staying at two Response to one Select, which really speaks to the value of Medicare coverage of a Response test for us. That is why we have been working diligently on that front. Operator: Thank you. And our next question comes from the line of Casey Woodring from JPMorgan. Your question, please. Casey Woodring: Hi. This is Sebastian Sandler on for Casey. Thanks for taking the question. My first question is on the sales rep ramp. Can you share the fully ramped rep count as of Q1? Then your latest expectations for fully productive reps exiting the year? And if you have this by prenatal and oncology, that would be super helpful. And then just any other color on how the process of getting these reps fully ramped is progressing—taking more or less time compared to your initial expectations? Oguzhan Atay: Thank you, Casey. The numbers that we shared in the March earnings call—we are approximately on track to those numbers. We are not going to share every quarter how many exactly ramped-up reps we have, but their productivity is staying within the expectations that we had from the past quarter. Casey Woodring: And then on oncology ASPs, it looked like those stepped down a touch sequentially. I am assuming this might have been on the NorthStar Select side, maybe from true-ups rolling off. So if you could give us more color on that. And then just ASP progression for the rest of the year—should this be pretty stable, or do you expect it to be more back-half weighted as some of these new contracts start kicking in? Oguzhan Atay: I believe the oncology ASPs, primarily excluding true-up, were very similar. True-up numbers change from quarter to quarter, and it can impact exactly what is being recognized. But there are no material changes in how our oncology tests are being paid. NorthStar Select has broad coverage and reimbursement, and NorthStar Response does not. We expect NorthStar Response ASP to be significantly higher once we have Medicare coverage of NorthStar Response, which we anticipate around the end of the year. Operator: Thank you. And our next question comes from the line of David Westenberg from Piper Sandler. Your question, please. David Westenberg: Hi. This is Skye on for Dave. Thanks for taking the question. Maybe just on the health system pipeline, where does that stand today? Are health system-related adoptions still not embedded in the guide? Oguzhan Atay: The health system adoption is something that we work on, but the timeline for health system adoptions can be very variable. So it is not directly embedded in the guide except for sales team territory growth expectations that are embedded as a standard in our projections. David Westenberg: Got it. Okay. Thanks. And then next, just a little bit more color on how you see cancer monitoring over the next few years and timing on that? Oguzhan Atay: Can you repeat the question? David Westenberg: Yes. How do you see cancer monitoring adoption over the next few years and the timing around that? Oguzhan Atay: You mean NorthStar Response–related adoption when you say cancer monitoring, or are you referring to more surveillance with respect to MRD? David Westenberg: More surveillance with respect to MRD would be great. Oguzhan Atay: Today, we do not have an MRD test, but we are working on building a tumor-naive MRD test. Our belief is that today most of the usage of MRD is in academic centers, and it is primarily in colorectal cancer. That is one area where access to tissue is much easier than other cancer types. We believe that the adoption of a tumor-naive test that is as sensitive, if not more sensitive, than many of the tumor-informed tests will be much more easily adopted by community oncologists who care for upwards of 80%+ of oncology lives in the United States. So, even though most of the adoption today is in colorectal and most is in academic centers, eventually the bigger adoption of MRD is going to be by community oncologists using tumor-naive tests, and that is why we spend a lot of our efforts around the tumor-naive aspect of our test, even though it is much easier to build a tumor-informed test. In fact, internally, we built a tumor-informed test that is ultra-sensitive just so that we can benchmark our tumor-naive test against it. Operator: Thank you. And our next question comes from the line of Brandon Couillard from Wells Fargo. Your question, please. Brandon Couillard: Hey, thanks. Good afternoon. Just two questions for you, Ross. Just want to confirm to what extent, other than the first quarter true-ups, have you embedded any additional true-ups over the balance of the year in the new guide? And then could you speak to the spike in accounts receivable in the first quarter? Ross Taylor: Sure. With regard to the true-ups, we do not include true-up revenue in the guide other than the historical Q1 numbers we have already seen. So for the out quarters, no, there is no true-up revenue embedded in that guide. The change in AR: we entered into a number of contracts in Q1, some of which came in late Q1 as well. We are not going to get reimbursement for those until several months from now, and some of that new contracting drove about half of the increase in our AR this quarter—or almost half of the increase in the AR. I would expect that will come down, if not by Q2, certainly by Q3. It just depends on how rapid these activities proceed. Operator: Thank you. And our next question comes from the line of Tycho Peterson from Jefferies. Your question, please. Tycho Peterson: Hey, I would love to dig into the Q1 volumes a bit. You called out an increase in active ordering providers last quarter. Could you maybe touch on how much of the volume contribution this quarter came from new providers versus repeat orders from previously integrated providers? Oguzhan Atay: Thank you, Tycho, for the question. We have seen a very similar number of newly active ordering providers that we added in this quarter compared to previous quarters. We have not seen any difference. Really, the difference between test volume increases between quarters is primarily due to the number of accessioning days in the quarter and when those providers become active throughout the quarter. Q4 tends to be seasonally slow for us; any difference between Q4 and Q1 is due to the number of accessioning days and the holidays in the quarter, which artificially decreases the test volume. Tycho Peterson: And then, on Unity Confirm, I am just wondering how you are thinking about share dynamics in the market today. There have been competitive launches as well. What is your view of share dynamics today? Oguzhan Atay: We are not seeing significant impact in the way that we are acquiring new providers and new accounts. Unity Confirm, granted, does create some noise, but the fact we have added a similar number of newly active ordering providers in Q1 as well as Q4—similar to previous quarters—really shows that our products are resonating with providers and we are executing well. Unity Confirm is another driver, another reason for providers to use our test. As opposed to some of our previous launches, this particular offering is only accessible if a provider has ordered Unity Aneuploidy as a frontline screen, which we believe is going to position our test much more as a frontline usage in certain cases where they may have relied on our test as a second line in the past. Sometimes, with our fetal antigen testing, we would receive another aneuploidy order even though frontline testing was another competitor's test, or we receive tests where our aneuploidy is being ordered because other tests were no-calls or were incorrect results. In this case, we are only enabling Unity Confirm if our test has been used as a frontline test, which means it will be an important driver of test volume. Tycho Peterson: And then last one: understanding the timelines for MolDX on NorthStar Response. We hear a lot about potential delays with MolDX and longer times to turn new applicants. What is the risk it gets pushed into next year? Oguzhan Atay: We are not seeing any issues with MolDX. They are responding within their stated timelines, which is 60 days, and it was a very productive back and forth with MolDX. We do not see potential for delay. It might even potentially be slightly earlier than we originally anticipated. Operator: Thank you. This does conclude the question-and-answer session of today's program. I would like to hand the program back to Oguzhan for any further remarks. Oguzhan Atay: Thank you, operator. And thank you all for joining today's conference call. We look forward to speaking with you on our next conference call in a few months. Have a good day. Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Operator: Good afternoon, and welcome to Sunrun Inc. First Quarter 2026 Earnings Conference Call. Please note that this call is being recorded and that one hour has been allocated for the call, including the Q&A session. During the Q&A session after the prepared remarks, please press [inaudible]. I will now turn the call over to Patrick Jobin, Sunrun Inc.'s Investor Relations Officer. Thank you. Please go ahead. Patrick Jobin: Thank you. Before we begin, please note that certain remarks we will make on this call are forward-looking statements related to the expected future results of our company, including our Q2 and full year 2026 financial outlook, and other statements that are not historical in nature, are predictive in nature or depend upon or refer to future events or conditions such as our expectations, estimates, predictions, strategies, beliefs, or other statements that may be considered forward-looking. Although we believe these statements reflect our best judgment based on factors currently known to us, actual results may differ materially and adversely. Please refer to the company's filings with the SEC for a more inclusive discussion of risks and other factors that may cause our actual results to differ from projections made in any forward-looking statements. Please also note these statements are being made as of today, and we disclaim any obligation to update or revise them. Please note, during this conference call, we may refer to certain non-GAAP measures, including cash generation and aggregate creation costs, which are measures prepared not in accordance with U.S. GAAP. These non-GAAP measures are being presented because we believe they provide investors with a means of evaluating and understanding how the company's management evaluates the company's operating performance. Reconciliations of these measures can be found in our earnings press release and other investor materials available on the company's Investor Relations website. These non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with U.S. GAAP. On the call today are Mary Powell, Sunrun Inc.'s CEO; Danny Abajian, Sunrun Inc.'s CFO; and Paul Dickson, Sunrun Inc.'s President and Chief Revenue Officer. A presentation is available on Sunrun Inc.'s Investor Relations website along with supplemental materials. An audio replay of today's call along with a copy of today's prepared remarks and transcript, including Q&A, will be posted to Sunrun Inc.'s Investor Relations website shortly. And now, let me turn the call over to Mary. Mary Powell: Thank you, Patrick, and thank you all for joining us today. At Sunrun Inc., we are rapidly ramping sales and operations to fulfill the surging customer demand we have generated for our offering. Sunrun Inc. is solidifying and expanding its leadership position as the nation's largest residential distributed power plant developer and operator. Our addressable market is no longer solar-driven savings. It is America's need for power to fuel our economy. Our strategy is working. In Q4, we told you we had reached an inflection point. Today, we are here to tell you that the momentum we built is holding and accelerating. In a market environment that continues to test many participants, our scale, our vertically integrated model, our product strategy, and our relentless focus on execution and customer experience are proving to be genuine, durable competitive advantages. Put simply, we believe the market dislocations occurring around us present opportunities for us to extend our lead and accelerate profitable, high-quality growth. Let me start with our Q1 results. We added approximately 19,000 customers in Q1, and our storage attachment rate increased again to 73%, reflecting our continued commitment to a storage-first strategy as we build the nation's largest distributed power plant. Aggregate subscriber value for Q1 was $1.1 billion, above our guidance range of $850 million to $950 million. Contracted net value creation was $108 million, near the high end of our guided range of $25 million to $125 million. Cash generation came in at negative $31 million, excluding equipment safe harbor investments. We chose to shift certain project finance transaction activity from Q1 into Q2, negatively impacting our cash generation for Q1. We remain on track for our full-year guidance of $250 million to $450 million. Danny will walk you through the details of the financials in a moment; I want to give you the strategic picture first. We closed 2025 having installed more than 237,000 solar-plus-storage systems, approximately 4 gigawatt hours of network storage capacity. In Q1, that number grew to 4.3 gigawatt hours. Our fleet of dispatchable storage has grown over 50% compared to the prior year. That is not just a metric. It is infrastructure. It is real distributed, dispatchable power woven into American homes and the energy system. And it is something no one else in this industry has at our scale. This is the business we have been building: not a company that sells solar panels, but a company that operates critical energy infrastructure that stabilizes the grid and provides customers price certainty and backup power. In a moment of unprecedented electricity demand, driven by AI data centers and electrification, coupled with an aging grid, that distinction has never mattered more. I want to spend a moment on the dynamic industry environment we are operating in. Sunrun Inc. is incredibly well positioned to capitalize and extend our lead in the industry. The changes happening in the industry are difficult for many companies to navigate, but we believe that they play directly to Sunrun Inc.'s strengths. Let me hit the big changes in the industry and our position. First, the consumer ITC under Section 25D of the Tax Code associated with cash purchases or loan financing sunset at the end of December. Many smaller dealers and some of our affiliate partners that had significant volume dependent on the 25D tax credit have suffered significant volume declines this year. Sunrun Inc.'s origination volume is almost entirely subscriptions, and thus we are not seeing similar impacts from changes to the 25D tax credit. Second, utility rate structures have become increasingly complex, and customer value propositions hinge on and can be expanded by storage that is properly designed and actively managed to ensure consumer value. We believe that our vertically integrated model has allowed us to provide the best customer experience and offerings. We train our sales force and operations teams and ensure end-to-end alignment. This is one of the reasons we have very deliberately shifted our growth mix towards our direct business. Third, the regulatory complexity navigating domestic content and FIAT rules is increasing. We believe that our experience and scale give us tremendous advantages to navigate these items from equipment procurement, logistics, and compliance. Fourth, we have focused on margins and cash generation well ahead of others in the industry. This allows us to operate with a strong balance sheet that has low parent recourse leverage, enabling us to strategically invest in profitable growth and make the right long-term business decisions from a position of strength. Our balance sheet strength, along with our large-scale operations, has also afforded us the ability to prudently invest in safe harboring, enabling maximum ITC levels through 2030. Sunrun Inc.'s end-to-end visibility, our vertical integration, and our sophisticated capital markets experience are precisely what allow us to drive competitive advantages and thrive. We are leaning in during this moment of industry change. We are seeing strong momentum in direct sales force recruiting. We are matching direct sales momentum by ramping our direct installation capacity, enabling us to approach year-over-year growth in overall installations later this year. We hired more than 1,000 people in sales year to date. We are onboarding hundreds more, representing some of the best talent in the industry from sales dealers who have recognized Sunrun Inc.'s sustainable approach and appreciate our customer experience focus. These talented sales representatives understand the shifts in the industry have made the dealer model unstable and unattractive. We are driving strong, profitable growth with expanding margins for new customers. We are also deep into our strategy of building capital-light sources of recurring cash flows that are independent of new customer origination. We will be monetizing our base of customers and providing at-scale resources to the grid. We plan to also offer these services to orphaned customers across the industry. We expect these recurring cash flows to scale and augment our cash generation growth in the coming years. Our full-year 2026 guidance remains intact, and we are excited about our long-term growth trajectory. I wanted to close by returning to what I believe most deeply about this company and this moment. America needs more power, and Americans want more independence and control. The proliferation of AI data centers, the electrification of transportation and homes, the decarbonization of the grid—these all demand new solutions. The answer is not going to come from a single large plant that takes years to build. Instead, we believe distributed, intelligent, flexible resources deployed into homes and communities today will be a meaningful part of the solution. That is Sunrun Inc. We have over 1.1 million customers across the country. We have the largest residential battery fleet in the country. We are dispatching energy to the grid. We are protecting families from outages. And we are doing all of this while generating meaningful cash, paying down debt, and building a balance sheet that gives us flexibility to invest in the future. Before handing it over to Danny, I also want to take a moment to celebrate some of our people who truly embrace our customer-first and service-focused mentality. This quarter, I specifically want to call out our team members in Hawaii. As we all saw, Hawaii experienced severe and catastrophic flooding this past March, affecting thousands of residents including many Sunrun Inc. customers. Over a dozen of our team members in Hawaii, ranging from electricians to installers to sales leaders, spent many hours assisting in recovery efforts on the island of Oahu. I am so thankful for their contributions. Darius, Kelton, Chad, and to all our Hawaii team members, mahalo. We are incredibly proud to have you representing Sunrun Inc. Danny, over to you. Danny Abajian: Thank you, Mary. Our Q1 volume performance exceeded our expectations as we expanded our sales force and increased productivity at a robust clip. We added nearly 19,000 customers this quarter, with average system sizes up 5% from Q4 and a 73% storage attachment rate, up two points from Q4. While customer additions are down year over year given the effect of reduced lead generation and sales activities in mid-2025 around the budget bill and our decision to reduce affiliate partner volume, early-funnel sales activities this year have seen an inflection point toward growth. Based on the strong sales in our direct business, we are on track to resume overall year-over-year growth in installations later this year. To provide some more color on early-stage activities in our direct business, our active sales force has grown over 20% since the start of the year, and March saw over 30% growth in sales bookings month on month. These trends are outpacing the typical ramps we have seen at this point in prior years. Importantly, this growth is occurring in higher-value geographies and with our desired product mix. Aggregate contracted subscriber value was $980 million in Q1. On a unit basis, contracted subscriber value was up 14% year over year driven by higher system sizes, a higher storage attachment rate, a higher average ITC level, and lower capital costs. Aggregate creation costs were $872 million in Q1. On a unit basis, creation costs were 18% higher year over year driven by higher system sizes, a higher storage attachment rate, and adverse fixed-cost absorption from lower volumes. Upfront net value creation was $91 million in Q1, or approximately 9% of aggregate contracted subscriber value. This represents the cash margin we expect to obtain once systems and their tax attributes are monetized before working capital and recourse debt interest costs. On a unit basis, upfront net subscriber value was $5,136, up over $4,000 per subscriber compared to the prior year. Cash generation was negative $59 million in Q1, or negative $31 million excluding the $28 million net investment in equipment safe harboring. Cash generation was lower than our guidance due to our decision to shift certain project finance transaction activity from Q1 into Q2. We repaid $92 million of recourse debt in Q1, ending the quarter with $680 million of unrestricted cash and $626 million of parent recourse debt. Turning now to our activity in the capital markets. Investor demand for Sunrun Inc.'s assets remains strong. We have executed and closed several traditional and hybrid tax equity funds and tax credit transfer agreements so far this year, and have developed a pipeline of several transactions we expect will close during Q2. Corporate ITC buyers and traditional tax equity investors are actively engaging in their 2026 tax planning, and we are capturing a broadening base of investors. According to industry data, approximately 27% of Fortune 1,000 companies purchased tax credits in 2025 in a market which grew nearly 50% from 2024. Tax credit investment has become common practice for hundreds of corporate treasurers and CFOs who are generating savings and reducing their corporate tax rates, and we expect more of them will catch on this year. Market activity has picked up considerably from 2025 when tax law changes created temporary tax planning uncertainty. Pickup in activity has also driven modest recovery in market pricing for ITCs. Certain multinational tax equity investors have paused 2026 activity as they await Treasury guidance on FIAT ownership restrictions to confirm that their capital structure does not present any complications. The broader universe of tax credit investors is not impacted by ownership restrictions and remains active. We have built a supply chain and operating process for full FIAT compliance. Through today, we have raised $774 million in non-recourse asset-level debt financing year to date. The publicly placed tranche of our recent $584 million securitization priced at a spread of 220 basis points, a 20 basis point improvement from our most recent transactions in Q3 of last year. As of today, closed transactions and executed term sheets, inclusive of agreements related to non-retained or partially retained subscribers, provide us with expected tax equity capacity, or equivalent, to fund approximately 1,000 megawatts of projects for subscribers beyond what was deployed through the first quarter. We also have over $675 million in unused commitments available in our non-recourse senior revolving warehouse loan to fund over 250 megawatts of projects for retained subscribers as of the end of Q1 pro forma to reflect the announced securitization. Approximately 23% of our subscriber additions in Q1 were monetized through the non-retained or partially retained model. A reminder: proceeds from these transactions are equal to or better than our on-balance-sheet retained monetization, while also providing simpler GAAP treatment and further diversification of capital sources. Under the joint venture structure, we retain a share of long-term cash flows along with grid services and the ability to cross-sell customers. Turning to our outlook on Slide 23. We are reiterating all of our 2026 full-year guidance. We expect strong volume growth in our direct business and to produce cash generation of $250 million to $450 million for the year, excluding the use of approximately $50 million to $100 million related to equipment safe harbor investments. We expect to continue to allocate cash generation to reduce parent leverage and make final equipment safe harbor investments. In the coming quarters, we will evaluate additional value-accretive capital allocation strategies depending on the market environment and our outlook. We will now open the call for questions. Operator: Thank you. And with that, we will now be conducting a question and answer session. Once again, we ask that you please limit yourself to one question and one follow-up. If you would like to ask a question, please press star [inaudible] on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset. One moment while we poll for questions. Our first question comes from the line of Philip Shen with ROTH Capital Partners. Please proceed with your question. Philip Shen: Thanks for taking my questions. First one is on that tax equity pause, Danny, that you mentioned earlier. I just wanted to understand what the impacts to your business are and whether you have been able to pivot away to other sources of capital or funding. Ultimately, this can drive the cost of funding higher. As a result, do you see any impacts to your volumes? I know you maintained your full-year guide. But the reality is, it is impacting the wider market. You cut affiliate volumes down 40% year over year a quarter ago. So is the bigger impact more with the affiliate business, and you have everything buttoned up for the direct business? Thanks. Danny Abajian: Yes. I would say there are two different questions in there, and I do not know that they are necessarily related if you are tying them together. Our strategy decision to lean into the direct business for all the reasons that we articulated is pretty much independent of our observations of conditions in the capital markets. So those two are not necessarily linked in the way the question suggests. On the capital markets side, I would not categorically refer to it as a pause in the market. Certainly, there have been a few who have paused their activity in doing transactions. We did see, as we noted on the last call, a slowdown in activity in late 2025. We noted that was a few cents per credit in terms of pricing impact. We had been seeing low-$0.90 per credit pricing move into the high-$0.80s, and we also noted a modest, partial recovery as market activity picked up early this year. Corporate buyers have resumed their buying activity sequentially. Once they had clarity on what they needed for 2025, the appetite was there; they then swiftly moved into filling their needs for 2026. It has been noted there are a few players who have paused over FIAT, and I would say that is not related to our supply chain; it is related to ownership-side FIAT restrictions. They want to be certain of their qualification before they resume activity, but that characterizes a rather small portion of the market. That does feed into supply-demand fundamentals that led to modestly lower pricing, but we are seeing nice recovery building. Matching that with the volume trajectory and demand we are seeing, we feel nicely balanced overall. Philip Shen: Thanks, Danny. Shifting over to the Freedom Forever bankruptcy, historically I think you worked with them. Can you talk about the exposure you have there, if any? And when did you cut off Freedom from your affiliate network? Was it back during the Q4 call, or earlier? Thanks. Danny Abajian: Yes, great question. Our partnership with Freedom has declined in volume programmatically over the last three years and gotten to a place where we have relatively little exposure or ongoing new sales generation with them. From a run-rate perspective, it is quite small. To be amply clear, the dislocation between our strategy on deemphasizing affiliate partner business and ramping up our internal business is not driven by capital. We are raising capital and growing that internal business swiftly, as Mary highlighted, and we are seeing robust growth there. It is really a focus around becoming an organization that has control over more aspects of the business, which is paramount as we transition to be a distributed power player and build and own those assets. On financial exposure, we have participated in the affiliate partner space for nearly two decades and have lots of safeguards to manage exposure regardless of the partner. The nature of the exposure is related to projects that are in flight. They may have been installed but not fully interconnected, so there is an exercise of working through in-flight pipeline for us. Because we are vertically integrated, should we need to step in and complete installations, we can do that, giving us more direct control over outcomes. We are not going to disclose specific figures here on the call. Philip Shen: Danny, Paul, thank you very much. Mary Powell: Thank you. Danny Abajian: Thank you. Operator: Our next question comes from the line of Colin Rusch with Oppenheimer & Co. Please proceed with your question. Colin Rusch: Thanks so much. I want to get into some of the assumptions on the net subscriber value. There is a little fewer megawatts getting amortized over the offers, that is clear. But having a higher percentage of non-contracted value, I want to understand the underlying assumptions around that and what is driving some of that value capture. Danny Abajian: Are you doing the comparison sequentially, just so I follow which numbers you are looking at? Colin Rusch: I am looking at almost $6,000 of non-contracted net subscriber value, which is substantially more than what we have seen historically. I am trying to understand what is driving that. Danny Abajian: There are a few factors at play. Some of it is system characteristics, some is mix. System sizes are larger, which you will note in the metrics. The storage attachment rate is higher. The average ITC level is higher as we had more domestic content qualification in the period; that will range a little for the balance of the year. Most notably, you will see fluctuation across the last several quarters related to the retained and non-retained mix; that is the biggest driver to the non-contracted value and a big driver overall. Of course, discount rate will fluctuate. On the creation cost side, it is more heavily driven by lower fixed-cost absorption in the period related to sequential volume declines over the last few quarters, which we expect to inflect and gain back. There are also mix effects as we shift toward our direct business away from affiliates; some lagging costs are blending up the creation cost figure, weighing on us in period, and that drag should alleviate over the coming few quarters. Colin Rusch: Thanks. Looking at the market, we are going through a substantial shift in end market dynamics with competition as well as where some of these crews are. What are the most prominent gating factors for megawatt growth right now—sourcing deals, construction availability, or tax equity? How are you managing those limitations? Mary Powell: Great question. We are ramping meaningful, profitable growth. Our access to capital to support it is strong. Our approach is an extension of what we have been doing for years: very sharply focused on where we can do that with the best customer experience and the highest margins, while positioning strongly from a distributed power plant perspective. Paul Dickson: Adding to that, as Mary has articulated on prior calls, we have been appropriately selective around hiring and onboarding sales talent to generate more volume in profitable markets at attractive returns, and to attract the best talent we can. Some of that talent swirled around with the 25D expiration and market turmoil—finance shops pulling back, changing pay, exiting; several installation shops struggling or closing. More of the thoughtful sales talent is realizing the unsustainable and unattractive nature of that model, and more of that business is flowing to us. Where previously we were cautious around internal growth, we are now seeing steep upticks and are increasingly bullish on approaching year-over-year growth overall later this year, absorbing the dealer decline and seeing attractive growth in the internal direct business. Colin Rusch: Perfect. Thanks, guys. Operator: Our next question comes from the line of Brian Lee with Goldman Sachs. Please proceed with your question. Brian Lee: Hey, everyone. Good afternoon, and thanks for taking the questions. Danny, going back to your comments around tax equity—it has been a key focus since your commentary from last quarter. It sounds like on the margin you are seeing some improvement in trends. You quantified it in terms of pricing, and it is not a systematic pause, maybe just a few lenders holding off. Is that a fair assessment of your view of the market today versus the end of last year and early this year? And how much does tax equity availability and cost play into the low and high ends of the range for cash generation this year? Danny Abajian: Your recap is spot on. We are seeing more buyer activity pick up. There is a narrow focus on the tax credit transfer market; that market was $28 billion in 2024 and $42 billion in 2025, growing 50% year over year despite the widely noted slowdown. It is still only 27% penetrated in the Fortune 1,000. Among buyers in 2023 and 2024, there was an 80% repeat rate in 2025. Once corporate treasurers and CFOs overcome the entry cost of learning how to do this, it becomes part of planning and is going mainstream. The amount of unsold credits exiting 2025 was half of what it was exiting 2024. Trends are positive, and we see research indicating potential full price recovery, with second-half pricing as high as the first half of last year. Beyond transfers, we have a broad base of capital: non-retained asset sale monetizations, traditional tax equity with new investors, and pref equity structures. We saw through enough transactions to get 2025 done; our focus is on 2026. Brian Lee: Super helpful. Any thoughts on how the low-to-high-end ranges of cash generation embed tax equity availability and cost? Danny Abajian: It is still approximately $25 million per penny on a dollar-per-credit basis, plus or minus. Operator: Our next question comes from the line of Praneeth Satish with Wells Fargo. Please proceed with your question. Praneeth Satish: Good afternoon, thank you. So just to understand it correctly, Q1 cash generation was impacted by a shift of financings into Q2 in the tax equity market. Can you help frame how much volume got shifted and what Q1 cash generation would have looked like absent that timing shift? And for Q2, now that we are in May, how far along are you in terms of proceeding with those transactions you shifted from Q1? Danny Abajian: The negative $31 million is the number that excludes the $28 million safe harbor investment. On a pro forma basis, starting from negative $31 million, you would have to believe that $31 million or more of a draw from a fund that closed earlier would have taken us to breakeven or positive. The delay is not related to a slowdown in the market; it is inherent to transactions that some close before the quarter, some after. All deals need to be right to close. We could see lumpiness over quarters. Our job is to keep transactions tightly on the calendar; sometimes they straddle quarter ends. We are generally fine with that. Zooming out over a rolling four-quarter period, we want a high magnitude of cash generation, which is what we are looking to for the whole year. Praneeth Satish: Got it, helpful. Switching gears, fleet servicing costs have been trending down quite a bit over the last few years, including this quarter. What is driving those reductions, and do you expect those costs to continue to decline, or are you nearing a natural floor? Mary Powell: Thanks for that observation. It is the result of a team relentlessly focused on improving customer experience and service while leveraging our scale and capabilities as the largest installer in the country, with a continued focus on driving down costs. We have also done a lot to leverage AI to get next-click improvements that drive down cost. We are pleased with what we have seen and expect more improvements in the coming months and years. Danny Abajian: Thank you. Operator: Our next question comes from the line of an Analyst. Please proceed with your question. Analyst: Good afternoon. Thanks for taking my question. Danny, you gave a number of 1,000 megawatts of closed transactions and executed term sheets. Can you speak to the mix within that tax equity pipeline between the different buckets—corporate buyers, big multinational financial institutions, etc.? Danny Abajian: In terms of investor mix, it ranges from very large global institutions to more specialized domestic players. On the ITC buyer side, it now spans across all industries, including companies not traditionally tied to the solar space. Analyst: Would you say corporate buyers are a bigger part of the mix today, and if so, how much? Danny Abajian: We noted 23% of systems were sold into the non-retained model—that is quantified and represents a single investor acquiring assets in a JV structure. Apart from that, there is a mix of traditional and hybrid tax equity funds—sometimes the tax credit purchase is stapled with the same investor participating in the fund, and sometimes we sell out tax credits to the ITC transfer market. There is also an emerging set of pref equity JV structures, such as what we announced with Hannon Armstrong last quarter. In those transaction types, there is also transfer activity going out to the same market that spans all industries. Analyst: Okay. Sounds good. Appreciate it. Operator: Our next question comes from the line of an Analyst. Please proceed with your question. Analyst: Good afternoon, thanks for the time. First, can you talk about the nature of the change in the partnership a little bit more? Does that impact anything around your cash flow and cash generation—reiterated guidance, etc.? Why do it now? And Mary, on the direct business ramp, is there any change in your strategy and go-to-market with the new sales talent? How are you shaping sales tactics versus the affiliate channel? Paul Dickson: Can you clarify which partnership you are referencing? Analyst: I apologize—on the financing side, the JV structure. How does retaining cash flows change, and how does that impact your cash guide? Danny Abajian: We have the same disclosures as in the past. There is the non-retained model with an energy infrastructure investor, and the Hannon JV transaction we discussed. We like the efficiencies of those structures. The economics are in a very similar range. We have noted that upfront proceeds look very similar in the non-retained model versus the retained model. All of that is assumed in the $250 million to $450 million cash generation guide. Paul Dickson: On market dynamics, the major point is understanding the market itself. Historically, people categorized consumer demand as solar savings, but consumers are generally unaware a better solution exists. As we scale salespeople to educate Americans about this alternative, we continue to see the same take rates, adoption, and excitement, which are accelerating. The real change is we are selling critical infrastructure: resiliency with a battery that insulates them against outages and price uncertainty due to energy shortages, while also being a grid infrastructure resource. Framed that way, the market is: does America need more power, and is dispatchable power useful? That is the market we serve. We have evolved how we train our salespeople and deliver the value proposition over the last 24 months, and we are seeing higher take rates and efficiency. Sunrun Inc. is focused on being stable and sustainable, underwriting assets correctly. As the broader market sees more turmoil, Sunrun Inc.’s stability becomes more attractive, and more people are flowing into our program. Mary Powell: Simply put, what we sell has become more sophisticated. Policy changes have become more sophisticated. Meeting customer needs requires a company like Sunrun Inc. that is very focused on the customer and has sophisticated capabilities around training the sales force and ensuring we provide the best fit for customers. We continue to make strategic changes to deliver world-class NPS, the right product, and the right program design for both the consumer and the grid. We can scale that significantly and effectively in the direct business, which is why you have seen us focus on it. Analyst: Excellent. Thank you very much. Operator: Our next question comes from the line of Maheep Mandloi with Mizuho. Please proceed with your question. Maheep Mandloi: Thanks for the questions. First, on products going forward, could you see selling a battery storage product similar to what we have seen in Texas with 25 to 50 kilowatt-hour batteries with utilities? Any opportunities there? Paul Dickson: Yes. We have launched our standalone battery offering, and it is being received extremely well. We have sold thousands of units. As that continues to grow in size and scale, we will likely start providing more reporting on it in the future. Maheep Mandloi: Great. And one housekeeping on recourse debt. Is the plan still to get to two times below cash generation, or any plans to pay down even further? Danny Abajian: We expect to get to that number, if not a little through it, by the end of the year. We had a big paydown in Q1, and we expect more paydown before year-end. We are trending towards less than 2x total parent debt to trailing four-quarter cash generation. Operator: Our next question comes from the line of Robert Zolper with Raymond James. Please proceed with your question. Robert Zolper: Thanks for taking the question. On your last call, you said across the portfolio you experienced roughly 75 basis points of annual net defaults. How has that been trending since the last call? Danny Abajian: Across the board, starting with the macro, we have seen a bit of credit cycle consumer performance degradation. There is a range based on different markets and average FICO profiles. Our affiliate and non-affiliate mix is also changing; we see elevation of default rates with greater affiliate mix and some market mix implications. We typically see an initial period of a couple of years where default rates look elevated, then annual default rates start to fall as we get through early issues on the customer-facing service delivery side. Our service costs are down more than 30% year over year with greatly improved SLAs, which is related. We remain in the less-than-1% per year territory—very small—but we have seen some elevation recently. We have reasons to believe those will come down and are generally contained. Robert Zolper: Understood, thank you. As it relates to renewal rate assumptions, if you have 75 basis points of net defaults annually, roughly 20% over a 25-year life, how could you have renewal rates in excess of 80%? Danny Abajian: On Slide 30, we show default-rate-affected sensitivities on contracted value, not on the non-contracted piece. For renewals, it is not linear. Our contracts typically allow us to renew at a 10% discount to the then-current utility rate. Our renewal assumption in the tables uses a percentage of our year-25 Sunrun Inc. solar rate. If initial savings and utility rate inflation outpace our annual rate of increase, we are well discounted to the expected utility rate in the future. Mathematically, you can get to these renewal rates even assuming customer attrition. Also, annual default rate reflects billed versus collected amounts. Many customers who do not pay for some period may be going through a foreclosure or short sale; ultimately a new, creditworthy homeowner often resumes payments. So it is not full attrition. Operator: Our next question comes from the line of Vikram Bagri with Citi. Please proceed with your question. Vikram Bagri: Good evening, everyone. One quick question. You are more sophisticated in raising and recycling capital than the average TPO. We have seen a lot of stress in the market with a few blowups; there was discussion about another one this morning by a supplier. Where do you see your market share at the end of this year or next year? Do you think the TPO market as a whole in the U.S. grows or shrinks after the dust settles on safe harbor, tax equity, and your guidance? Fully understanding you manage for profitable growth, how do you see the market evolving? And based on that, if there is an opportunity to gain market share given your hiring, would you layer on more safe harbors? Paul Dickson: Today, Sunrun Inc. represents one-third of subscription volumes in the United States on the solar product. We are more than 50% of the storage market. On those two metrics, we anticipate increases as we execute our strategy. We expect continued consolidation in the space and to be a recipient of that consolidation. Danny Abajian: On safe harbor, with our $50 million to $100 million use of cash for safe harbor activity this year, we have a July 4 deadline—one year from the date of bill passage. As we complete that exercise, we will have safe-harbored the use of the solar ITC out through 2030 with a combination of vendors, with redundancy and buffer for growth. That gives us a window to play the market opportunity and enables market share capture over time, especially with the 25D credit no longer there; a lot of demand will access solar via our product. On operational fulfillment, we coordinate very specifically by geography. We see how many retail stores are generating leads, how many new reps are selling at the doors; we get the exact signal we need to hire on an existing platform already at scale and can grow cost-efficiently. Pull-through on fulfillment is a coordination task; we do not see bottlenecks. Operator: With that, ladies and gentlemen, this concludes our question and answer session as well as today's conference call. We thank you for your participation, and you may disconnect your lines at this time. Have a wonderful rest of your day.
Operator: Welcome to the IBEX Limited Third Quarter FY 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speakers' presentation, there will be a question and answer session. Please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. There is an accompanying earnings presentation available on the IBEX Limited Investor Relations website at investors.ibex.co. I will now turn this conference over to Greg Bradbury, Investor Relations for IBEX Limited. Greg Bradbury: Good afternoon, and thank you for joining us today. Before we begin, I want to remind you that matters discussed on today's call may include forward-looking statements related to our operating performance, financial goals, and business outlook, which are based on management's current beliefs and assumptions. Please note that these forward-looking statements reflect our opinion as of the date of this call, and we undertake no obligation to revise this information as a result of new developments which may occur. Forward-looking statements are subject to various risks, uncertainties, and other factors that could cause our results to differ materially from those expected and described today. For a more detailed description of our risk factors, please review our annual report on Form 10-K filed with the U.S. Securities and Exchange Commission on 09/11/2025, and any other risk factors we include in subsequent filings with the SEC. With that, I will now turn the call over to IBEX Limited CEO, Bob Dechant. Bob Dechant: Thanks, Greg. Good afternoon, and thank you all for joining us today as we discuss our third quarter results for fiscal 2026. I am excited to report that our third quarter represented yet another period of outperformance, where we again extended the separation between ourselves and the rest of the traditional BPO market. We delivered record revenue growth of 17% to $164.4 million while adjusted EPS grew by 11% to $0.91. This was our fifth straight quarter of double-digit revenue growth, seventh of our last eight quarters of double-digit growth in adjusted EBITDA, and it was our eighth consecutive quarter of double-digit GAAP and adjusted EPS growth, all done organically. Put together, we have a proven track record of delivering strong results and are confident in the momentum we have going into FY 2027 and beyond. Our strong results were again anchored by our two key pillars of growth: driving new wins with key logos and market share gains with existing clients, driven by our continued ability to outperform the competition operationally. In fact, over the last five quarters, our growth within our top 10 clients, where we often compete against our multibillion-dollar competitors, has averaged more than 25%. We also had 100% client retention for the quarter and revenue retention for the year of 99.9%. This is the flywheel we have created that continues to drive blistering growth for IBEX Limited. In the quarter, we won another new logo and have since added three additional significant wins in the first few weeks of April, for a total of 11 year to date. These will set us up well for FY 2027. Growth within our existing customers continues to be strong and broad based, coming primarily across our strategic verticals. We continue to win big in our health care vertical, where growth was nearly 54% and represented the high watermark for the quarter. This vertical has been a standout performer, growing rapidly since we launched it in 2021, and now will far exceed $100 million by the end of this fiscal year. This success demonstrates our ability to build and scale new verticals from the ground up and validates our ongoing investment in India as a high-growth market for our business now and in the future. The IBEX Limited brand today is stronger than it has ever been. Our employee and client net promoter scores remain world class, and our focus on culture and operational excellence is reinforcing our position as a trusted partner and industry leader. And all this is before we factor in our landmark strategic partnership with Sierra AI that we formally announced earlier this week. Through this partnership, IBEX Limited will integrate Sierra’s market-leading AI technology with our best-in-class CX expertise, tech integration, and deep analytics to design and deploy scalable end-to-end AI-powered CX solutions. We believe we can stand up these solutions in weeks, not months or years. We are now uniquely positioned to provide a seamless solution that leverages the strengths of both leading AI and human-powered support. The volume and velocity of opportunities in just the first months since signing this partnership has been great, along with several decisive early wins. More to come on this in the near future. We believe this collaboration will be transformative for our business and set IBEX Limited up well for the future. Within that context of AI’s impact on our industry, I would like to take some time to share our thoughts on the current state of the market and IBEX Limited’s place in it. Today, there is a pervasive view that with the advent of generative AI, a lot of traditional call center work will be replaced by AI. The belief is that the size of the call center industry and volume of interactions handled by human agents will shrink over time, and as a result, BPO volumes will shrink as well. This is the perceived threat that is front and center in our industry, and for labor-arbitrage-only driven businesses, what I call BPO 1.0, I honestly believe this perceived threat is real and represents a big challenge for their businesses. However, for differentiated providers like IBEX Limited that are leaning into agentic AI, this instead is an opportunity. Let me explain. Clients today are looking for partners that are more than labor arbitrage, ones that bring culture, technology, and business insights to create a great experience for their customers. I call this BPO 2.0. They continue to rapidly move away from their BPO 1.0 vendors, shifting from bigger to better in the decision-making process. This plays well for BPOs that are faster, more flexible, and differentiated. For IBEX Limited, our land-and-expand flywheel—where we win trophy new clients and then take significant market share from the competition—has enabled us to post record results over many consecutive quarters and establish IBEX Limited as the best BPO in the industry. And we have done this as many of our clients are currently deploying agentic AI. In fact, one of our larger clients began deploying an AI agent solution last summer. Within six months, their call volumes decreased by 20% due to the containments of the AI solution. Yet, over the same time, we have been able to continue to grow our overall business at 17% while revenues with this client hold strong as we continue to take market share away from underperforming competitors. And now that we have established our partnership with Sierra, we have the opportunity to deliver on that solution ourselves, capitalizing on our deep understanding of the customer journeys and strong client partnerships. We believe these solutions will be accretive to our business as we add on the AI volumes on top of our BPO business and create another vector for highly profitable revenue growth. In summary, I am confident that this industry is extremely viable if you are a strong, differentiating BPO with the ability to deliver a great agentic AI solution. And I am even more confident in IBEX Limited and our ability to lead this transformation in the BPO industry. And now, as I look forward, adding this powerful new arrow to our quiver uniquely enables us to provide a truly seamless customer experience from AI agent to human agent. This significantly widens and deepens our already compelling competitive moat and supercharges our already powerful business and defines our leadership position in BPO 3.0. That is the importance of this announcement to our business. To this point, our AI agent solution is seeing early and fast wins. We are winning opportunities versus other AI technology companies, SaaS companies, and BPO competitors, leading them across the board in terms of deal wins, speed to deployment, and successful containment and resolution. As an example, in one of our early wins with a leading airline, we competed against all three competitor types and easily outperformed the various competitors in a bake-off, having our deployment with Sierra in place and delivering results far exceeding the targeted benchmarks before our competitors could even go live. And we did this solution in three languages. As a result, we have now been awarded all the business. We are also seeing exciting traditional BPO opportunities coming to us as a result of our Sierra partnership. As an example, we recently were introduced to a leading luxury activewear brand looking for the right partner to help them scale human agent support to complement their great AI solution as their brand experiences hypergrowth, and within 30 days, we signed and launched this new client in April. Our ability to respond and execute with speed and experience—and as I like to say, moving at the speed of AI—is setting IBEX Limited apart. Additionally, it is clear that AI is raising the bar for exceptional human agent customer support, which plays very well into our strengths. We are excited with the velocity of our AI pipeline. In summary, we are confident in our ability to outperform the BPO industry, but more importantly, we will continue to define and lead the new era of BPO 3.0 as we aim to make ourselves even more valuable and essential through our existing and new clients. I am proud of our team’s execution quarter over quarter and remain more optimistic than ever about our future. With that, I will now turn the call over to Taylor to go into more detail on our fiscal third quarter financial results and guidance. Taylor? Taylor Greenwald: Thank you, Bob, and good afternoon, everyone. Thank you for joining the call today. In my discussions of our third quarter fiscal year 2026 financial results, references to revenue, net income, and net cash generated from operations are on a U.S. GAAP basis, while adjusted net income, adjusted earnings per share, adjusted EBITDA, and free cash flow are on a non-GAAP basis. Reconciliations of our U.S. GAAP to non-GAAP measures are included in the tables attached to our earnings press release. Turning to our results, our third quarter results are once again among the strongest in our history—record revenue, adjusted EBITDA, EPS, and adjusted EPS. As Bob mentioned, this was our fifth consecutive quarter of double-digit revenue growth, it was our seventh in our last eight quarters of double-digit adjusted EBITDA growth, and it was our eighth consecutive quarter of double-digit GAAP and adjusted EPS growth. Our differentiated solutions and execution are clearly separating us from the pack. Third quarter revenue was $164.4 million, an increase of 16.8% from $140.7 million in the prior-year quarter. Revenue growth was driven predominantly by broad-based growth in our high-margin health tech vertical of 53.7%, technology vertical of 42.6%, travel, transportation, and logistics of 15.1%, and retail and ecommerce of 8.3%, along with continued growth in our digital acquisition business, partially offset by an expected decline in telecommunications, one of our smallest verticals, at 23.1%. We continued to win and grow in all geographic markets during the quarter. Our onshore region grew 36.8% compared to the prior-year quarter, driven by growth of our high-margin digital acquisition business and several clients in our higher-margin health tech vertical. Our highest-margin offshore revenues grew 13.9%, and our nearshore locations grew 3.7%. Offshore revenue comprises 50% of total revenue, as onshore revenue expanded to 27.9% of total revenue from 23.8% in the prior-year quarter, reflective of the growth in our digital acquisition services and onshore health tech delivery. Our higher-margin digital and omnichannel services continue to strengthen, growing 18% versus the prior-year quarter to 82% of our total revenue. We have structurally built IBEX Limited so that our growth vectors are our highest-margin regions, services, and vertical markets, and we expect that we will continue to be successful driving growth in these higher-margin areas as new client wins and growth in our embedded base continue to be focused in these areas. Third quarter net income increased to $13.3 million compared to $10.5 million in the prior-year quarter. The increase was primarily driven by continued revenue growth and operating leverage gained from SG&A expenses as they decreased from 19.2% to 16.7% of revenue, partially offset by $0.8 million of severance expense. The severance expense was incurred as one of our clients shifted their volumes from our nearshore to higher-margin offshore region. In the shift, we were able to pick up moderate market share. We expect an additional asset impairment charge related to this move in the fourth quarter as we adjust capacity. Our tax rate was 16.6% versus 19.2% in the prior-year quarter, primarily attributable to changes in revenue mix across our taxable jurisdictions and favorable discrete tax benefits in the current-year quarter. We expect our effective tax rate before discrete items for the fourth quarter to be approximately 19%. Fully diluted EPS was $0.89, up 22% from $0.73 in the prior-year quarter, with the increase driven by strong operating performance. Our weighted average diluted shares outstanding for the quarter were 15 million shares, versus 14.4 million one year ago. Moving to non-GAAP measures, adjusted EBITDA increased to a record of $22 million, or 13.4% of revenue, from $19.4 million, or 13.8% of revenue, for the same period last year. The 40-basis-point decline in adjusted EBITDA margin was primarily driven by the temporary impact of the work shifting from nearshore to offshore and a less positive impact from deferred training revenue, partially offset by lower SG&A expenses as a percent of revenue compared to the same quarter in the prior year. It is worth noting for the first nine months of fiscal year 2026, our adjusted EBITDA margin is up 50 basis points to 13%. Adjusted net income increased to $13.6 million from $11 million in the prior-year quarter. Non-GAAP fully diluted adjusted earnings per share increased 11% to $0.91 from $0.82 in the prior-year quarter. As a company, we are pleased with the client diversification we have established over the last several years. For 2026, our largest client accounted for 9% of revenue, and our top five, top 10, and top 25 clients, where we see many of our largest competitors, grew 22%, 19.3%, and 15.8%, demonstrating our ability to win market share. Concentrations for these same cohorts represented [inaudible] of overall revenue, respectively, as compared to [inaudible] of overall revenue in the prior-year quarter, representative of a well-diversified client portfolio. Over the past decade, we have done a tremendous job of not only retaining our top 25 clients, but also winning and growing new strategic clients. Two great examples of this are one of our signature client wins from fiscal year 2025 growing into a top 20 client, and one of our signature client wins from fiscal year 2024 growing into a top 10 client. Another signal of our ability to win and scale clients is the growth we continue to see in client counts averaging more than $1 million per annum in revenue, the count of which has grown nearly 20% from the prior-year quarter to 70 clients in the third quarter. Switching to our verticals, HealthTech grew 54% and increased to 20.8% of third quarter revenue versus 15.8% in the prior-year quarter. Technology grew 43%, an increase to 9.2% compared to 7.5%, and our Other vertical increased 27% to 14% of total revenue compared to 13% in the prior-year quarter. These increases were driven by continued growth in multiple offshore geographies and our continued ability to win significant new clients in these verticals. Conversely, our exposure to the lower-margin telecommunications vertical decreased to 8.6% of revenue for the quarter, versus 13.1% in the prior-year quarter, as we see lower volume from legacy carriers. Revenues from the fintech vertical were up 5% and represented 9.7% of revenue for the quarter, versus 10.8% in the prior-year quarter, and revenues from retail and ecommerce grew 8.3% to 23.9% of revenue, versus 25.8% in the prior year. Travel, transportation, and logistics grew 15% and stayed relatively constant at 13.8% of revenue. Moving to cash flow, net cash generated from operating activities was a strong $11.9 million for 2026 compared to $8.8 million for the prior-year quarter. The increase was primarily driven by increased revenue and profitability. Our DSOs were 71 days, down from 73 days at the end of the second quarter, which is consistent with our expectations. We expect our DSOs to remain stable in the low to mid-70s on a go-forward basis. Capital expenditures were $5.3 million, or 3.2% of revenue, for 2026, consistent with the prior-year quarter. Free cash flow was an inflow of $6.6 million in the current quarter, compared to an inflow of $3.6 million in the prior-year quarter, driven by the increase in net cash generated from operating activities. During the quarter, we repurchased approximately 0.14 million shares for $4.5 million, bringing our fiscal year share repurchase to 0.31 million shares for $10.1 million, leaving $3.2 million on our share repurchase authorization. We ended the third quarter with $15.4 million of cash and debt of $1.4 million, for net cash of $14 million, consistent with a net cash position of $13.7 million at the end of our last fiscal year. Our strong financial results in fiscal year 2026 are being driven by our differentiated strategy and sustainable growth trends with our clients, giving us confidence in continued outperformance heading into fiscal year 2027. Our third quarter revenue was again led by meaningful growth in our higher-margin services and vertical markets, particularly robust growth in health tech. This combination of drivers led to a record quarterly adjusted EBITDA of $22 million. As we head into the fourth quarter, our healthy balance sheet and cash flows are enabling us to make thoughtful investments to support increased capacity for anticipated growth, as well as further extend our current AI leadership position. Reflective of our outstanding performance thus far and our forward momentum, we are again raising our revenue and adjusted EBITDA guidance for the year. Revenue is now expected to be in the range of $638 to $642 million, up from $620 to $630 million. Adjusted EBITDA is now expected to be in the range of $82 to $84 million, up from $80 to $82 million. Capital expenditures are now expected to be in the range of $25 to $30 million, up from our previous range of $20 to $25 million, as a result of ongoing investment to meet increased demand in higher-margin regions. Our business is well positioned for today and for the years ahead. We are excited about the future of IBEX Limited as we head into 2026 and beyond. With that, Bob and I will now take questions. Operator, please open the line. We will now open the call for questions. Operator: Please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment for questions. Our first question comes from David Koning with Baird. You may proceed. David Koning: Yes. Hey, guys. Congrats on another good quarter. Bob Dechant: Thanks, Dave. Yes, we are very proud of what we continue to do. David Koning: Yes, for sure. I wanted to kick it off with the new AI partnership. I had two questions around that. One is model, and then secondly, how do you decide whether to use some of your AI solutions or their AI solutions? And does this cannibalize some of your stuff? How does that all work? Bob Dechant: Sure, Dave. Let me repeat what I think I heard you say, because you were a little bit garbled from my end. The question was really around, with Sierra, how does that impact versus the stuff that we have built ourselves? I think it is very easy to describe that. The elements that we have built in the WAVE iX stack are in our internally focused business—things that can help our agents do their jobs better, things like training simulators for agents, things like agent assist, something at their side that they can use that is AI to help them resolve a complex issue quicker. Those are the elements that we have built internally. As it relates to AI agents, our philosophy was there is no way we could compete against the best in class out there that are creating that engine. For us, trying to build that, we would have fallen flat on our face in front of every CTO in the industry, and we therefore believed that we wanted to partner with the leading player in the industry. Sierra is clearly that leader, a cut above. From their standpoint, when they looked at us, they said, “What you are doing, how you have leaned in, you are a cut above.” So it really aligned very well with the two companies’ visions, philosophies, and positions in the industry. To your point, it does not impact at all. In fact, this gives us now the best-in-class engine with the best-in-class BPO. David Koning: Yes, okay. And I also asked about the economic model. How does the rev share work on that? Bob Dechant: Sure. The contracts that we are going to be doing are going to be IBEX Limited contracts that we will be billing our clients on, and then our teams will be working, building the implementation, etc. We have an arrangement with Sierra that we have negotiated a cost structure for those resolutions and all. With the combination of the two, we believe it is very accretive to BPO margins and, directionally, our BPO margins are in the 30% gross margin range. These are technology/software margins, which, as you know, are significantly higher. We feel this is a high-growth vector for us that will drive significant margin expansion for us when you put all that into the equation. Now, I think your last part of your question, Dave, if I got it right, was how do you see this cannibalizing your business? Look, we are leaning into that. Our clients are moving at AI, and we are growing our business the highest of anybody in the industry, as you can see, and that has been many quarters. We have been able to do that because of the flywheel—winning new clients and then taking market share from those clients. This accelerates that because it validates us as a cut above, as a differentiated player. As I mentioned in my remarks, they brought us opportunities that we have closed in AI speed, not BPO speed. We think that on the whole, this is going to accelerate our overall growth business. It will cannibalize some of our business as human volume gets displaced by AI, but if we have that solution in place, I can guarantee you that the model says it will be accretive for revenue. Having the AI solution and the revenues associated with that, plus what we have on the BPO side—the human side—add those together, it will be a growth factor for us. One of the real advantages is being fast, nimble, leaned in, where all of this is opportunity for us. David Koning: Yes, great. Maybe if I can just do one more. The 54% growth—how much of that was new clients? How much of that is existing clients growing? And is there any lumpy revenue, like unsustainable revenue, in Q3 because it was so strong? Bob Dechant: Great question, Dave. Over the last two years, we have brought in six new logos in the health care space that are meaningful new logos—players that are leaders in their respective spaces. It is a combination of that, and then we have a couple of, in particular, the largest payer in the world, and we have been taking a whole lot of market share. So our 54% growth is a combination: we are taking market share where clients have massive budgets north of $600 million, and we are winning a lot of very competitive new logos that are driving that growth. What is interesting is some of that is landing in the U.S., and I will just call out the beauty of that. Dave, you have been with us forever. You know that our U.S. business has, over the years, been a low-margin business where the majority of our margins were made outside the U.S. Over the last couple of years with our play in health care, we have done a complete transformation of the U.S. market. Now you can see it is actually not at a trough; it is growing, and growing well. It is growing profitably because we have taken what I would call legacy old telcos—where nobody ever makes money on them—and we have replaced them with leading health care companies. An amazing shift that we have done that you can see in the results on top line and bottom line results. Taylor Greenwald: And, Bob, just to follow up on Dave’s question too, none of that revenue was one time in nature, Dave. It is all sustainable, and this is the new run rate for health care. David Koning: Awesome. Thanks, guys. Good job. Bob Dechant: Yes, David. To that point, what Taylor just said is if you look at how our business flows now—historically, go back five years ago—our Q2, December, was always a big increase, and then our revenues would come down hard as a result of retail and some of the open enrollment in the early days of health care. Today, if you look at the last couple of years, we have been very smooth from Q2 to Q3 and beyond. That is how our business is structurally built now. To Taylor’s point, there are no real Q2 or Q3 one-time bumps that go down. It is sustainable and repeatable. David Koning: Gotcha. Well, thanks, guys. Good job. Bob Dechant: Thanks, Dave. Taylor Greenwald: Thanks, Dave. Thank you. Operator: I would now like to turn the call back over to Bob Dechant for any closing remarks. Bob Dechant: Thanks, Josh. And thank you all for listening today. I would like to close by once again thanking my entire organization, who is the best in the industry. They continue to deliver and execute, and we have built this amazing flywheel here. We love the trajectory of our business in the future. Now with our Sierra announcement, we believe our business is extremely future-proofed and will be strong over the long haul. Thank you all. We look forward to talking next quarter. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
Operator: Good afternoon, and thank you for standing by. Welcome to Forrester Research, Inc.'s first quarter 2026 conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to turn the conference over to the Vice President of Corporate Development and Investor Relations, Edward Bryce Morris. Please go ahead. Edward Bryce Morris: Thank you, and hello, everyone. Thanks for joining today's call. Earlier this afternoon, we issued our press release for the first quarter 2026. If you need a copy, you can find one on the website in the Investors section. Here with us today to discuss our results are George F. Colony, Forrester Research, Inc.'s chief executive officer and chairman, and Chris Finn, chief financial officer. Carrie Johnson, our chief product officer, and Christophe Favre, chief sales officer, are also here with us for the Q&A section of the call. Before we begin, I would like to remind you that this call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expects,” “believes,” “anticipates,” “intends,” “plans,” “estimates,” or similar expressions are intended to identify these forward-looking statements. These statements are based on the company's current plans and expectations and involve risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in the forward-looking statements. Factors that could cause actual results to differ are discussed in our reports and filings with the Securities and Exchange Commission, and the company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise. Lastly, consistent with our previous calls, we will be discussing our performance on an adjusted basis, which excludes items affecting comparability. While reporting on an adjusted basis is not in accordance with GAAP, we believe that reporting these numbers on this adjusted basis provides a meaningful comparison and appropriate basis for our discussion. You will find a detailed list of items excluded from these adjusted results in our press release. And with that, I will hand it over to George. George F. Colony: Hello, and welcome to Forrester Research, Inc.'s Q1 2026 earnings call. With me is our chief financial officer, Chris Finn, who will deliver a financial report following my remarks. I will be covering four key themes today: one, our financial performance in 2026; two, trends in the AI world and their impact on Forrester Research, Inc.; three, an update on our journey to become the AI research company, including key research releases; and four, an update on our progress toward our four company initiatives. Starting off with a summary of our financials. In Q1, we saw continuing momentum on our key business indicators. Wallet retention improved by two points from last quarter to 89%, which is up three points from the previous year. Client retention improved by one point from the prior quarter to 78%, up five points from the prior year. Finally, the percentage of multiyear deals as a percentage of our total CV reached 72%, up from 71% last quarter. On the CV side, we saw a decline of 3%, an improvement on the 6% decline in 2025. Our revenue was down 5% from the prior year at 85.5 million. Research revenue was down 2% while consulting revenues declined by 13%. Consulting weakness is associated with our decision to exit the strategy consulting business in 2026. We had strong cash flow in the quarter, delivering 19 million of free cash flow. We are increasing the low end of our revenue guidance, driven by improving metrics and confidence in our business, and Chris will go into more detail shortly. AI technology continues to shift and evolve at fast rates, presenting our clients with two challenges. One, they will have to construct a private model that will serve their customers. And two, they will be replacing many of their internal systems like CRM or financials with new software based on what Forrester Research, Inc. calls AI computing. The market is composed of public models built by Anthropic, OpenAI, Google, and others, and private models deployed by Bank of America, Bloomberg, and many other large enterprises. Forrester Research, Inc. believes that approximately 70% of the revenue earned through AI in the future will come from private models, not public models. Why will private models proliferate? Data sensitivity, regulatory pressure, and intellectual property protection will increasingly push businesses to build and operate their own AI models for specific use cases across banking, insurance, and other sensitive industries. Retaining customer trust will be a primary incentive driving the construction of these models. The second challenge will be rebuilding internal systems using new software constructed with AI computing technologies, primarily agentic AI. The way that our clients operate their businesses will be vastly changed over the next five years. Why are these two changes relevant to Forrester Research, Inc.? Whenever there has been a revolution in how large companies connect to their customers, as with the advent of mobile and social, our business in B2B marketing and B2C marketing has grown. And when global enterprises move to a new generation of internal systems, as with cloud computing, our technology research business has historically expanded at faster rates. Change is the gasoline that drives our model faster, and the AI wave is forcing unpredictable and relentless change on our clients. This was very evident last week when we held our B2B Marketing Summit in Phoenix. The theme of that event was the go-to-market singularity: how AI is radically changing the rules of developing, marketing, and selling products in the B2B world. In the first quarter, we released over 420 research reports and datasets, and I wanted to highlight two of them here. A report entitled “Accelerate Your AI Voyage” found that most enterprises are struggling to turn growing AI adoption and investment into measurable business impact. One of the key factors holding businesses back is low artificial intelligence quotient, or AIQ—Forrester Research, Inc.'s measure of AI aptitude—with many employees lacking a clear understanding of how to use the technology. Other barriers include an overemphasis on productivity-focused use cases, difficulty measuring impact, and siloed adoption within individual functions. This report surveyed over 1,500 AI decision-makers at firms accelerating their AI efforts. It found that while there is an urgency to adopt AI, many businesses are paralyzed by a lack of understanding and disjointed, siloed adoption. “Forrester's AI Use Case Catalog,” another report, is designed to help senior decision-makers narrow their options on where AI should be applied. It includes more than 900 use cases organized by functions, industries, and desired outcomes. The tool allows clients to filter their specific needs to serve as a short list of use cases and pinpoint the AI opportunities that best align to their specific business goals. We are leading this new era by expanding our research coverage of AI, but that is not the only way that we are seizing the moment. As we have discussed on previous calls, we are using AI technology to improve the way that our clients use our research and services, and I want to take this opportunity to update you on our progress. We have upgraded our AI model from the first generation, what we call Izola, to a new generation, Forrester AI. This new version has improved capabilities. One, the model is now fully conversational, enabling clients to go deeper into our content. Forrester AI suggests prompts, leading users to comprehensive answers. Two, we made structural improvements to bring more transparency and depth to the responses. When a user types a prompt, Forrester AI is deploying reasoning to show how it arrived at the response, surfacing the key steps and research underlying the answer. And three, Forrester AI provides responses in 197 languages. In March, we announced that Forrester AI is certified for Microsoft Teams and is available as an app in Microsoft Marketplace. This means that a client can use Forrester AI from within Teams—we are going where our clients work and live. Last week at B2B Summit in Phoenix, we announced that clients will be able to work in Microsoft Copilot but receive analysis and answers from Forrester AI. These answers can be integrated with a range of Microsoft tools, including emails, presentations, and documents. We are doing this through the deployment of our model contact protocol server. In addition to Teams and Copilot, we are developing integration with other models and systems—again, going where our clients work. Client adoption of Forrester AI continues to grow. Usage hit an all-time high in Q1, with overall usage up 55% year over year and prompt volume up 65%, reflecting growing client demand for trusted, research-based AI guidance. Turning finally to our four key initiatives for the year. While these are internal initiatives, I thought that investors should be informed on our progress. They are: one, execution of the retention life cycle, our post-sales program for ensuring that clients are engaged and getting value from our research. From Q4 to Q1, the customer success organization accelerated clients’ time to onboard. This is one factor in helping us to improve client retention numbers. Two, expanding the product portfolio and embedding Forrester AI where clients work. With the Teams and Copilot integrations, we are on schedule here. We are leading AI. Three, building a culture of growth within sales. Q1 was the first quarter under the guidance of our new chief sales officer, Christophe Favre. We have made a good start to the year, with Q1 CV productivity per rep 6% higher than a year ago. We have intensively trained the sales force on how to position and sell our new Forrester AI portfolio. And four, offering actionable, all-seasons research. We are building more research that our clients can apply immediately and research that is relevant even when companies are not transforming—hence, all-seasons. This imperative is on track as we have created 70 initiative blueprints in Q1—step-by-step guidance on how our clients can advance their most important projects. The year has gotten off to a good start with Forrester AI growing, more practical research in the hands of our clients, engagement with the clients accelerating, and sales continuing to focus on expanding CV. We are turning the company back toward growth, and we have made a good start executing that pivot. Thank you, and I will now turn the call over to Chris. Chris Finn: Thanks, George, and good afternoon, everyone. In the first quarter, we saw improvements in our key metrics, continuing the momentum we experienced in 2025. Client retention and wallet retention continue to improve, and the decline in CV continues to slow. With the improvement in our metrics and progress on our strategy—embedding our products where our clients work—we are raising the low end of our revenue guidance for the year. In addition, we generated strong free cash flow of approximately 19 million for the quarter. Excluding our one-time headquarters CapEx of 5.4 million, free cash flow was approximately 25 million. Q1 saw a 3% CV decline in the quarter, and based on incremental improvements over the coming quarters, we continue to expect CV to be slightly up for the year, driven by the following areas: one, client demand for trusted advice to help them navigate their AI journey; two, our continued investment to enhance the capabilities of Forrester AI; and three, our product strategy with AI Access and embedding Forrester AI in clients' existing work environments, along with further product portfolio enhancements to come. All these initiatives will continue to support and drive improvement in CV performance. These ongoing efforts are laying the foundation for sustained CV growth in the coming years. For the total company, we generated 85.5 million in revenue, compared to 89.9 million in the prior-year period, which is an overall revenue decrease of 5%. As we outlined on our Q4 call, we expect revenue to decline this year due to bookings declines we experienced in 2025, the sunsetting of our strategy consulting business, and the reimagined events portfolio. In terms of our revenue breakdown for the quarter, research revenues decreased 2% compared to 2025, with revenue from research products down 4%, offset by growth in reprints. Client retention of 78% was up one point from the prior quarter and up five points from the prior year. Wallet retention was up two points to 89% from 87% in the prior quarter and up three points from the prior year. We believe the retention improvements reflect the ongoing alignment and improvements across the go-to-market ecosystem of customer success, sales, and research functions as they execute on the retention life cycle work. Our consulting business posted revenues of 18.6 million, which was down 13% compared to the prior year. The content marketing business was down 5% while the advisory business was up slightly. The majority of the decline can be ascribed to the strategy consulting business, which we stopped actively selling early in the quarter. We will continue to execute delivery on existing strategy consulting backlog over the coming quarters and exit this business by year-end. Regarding our events business, revenues were insignificant this quarter and in the prior year, as we did not hold any events during these periods. Continuing down our P&L on an adjusted basis, operating expenses for the first quarter decreased by 1%, primarily driven by lower real estate costs. Headcount was down 8%; however, these savings were offset by one-time costs largely associated with now-concluded litigation. Operating income decreased by 135% to negative 0.9 million, or negative 1% of revenue in the current quarter, compared to 2.5 million, or 2.8% of revenue, in 2025. Interest expense for the quarter was 0.8 million, up from 0.7 million in 2025. Finally, net income and earnings per share decreased 135% and 136%, respectively, compared to Q1 of last year, with net income at negative 7 million and earnings per share at negative 0.04 for the current quarter, compared with net income of 2 million and earnings per share of 0.11 in 2025. Looking at our capital structure, first quarter cash flow from operating activities was 25.6 million and capital expenditures were 6.2 million. Approximately 5.4 million of capital expenditures are associated with the one-time physical buildout of our Cambridge headquarters. Remaining cash spend for the buildout, net of reimbursements from the landlord, will be approximately 4 million to 5 million. Our balance sheet is strong, with cash at the end of the quarter of over 145 million and debt of only 35 million. In addition, in March, we executed an extension of our credit facility, moving the maturity date to March 2029. We did not pay down any debt nor did we repurchase any shares in the quarter. Moving on to guidance. For 2026, we are increasing the low-to-midpoint range of our revenue guidance, with the rest of our guidance remaining unchanged. Let me provide some additional commentary on our outlook for the year. For 2026, we now expect revenue to be 350 million to 360 million, or down 9% to 12% versus 2025. The increased confidence in the range is driven by the metric improvements previously discussed and stronger sponsorship bookings for the upcoming events. This guidance assumes the outlook for research to be a mid-single-digit decline, consulting to be a decline in the low 20s, and events to be a decline in the mid to high teens for the year. Despite the first quarter one-time expenses, we still expect our operating margins to be in the range of 6% to 6.5% for 2026, and interest expense is expected to be 2.3 million for the year. We are guiding to a full-year tax rate of 29%. Taking all of this into account, we still expect EPS to be in the range of 0.72 to 0.82 for the full year. We are continuing to see the positive momentum we experienced as we exited 2025. The first quarter of 2026 saw significant enhancements to our Forrester AI capabilities. This included embedded access via Microsoft Teams and the launch of the Forrester AI agent in Microsoft Copilot public models and custom applications as we embed Forrester AI into the places where our clients work. In addition, our unique research focus on key AI topics puts Forrester Research, Inc. in a strong position to take advantage of the upcoming AI demand. We are looking to capitalize on this demand, continue our focus on execution, and use it to drive continued metric and operational performance throughout 2026. Thank you all for taking the time today. I will hand the call back to George. George F. Colony: Thank you, Chris. To conclude, we are making steady progress on our four key initiatives for the year, including our execution of the retention life cycle, increased product options and AI opportunities, a renewed culture of growth within sales, and actionable, all-seasons research. As a result of these measures, we are seeing early but encouraging positive signs in our key metrics. We will now open the call for questions. I will now turn the call over to the operator for questions. Operator: Thank you, sir. As a reminder, to ask a question, you will need to press 1-1 on your telephone. To withdraw your question, please press 1-1 again. Our first question comes from the line of Anja Soderstrom from Sidoti. Please go ahead. Anja Soderstrom: Hi, thank you for taking my question. First, I am curious, given that you see contract value decline but expect that to increase in the coming quarters, what gives you confidence in that? Unknown Speaker: Sorry. Can you repeat the question? Anja Soderstrom: Yes. You mentioned you expect incremental increases in the contract value in the coming quarters. What gives you confidence in that? Chris Finn: From a contract value standpoint, we have seen really strong bookings this year compared to last year on the sponsorship side, and we are coming off a really great B2B event in Phoenix where engagement was incredibly strong with clients. We had a significant increase—actually, we were up 10% on attendees. All the metrics are pointing in the right direction on the events business—certainly much stronger starting this year off with event season than last year or prior years. We continue to expect that momentum to move in the right direction. The way the events business works, attendees and sponsorships are sold significantly in advance, so we are seeing really good engagement there this year, and we are really excited. I think a lot of the changes that we made in the format—more local and customized content—are really making a difference. Anja Soderstrom: Thank you. And then, in terms of the product portfolio expansion, what does your roadmap look like for the rest of the year? Carrie Johnson: Hi, Anja. Thank you for the question. We have two key initiatives on the product portfolio front. One is providing clients with more options in the way that they buy Forrester Research, Inc. AI Access was a big change that we announced last year, and we are seeing good success there, and you will continue to see more of those types of products—both for some access options for Forrester Research, Inc. and then also to work more closely with our most senior analysts. Stay tuned for that on the roadmap. The other side of the roadmap is, as you have heard, a lot of Forrester AI. We continue to have major releases of Forrester AI, as George mentioned, and also plan to continue to deliver on what we call our “where you work” strategy, which is embedding Forrester AI where clients work. George talked about Copilot—stay tuned for more options for our clients that work in other types of tools as we build out that roadmap throughout the year. George F. Colony: Yes, there are two major initiatives here, Anja. One is embedding AI where our clients work, as Carrie just said, and the other one is filling out the product line so she has more optionality—so embedded and optionality. Anja Soderstrom: Okay. And as you get embedded in these systems, do you see a strong uptick in interest, or how is that affecting your sales model? Carrie Johnson: We launched Microsoft Teams first in March, and that was very well received. The launch of Copilot has actually seen traction double even that, which I think is a good testament to some clients finding it on their own through things like the Microsoft Marketplace, because it is such a compelling offer to remove friction in accessing Forrester Research, Inc.’s insights and now getting true advice alongside their actual work. We are really pleased with what we are seeing so far there. Christophe Favre: And from a sales perspective, Anja, it is clear that large enterprises are willing to scale intelligence across their different functions, and Forrester Research, Inc. has the ability with Forrester AI to deliver trusted advice fast. Those organizations are looking to elevate leaders’ confidence to act and decide in this period of uncertainty, volatility, and opportunity with the AI revolution. I am training my sales organization to be able to sell those large enterprise-wide deals, and we see a very interesting pipeline moving forward. Anja Soderstrom: Thank you for that color. I also have a follow-up for you. You mentioned in prepared remarks that you are building a culture of growth within sales. Can you talk about what changes you made for the sales force to motivate them more? Christophe Favre: We already have some pockets of growth in the international market. My focus since I took my new role has been on the North American business. We have organized North America around six industries where Forrester Research, Inc. has strong expertise and growth opportunities. I have redefined the territories to ensure that our best account managers and our best new-business developers are in front of the highest-potential accounts. The second thing I have done is train our sales force to leverage AI to improve their productivity and feel more confident when discussing key AI changes taking place in the marketplace. So one, changes on the territories; two, training; and three, building their confidence. Everybody is excited by the new Forrester AI roadmap that we put in place. Anja Soderstrom: Thank you so much. That was all for me. Christophe Favre: Thanks, Anja. Operator: Thank you. Our next question comes from the line of Vincent Alexander Colicchio from Barrington Research. Please go ahead. Vincent Alexander Colicchio: Christophe, what portion of the changes that you plan to make have started to get implemented? And how long before you expect the changes you bring to bear to have a meaningful impact? Christophe Favre: Vince, I wanted to act fast because the opportunity is in front of us. All the organizational changes that I just discussed have been put in place in the North American business, and we have put sales technology and marketing technology in place to help that organization grow in efficiency. We can now really take advantage of the new Forrester AI portfolio, and we are starting to see pockets of growth in the North American business. I will name two industries where we see that growth: high tech and the industrial sectors. We see some good momentum here. George F. Colony: Vince, George here. Christophe is not one to wait. He is moving quite fast, and everything he is speaking about, he is implementing. Vincent Alexander Colicchio: Good to hear. Next question on the sales pipeline for CV. Has that improved since last quarter? Christophe Favre: Yes. We see consistency in the growth pipeline, and we have seen acceleration in two areas. One, thanks to Forrester AI, organizations are really looking for help in adopting AI and getting trusted advice faster, and with Forrester AI we have a unique competitive edge in the marketplace. The other is that we are starting to see very large organizations interested in our embedded portfolio, and the announcements we made regarding our partnership with Microsoft Teams as well as Microsoft Copilot have resonated in very specific industries. That is looking good. Vincent Alexander Colicchio: Which industries? Christophe Favre: We have seen financial services, agencies, and government being interested in that type of solution. Vincent Alexander Colicchio: And George, how is AI Access performing? Is it helping to bring back old clients? Carrie Johnson: We are a little bit ahead—AI Access has basically hit our expectations, especially on two fronts. One, new business, which is quite useful for our win-back programs of former clients who are looking for more flexible price points but appreciated Forrester Research, Inc.’s insights and advice. Christophe can expand on that. And the other is expansion within existing accounts, which is also the role of launching that product. We are pleased it is doing what we wanted it to do for our CV portfolio. George F. Colony: Forty percent of reps have now sold AI Access, so that is very encouraging. Chris Finn: And Vince, this is Chris. I would add that we are seeing good momentum as a percentage mix of the portfolio from a CV perspective. It is just under 5%, and in the near term, we expect it to approach 10% as we exit the year and get into 2027. We are really happy that, as we look at our CV per client, we are not seeing any degradation there. CV per client has been pretty consistent in that 160,000 to 180,000 range, so we are really happy with that. We are not seeing cannibalization at all either. Vincent Alexander Colicchio: Thanks, guys. I will go back in the queue. George F. Colony: Vince, thanks very much. Appreciate it. Operator: I am showing no further questions in the queue at this time. I would like to turn the conference back over to Chris Finn, chief financial officer, for closing remarks. Chris Finn: Thanks, everyone, for joining today. Please reach out to Edward Bryce Morris or me if you have any follow-up questions. Appreciate it. Unknown Speaker: Thank you. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to Niagen Bioscience Inc First Quarter 2026 Earnings Conference Call. My name is Carina, and I will be the conference operator today. At this time, all participants are in a listen-only mode. As a reminder, this conference call is being recorded. Earlier today, Niagen Bioscience Inc issued a press release announcing its financial results for 2026. If you have not reviewed this information, it is available within the Investor Relations section of Niagen Bioscience Inc’s website at niagenbioscience.com. I would now like to turn the call over to Lauren Rittman-Borzansky, assistant controller. Please go ahead. Lauren Rittman-Borzansky: Good afternoon, and welcome to Niagen Bioscience Inc’s first quarter 2026 conference call. Joining me today are our chief executive officer, Rob Fried, chief financial officer, Ozan Pamir, and Senior Vice President of Scientific and Regulatory Affairs, Doctor Andrew Shao. Doctor Shao will be joining the call for Q&A. Before we begin, I would like to remind everyone that today’s call may include forward-looking statements. These statements relate to, among other things, our research and development activities, clinical trial plans and timing, regulatory filings, expansion into new markets, business development opportunities, and our expected financial and operating performance. These statements are based on our current expectations as of today and are subject to risks and uncertainties that could cause actual results to differ materially. For a discussion of these risks, please refer to our most recent Form 10-Q and other filings with the SEC. We undertake no obligation to update these statements except as required by law. In addition, we may reference certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures can be found in today’s earnings release and presentation, both available in the Investor Relations section of our website. With that, it is now my pleasure to turn the call over to our CEO, Rob Fried. Rob Fried: Thank you, Lauren. Good afternoon, everyone, and thank you for joining us on today’s investor call. In the first quarter, we delivered $31.5 million in revenue, a 5% year-over-year growth excluding revenue from the recently divested reference standard business. We generated net income of $6.3 million and ended the quarter with $66.5 million in cash and no debt. We had an increase in working capital of about $5.4 million from the prior quarter, leaving a total of $82.3 million. The core e-commerce business grew 14% year-over-year. The direct-to-consumer website grew twice as fast as Amazon. As anticipated, two of our customers did not order this quarter as much as they did a year ago, which impacted overall growth, but we do see promising indicators to start the year. The awareness around Niagen and the benefits of NAD supplementation continues to gain media attention. Over the last year, we have garnered many features with major media outlets, including a cover feature in Business by LA Times Studios, and additional digital features on LA Times, The Wall Street Journal, The Washington Post, Business Insider, People Magazine, GQ, Vogue, Vanity Fair, Bio Tuesdays, The New York Post, U.S. News & World Report, Everyday Health, Elle, Allure, and others. These features serve as a powerful validation that overall awareness of the importance of NAD is growing stronger and major media outlets are recognizing the strength of our science, the quality of our products, and our leadership in the industry. An example of why experts and industry journalists understand Niagen to be unique in this space is our recent launch of the Niagen Plus at-home injection kit and our telehealth capability. There are numerous federal and state requirements that had to be met in order to offer a product such as this, and the ingredient itself must be pharmaceutical grade. It must conform to very high purity and sterilization standards, and it has taken many years and countless hours from the exceptional Niagen Bioscience Inc team to get here. I am very proud of this achievement. It is the first product launch through our very own telehealth platform and places us firmly in the heart of a growing and important longevity trend. Of course, as we do with most things, we are approaching this new endeavor methodically, and I expect it to iterate and improve with time. Niagen Plus is not our only new development in our product pipeline. In March, we pilot-launched the Niagen NanoCloud, our first skincare topical product. Early demand has been extremely strong, and we are already nearly sold out. The wide launch will be in October. Surveys of the early adopters of NanoCloud have yielded results: visibly more youthful, smoother, and more moisturized skin and improved skin texture. These results are consistent with the recently completed independent study. In addition to our own TRU NIAGEN consumer products, we expect to supply NIAGEN as an ingredient to reputable and trustworthy skincare brands. Last month, we announced that NR chloride, patented as NIAGEN, has achieved a published USP dietary supplement ingredient monograph. A USP monograph is usually reserved for approved drugs and rarely dietary supplements. There is now a global benchmark for what high-quality NR chloride should look like in dietary supplements, and that benchmark is NIAGEN. NIAGEN is the only ingredient among the NAD and NMN companies to reach this standard. This is merely one of many examples of our dedication to investing in science and innovation and in high quality and makes our company truly unique in the NAD space. NAD science continues to evolve. As the leader in NAD science, we take pride in contributing to research that advances the understanding of NAD and its implications for human health. In March, we were the lead sponsor of the inaugural NAD for Health scientific meeting hosted by the University of Copenhagen. This brought together world-renowned researchers, clinicians, and industry partners. A prominent discussion at this conference was a new development in the understanding of how, when, and where different NAD precursors exhibit their effects. We learned that while whole blood NAD remains an important biomarker, tissue NAD may be the key determinant of functional outcomes. Emerging evidence suggests that NR through IV or injection can support more rapid, direct, and substantial NAD augmentation in peripheral tissues such as the liver, kidney, brain, skeletal muscle, and skin. Additionally, recent evidence suggests that combining NAD-boosting supplementation with exercise may produce additive or potentially synergistic effects on certain functional outcomes such as blood flow and aerobic capacity. These learnings will require further validation in human clinical trials, and we look forward to this next phase of research. We continue to make steady but deliberate progress towards pharmaceutical applications of our NAD precursor portfolio in orphan indications, particularly ataxia telangiectasia. We are working with CROs to design and key IND-enabling preclinical studies, a portion of which were initiated earlier this year, and I hope to have more updates or key developments on future calls. Niagen Bioscience Inc continues to set an example in the industry. We are dedicated to doing things the right way, to advancing the science, and to promoting the understanding of how NIAGEN plays a critical role in improving health. This is what sets us apart from all other NAD companies. I would now like to hand the call over to Ozan to run through the financials and then on to Q&A and closing remarks. Ozan? Ozan Pamir: Thanks, Rob. It is a pleasure to once again address our investors, partners, and team members today. We had a solid start to the year with strong e-commerce growth coupled with exceptional net income. In 2026, we delivered $31.5 million in revenue, or $31.1 million excluding the reference standard segment, an increase of 5% year-over-year. TRU NIAGEN revenue grew by 4% to $22.4 million, a $0.9 million year-over-year increase, driven primarily by e-commerce revenue of $19.2 million, which was up by 14%, or $2.4 million. Our NIAGEN ingredient revenue was $8.2 million, up 2%, or $0.185 million year-over-year. Within the ingredients business, we delivered $7.3 million in food-grade NIAGEN sales to key partners and $0.85 million in pharma-grade NIAGEN sales. TRU NIAGEN international and domestic distribution is an area of opportunity for the company. Sales to Watsons and other B2B partners were down by $1.5 million year-over-year due to timing of orders and changes to inventory management. You can continue to expect quarterly fluctuations in sales to Watsons, a valued partner and an important component of our international distribution strategy. We do expect sales to Watsons to increase during the year based on their forecasts. Gross margin improved to 63.5% in the first quarter, up 10 basis points compared to 63.4% a year ago. This improvement was driven primarily by changes in product mix and business mix. Selling and marketing expense as a percentage of net sales was 30.7%, compared to 26.6% in 2025. The increase in selling and marketing expenses reflects investments in marketing and advertising to drive e-commerce growth, brand awareness, and to support commercial launches of new products. Research and development expense was $1.5 million, $0.22 million higher year-over-year. The driver of the increase is continued investment into clinical studies for new product launches and providing materials and resources to support external research. General and administrative expenses totaled $7.2 million, a $2.1 million increase compared to the previous year. The increase in G&A expenses is driven by the absence of a $1.3 million recovery of credit losses related to our legal settlement with Elysium and higher share-based compensation. Finally, our net income for the quarter was $6.3 million, or $0.08 per share, an improvement compared to $0.07 per share for 2025. Turning to balance sheet and cash flow, our balance sheet remains strong. We ended the quarter with $66.5 million in cash and no debt. For the three months ended 03/31/2026, net cash used by operations was $1.2 million, compared to net cash provided by operations of $7.9 million in the same period last year. Cash used by operations was driven primarily by investments in inventory of $3.6 million, the timing of customer orders and collections, and a larger outstanding balance from a partner, which was subsequently collected in April. Trade receivables were also impacted by an updated Amazon policy where a seven-day hold on sales proceeds is implemented, which was a one-time impact on operating cash flows. We expect inventory levels to decrease throughout the remainder of the year. Cash from investing activities is primarily comprised of the sale of the reference standards business for proceeds of $5.8 million, while cash used in financing activities includes $2.4 million of common stock repurchases during the first quarter as part of our increased share repurchase program of $20 million. Regarding our full-year 2026 outlook, detailed information on key financial metrics can be found in our earnings press release and presentation. For our top-line growth, we are reaffirming our guidance of 10% to 15% growth year-over-year. Awareness around NAD+ has yet to reach its peak, and we remain confident in our opportunities for growth in this year and beyond. We anticipate that our e-commerce channel will be a consistent growth engine, and we expect that our innovative launches will provide upside. While sales to certain distribution or ingredient partners may fluctuate quarter to quarter, we remain confident in the year ahead. We are also revising our outlook for selling and marketing expenses to increase in absolute dollars and increase as a percentage of net sales, compared to our previous expectation of remaining stable as a percentage of net sales while increasing in absolute dollars. While we are not ready to commit to a broader brand initiative or investment, we are expecting to invest in marketing to generate refreshed creative assets to push brand awareness on all channels. Finally, we are revising our outlook for general and administrative expenses. We now expect expenses to be up $3 million to $4 million in absolute dollars year-over-year, compared to the previous expectation of $4 million to $5 million. This change in outlook is primarily driven by a shift of our investments from infrastructure to supporting brand awareness efforts. With the first quarter behind us, we are focused on building on the momentum we have established. We have the right operational foundation and focus to position the company for a strong year and for longer-term success. Operator, we are now ready to take questions. Operator: Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, please press 1 again. A kind reminder to please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Jeffrey Cohen with Ladenburg Thalmann. Your line is open. Please go ahead. Jeffrey Cohen: Oh, hey, Rob. Good afternoon. Thanks for taking our questions. Big picture, could you talk about the FDA and the last motion and the ramifications of NMN as far as its sales as well as its sales through Amazon, and what is the impact there upon your business? What is the outlook there as well? Thank you. Rob Fried: Sure. We think NMN is a good ingredient, and it does effectively elevate NAD. It does not do it nearly as well as NIAGEN. In fact, there was a study published this quarter out of Norway that showed that NR increased blood NAD levels 2.3 times for the equivalent amount to NMN. Also, every NMN product that we have tested infringes on existing patents for NMN. We have also done studies, and others have done studies, that show that the percentage of NMN products in the market that meet what is on the label is very low. We think that the reversal of the drug preclusion ruling by the FDA in September was a bad decision and a questionable decision, and we think it has a very good chance of being reversed yet again. So for all those reasons, we are not bullish long term on NMN. But unquestionably, we are seeing an increase in NMN sellers and NMN sales on Amazon and elsewhere, and it is impacting our sales. In fact, there are more than 300 SKUs now on Amazon whereas in September there were zero. Jeffrey Cohen: So, Rob, what would you speculate the ramifications to NIAGEN have been over the first quarter? Rob Fried: I cannot give you a precise number, but we see an increase in bidding costs for keyword searches on Amazon and elsewhere, and we see more difficulty getting new-to-brand customers. Many of the NMN sellers are selling at a very, very cheap price, which probably coincides with the fact that some of these companies that come out of Belarus or China do not have any scientific research, they do not need label claims, and they charge a very small amount. So for those buyers that are basically price influenced, I think a lot of those are going to NMN. But as I say, I do not think it is a long-term thing. It has affected us, and I cannot give you a precise amount or number, but it is creating some headwinds for us that did not exist a few months ago. Jeffrey Cohen: Okay. That is super helpful. And as a follow-up, could you talk about the IV clinic locations? I know you were in approximately 1,200 locations last quarter. Could you talk about any trends there as far as placements, utilization, pricing, demographics, anything there you can give us some color on? Rob Fried: Yes. As you say, it is in 1,200 clinics now. We are seeing the order rate very strong, and the repeat rate is strong. It tends to be a more affluent consumer, and they are in the major cities, most of them. It is very well represented in the larger cities. We are also in cruise ships and it seems to do very well on these cruise ships. They still charge a great deal for it. The average price is still between $800 and $1,000 per IV, but people do experience a benefit and they are very enthusiastic about it. We have some partners like Restore that are doing an excellent job of educating the consumer when they come in on the benefits of NIAGEN IV over NAD IV, and they tell us that they are having great success and great repeat purchasers. Jeffrey Cohen: Super. Thanks for taking the questions. Nice quarter. Rob Fried: Thank you. Operator: Your next question comes from the line of Susan Anderson with Canaccord Genuity. Your line is open. Please go ahead. Susan Anderson: Hi. Good evening. Thanks for taking my question. I know it is early days, but any initial thoughts on the NIAGEN Plus IV injectable launch—any initial consumer response? And then also, do you have plans in place yet to roll it out to other telehealth platforms, and if so, what would the timing of that be? Rob Fried: Thank you. Very good questions. As you know, we launched over the weekend our Niagen at-home injection kit. It has taken us many years. We are very, very excited to be there. It is only four or five days, but it has been, I would say, outstanding those first four or five days in terms of traffic and conversions. Our expectations obviously are low. There is no marketing yet. The only marketing that we are doing is some email campaigns and some media press releases, and it has been picked up in some media. We have not done any paid ads at all as of yet. But the response right out of the gate is quite enthusiastic, so we are extremely encouraged. We are also not yet available in California, which represents a very disproportionately large percentage of the consumers of products such as these, and that is because our primary 503B pharmacy, Wells, is not licensed to supply in California. They believe that this problem will be resolved in the next few weeks, so we are hopeful for that. Susan Anderson: Okay, great. That sounds good. And then thinking about the consumer products—so NIAGEN supplements, etcetera—are you thinking about channels as we look forward? Do you eventually maybe go into retail with things like the core NIAGEN supplement? Are there other channels that you are considering? Rob Fried: Yes. We do expect to broaden the distribution footprint in other countries and also in retail in the United States. There are a few new companies in the dietary supplement space, brands to whom we will be supplying NIAGEN as an ingredient, so we will be expanding the distribution. Additionally, we will be rolling out additional products. As you know, we launched the NanoCloud product recently, and that has done extremely well. We expect to do a wide release of that in October. Similarly, we expect to supply NIAGEN as an ingredient to other skincare companies. As always, we will be very careful about the companies to whom we supply NIAGEN as an ingredient. They will be reputable, trustworthy companies with existing brands, so we see an expansion in that regard as well. Susan Anderson: What is the demand from other skincare or beauty companies for the ingredient, especially after you rolled out your own NanoCloud? Have you seen any of those companies come to you or show interest in adding the ingredient to their products? Rob Fried: Yes, and we have been in discussion with two major skincare brands. Susan Anderson: Great. That sounds good. Thanks a lot. Good luck the rest of the year. Rob Fried: Thank you, Susan. Operator: Your next question comes from the line of Sean McGowan with ROTH Capital Partners. Your line is open. Please go ahead. Sean McGowan: Thanks. Hi, guys. A few questions for Rob and then a couple of clarifications for Ozan. Rob, what do you expect is going to be the impact in the near and midterm of adding the new compounding pharmacy, and when do you think we will see that impact? Rob Fried: We are hopeful for two things. One is a wider distribution of sales to clinics. We are in 1,200 clinics at this point, but there are some thousands of addressable clinics, so we are hoping to expand the number of clinics to whom we are selling. We are also hoping that the ultimate price point to the end consumer comes down. If $800 is a lot to pay for many people, we think if we can get that price down through more clinics, more competition, and more pharmacies, we can expand the addressable market. Sean McGowan: Do you expect to increase beyond these two—so it is Wells and Olympia, right?—and would you expand beyond those? When do you think we will see that impact? Rob Fried: I think we will see the impact of Olympia in the summer, the end of the summer. It is possible we would talk to other pharmacies. There are 503B pharmacies and 503A pharmacies, but at this point, we do not know. It takes a while to ramp them up anyway. Sean McGowan: A couple of points of clarification for you, Ozan. One, the increase in the inventory number—what drove that? Is that any indication of acceleration in your expectation of sales, or is there something else going on there? And then in your commentary on G&A and sales and marketing and the outlook, would you expect the reduced outlook for spending in G&A to be offset by the increase in sales and marketing, so we wind up effectively with the same operating income level? Ozan Pamir: Hey, Sean. Regarding the inventory level, the main driver is that we made commitments to make these purchases from our primary supplier, W.R. Grace, about six months ago. This was all scheduled inventory that was coming in to support us for the year. We do expect that throughout the remainder of the year, the inventory levels will come down. And yes, on your second question, that is a fair assumption. Operator: Your next question comes from the line of Raghuram Selvaraju with H.C. Wainwright. Your line is open. Please go ahead. Analyst: Hi. John Vee sitting in for Ram. Thank you for taking my question. To start, have recent developments on the compounded GLP-1 front affected demand for NIAGEN Plus IV? Rob Fried: We only know in the sense that we get many calls and inquiries from these clinics and these compounding pharmacies, especially the compounding pharmacies, who often are saying, “What is the next big thing after GLP-1?” It seems like NAD is teed up for that. Analyst: Got it. How do you think the telehealth launch will impact operating efficiency, and what emerging promotional strategies do you expect to deploy under the scope of this approach? Rob Fried: We are going to market it similarly to the way we market TRU NIAGEN. It is mostly in the e-commerce business, so it is the use of social media, paid ads, earned media, PR, and the use of influencers, and we do studies. We publish these studies, and these studies tend to get picked up by people who pay attention. We have already put out two studies, and there are several more ongoing. As we learn, we put them out. There is a network of people that absorb this information because they are very curious about how they can improve the way their body ages. Analyst: Got it. Lastly, would you be able to go into the status of the complaint aimed at removing NMN products from the U.S. market? Rob Fried: We sued the FDA because we think that their ruling reversing the drug preclusion decision was incorrect. The FDA replied to that lawsuit recently, last week, and we are awaiting hearings on that reply and then the judge’s decision. We think his final decision will be within a year. Analyst: Got it. Thank you so much. Rob Fried: Thank you. Operator: Your next question comes from the line of Bill Dezellem with Titan Capital. Your line is open. Please go ahead. Bill Dezellem: Great. Thank you. Relative to the NanoCloud skincare product, would you walk us through how you are marketing that and how you ended up getting such great traction so early on? And secondarily, what you are learning from having that product in the market? Rob Fried: We are marketing very little at this point. It is mostly existing TRU NIAGEN consumers that are also purchasing NanoCloud as a bundle, so they are seeing it on the website when they order TRU NIAGEN. There is some social media discussion about NanoClouds, but the amount of our actual paid advertising is very small at this stage. We have done surveys of these consumers. It has now been on the market almost two months, so for the people that purchased once, we sent out a survey and we have gotten some extremely positive responses from these early consumers on the impact that it has had on their skin. Bill Dezellem: As you see the consumer behavior, has that led to any learnings in terms of how, when you do your commercial launch in October, you want to approach it? What are you seeing or learning from any of the social media that is taking place? Rob Fried: We are learning that it is predominantly a female product, at least thus far. It seems like there is a very high repurchase rate. We also realized that we could probably change the pricing a bit; we will probably increase the pricing a bit for the product. There has been some interest from retail on NanoCloud and skincare products, and we are considering that. In terms of the effectiveness of the advertising, of course we buy these ads, we track their performance, and we optimize it. Those learnings will inform the larger ad campaign that happens in October. Bill Dezellem: And just following up on the retail stores, Niagen has had a couple of—I will call them fits and starts—in, I think it was Walmart many years ago. How would this launch be different if you were to go that route, and how would you convert that to a greater level of success than you were able to have the first time? Rob Fried: We did try once in Walmart. We were never in Walgreens. That was just about timing. It actually sold quite well in Walmart—extremely well in Walmart. It is just that it took us a year to get our EV campaign going in conjunction with the launch at Walmart. It took too long. What we learned from that experience is that there needs to be marketing in connection with a retail launch, and you need to have that marketing campaign ready to coincide with the retail launch. We do not expect a wide retail launch. It will be slow. We are in certain retail locations now outside the U.S., in Watsons locations in Hong Kong and Singapore. We are in The Vitamin Shoppe presently, and we are in a few specialty shops as well. I expect that it will not be a broad, wide retail launch. It will be partner by partner and regional. Bill Dezellem: Great. Thank you. Rob Fried: Sure. Operator: And our last question comes from J.P. Mark with Farmhouse Equity Research. Your line is open. Please go ahead. J.P. Mark: Hi. Good afternoon, Rob and Ozan. Quick question for you about Niagen Plus and really about the three customer segments. Do you see meaningful overlap between the oral supplement user, the high-end IV user, and this newer at-home injectable user? Are they completely distinct populations, or do they overlap? Rob Fried: It is a bit early to know that, but we think that the NIAGEN injection product is more of an acute product. We understand the NR pathway that Doctor Charles Brenner discovered, which he called the NR kinase pathway, is located mostly in certain types of cells—that is, skeletal muscle cells, brain cells, spleen, kidney, and skin cells. So people that are interested in some sort of acute therapy are perhaps more likely to go with the injection, and the oral would be more of a maintenance product. We do think that some people will use both intermittently, but we do not yet know because the at-home kit is only recently on the market, and we will see how it plays out. J.P. Mark: In terms of the marketing to different segments, have you already identified what you think are the most promising social media paths or specific opportunities that you can tap into? You mentioned influencers—are there certain kinds of influencers or affiliates specifically who are more likely to reach your target market? Rob Fried: In the early stages, we know that the biohacker community, the strong anti-aging community, and the peptide community, if you will, are more inclined to try the Niagen at-home injection product—indeed, even the IV product, although to a lesser extent. So we think that is our early-stage primary addressable market. In the longer run, we think that elevating NAD with NIAGEN, whether by injection or TRU NIAGEN, has a beneficial impact on things like fatigue, muscle repair, or even inflammation in general across many cell types and organ types. Overall, we think it serves well as an anti-aging product. We think it is complementary to GLP-1s, so we are hopeful that in the long run the at-home kit becomes addressable as a complement to people who are presently self-injecting a GLP-1 agonist. J.P. Mark: And last question: Are you teed up on a bunch of podcasts? That would be the best marketing you can possibly do, I think. Rob Fried: We have done a few, and I think we have signed up a few more. There are many podcasters that have requested an IV or an injection that we are supplying to them. We will hear back from them and see if they want to follow it up with an interview. J.P. Mark: Okay, great. Thank you very much. Good quarter. I wish you the best for the rest of the year. Rob Fried: Thank you. Operator: And there are no further questions at this time. I will now hand the call back to Lauren Rittman-Borzansky for closing remarks. Lauren Rittman-Borzansky: Thank you, Carina. There will be a replay of this call beginning at 07:30 PM Eastern Time today. The replay number is 1-833-461-5787 and the replay ID is 828848803. Thank you for joining us today. We look forward to updating you again next quarter. Operator: This concludes today’s call. You may now disconnect.
Operator: Good day, and welcome to the Universal Technical Institute, Inc. Second Quarter 2026 Earnings 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. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Matt Kempton, Vice President of Corporate Finance and Investor Relations. Please go ahead. Matt Kempton: Hello, and welcome to Universal Technical Institute, Inc.'s Fiscal Second Quarter 2026 Earnings Call. Joining me today are our CEO, Jerome Grant, and CFO, Bruce Schuman. Following our prepared remarks, we will open the call for your questions. A replay of this call, its transcript, and our investor presentation will be archived on the Investor Relations section of our website at investor.uti.edu along with our earnings release issued earlier today and furnished to the SEC. During this call, we may make comments that contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which, by their nature, address matters that are in the future and are uncertain. These statements reflect management's current beliefs and expectations and are subject to a number of factors that may cause actual results to differ materially from those statements. These factors include, but are not limited to, those discussed in our earnings release and SEC filings. These statements do not guarantee future performance; therefore, reliance should not be placed upon them. We do not intend to update these forward-looking statements as a result of new information or future developments, except as required by law. Please note unless otherwise stated, all comparisons in this call will be against our results for the comparable period of fiscal 2025. The information presented today also includes non-GAAP financial measures. These should be viewed in addition to and not as a substitute for the company's reported results prepared in accordance with US GAAP. All non-GAAP financial measures referenced in today's call are reconciled in our earnings press release to the most directly comparable GAAP measure. For more information regarding definitions of our non-GAAP measures, please see our earnings release, financial supplement, and investor presentation. With that, I will turn the call over to Jerome Grant, CEO of Universal Technical Institute, Inc., for his prepared remarks. Jerome? Jerome Grant: Thank you, Matt. Good afternoon, everyone, and thank you for joining us. Before I dive into the details of our second quarter results, I want to take a moment to give you some insight into how we are thinking about the business right now. The first half of the year has played out quite well and, in some areas, better than we originally anticipated. As always, a huge thank you to our team, industry partners, and over 26,000 active students for driving these strong outcomes. Demand is strong, our model is working, and we have exceptionally clear visibility into the returns on our strategic North Star investments. We are seeing increasing validation that these investments are driving the outcomes we expected. Building on what has been a strong start to the year, we saw key leading indicators come in at or above our expectations, further reinforcing our confidence in the trajectory of our business. We delivered another quarter of strong operational performance supported by sustained demand across both of our divisions and continued execution against our North Star strategy. Total new student starts increased 14% year over year in the quarter with meaningful contributions from both divisions. The UTI division delivered approximately 15% growth while the Concord division grew 13%, highlighting the consistency and durability of demand across both our trades and health care. Average full-time active students grew 7%, reflecting continued momentum as we scale both new and existing campuses. Core growth and program expansion translated into continued top line strength, with revenue of $221 million, up nearly 7% year over year. Our baseline adjusted EBITDA came in at $25 million. Including approximately $11 million of growth investments, our reported adjusted EBITDA was just over $14 million, in line with expectations. Our performance in the first half of the year has reinforced our confidence in our full year outlook, and as such, we are reaffirming our guidance on all metrics. Bruce will walk you through the guidance in more detail shortly. We believe this reaffirmed strong outlook for 2026 reflects our confidence in the performance of the business while also setting us up well for the final three years of this phase of our North Star strategy. It is not just the macro demand environment that gives us this confidence, but also how we are executing against a model that is proving to be both repeatable and scalable. Our campus launch playbook continues to deliver consistent results that are trending in line or ahead of our expectations. At UTI San Antonio, which opened in March, each of the first two starts exceeded our plan by nearly 60%. Based on early performance, we now expect the campus to ramp to scale at or better than originally modeled with a projected mature run rate of approximately 800 students. In Atlanta, we are preparing to launch our first UTI campus in the state. This campus is expected to serve over 1,500 students at scale. We are already seeing great traction with strong interest and early enrollments pacing well in preparation for the planned start in July. Although these are exciting results in 2026, more importantly, they are early leading indicators critical to ensuring the success of this multiyear strategy. They validate not only demand, but also our ability to foster and fill campuses more efficiently than originally modeled, giving us increased confidence looking at our broader new campus pipeline. Looking ahead to fiscal 2027, we remain on track with our four previously announced locations across the country and are excited to see those launch next year. These campuses include a comprehensive UTI campus in Salt Lake City, expected to serve 1,500 students, as well as Concord campuses in Houston, Atlanta, and the Phoenix metro area, each with projected run rates of approximately 600 students. Throughout all of this, the North Star operational targets we have previously outlined remain unchanged. We plan to open a minimum of two and up to five new campuses annually, as well as launch 12 to 20 new programs across the UTI and Concord divisions each fiscal year. In fiscal 2026, we will have opened three new campuses and are on track to launch 20 new programs with at least 10 coming from each division. On the UTI side, we have two campuses and 12 programs lined up this year. The new programs span HVACR, aviation maintenance, and our electrical suite, which includes industrial maintenance, robotics and automation, and wind turbine technology. Most recently, the UTI Sacramento campus graduated its first HVACR class in January, and the UTI Austin campus successfully delivered its first EV courses in February. On the Concord side, we have opened one new campus, and across our existing campuses, we will launch at least 10 new programs in 2026, including high-demand fields such as radiation technology, surgical technology, and diagnostic medical sonography. Beyond program replications in new campuses, we are also continuing to focus on optimizing our existing footprint. As you may recall, we recently expanded the UTI Dallas campus to serve an additional 100 students and incorporate HVACR, aviation, and electrical programs in addition to auto, diesel, and welding. Since launching last quarter, all of the program enrollments and starts have exceeded expectations, and the second half of the year looks to be just as promising. In addition to expanding capacity for popular programs such as aviation, HVACR, welding, and dental hygiene at legacy campuses, we are increasingly focused on how the UTI and Concord divisions can collaborate more closely across areas such as marketing, admissions, and operations. Through cross-brand collaborations fueled by rapid AI technology advancements, we believe we can potentially unlock incremental margin expansion in the coming years while simultaneously enhancing execution across the company. And while on the topic of artificial intelligence, I want to focus on some extremely important opportunities ahead of us. As many of you know from the stories in the media each quarter as US jobs data is published, we are in the early stages of a generational shift in the labor market. Driven in large part by artificial intelligence, the longstanding dynamic between white-collar and skilled-collar job opportunities has been disrupted. AI is reshaping the economy, but not only in the way many initially expected. As white-collar work becomes increasingly automated, especially at the entry levels, demand for trades and health care professions is accelerating. Beyond this shift, it is important to realize that there are also new AI-enabling opportunities and roles essential to building, maintaining, and operating the infrastructure that supports this new economy. From data centers and energy systems to advanced manufacturing and health care, the physical and technical workforce required to support AI-driven growth is expanding rapidly. This is exactly where we are positioned. Not only are we training students for today’s jobs, we are preparing them for the future AI-enabled workforce that is being built right now. Importantly, we believe that this trend is not cyclical; it is structural. We believe this dynamic will continue to drive demand for our programs for years to come. Supported by both powerful macroeconomic tailwinds and long-term partnerships, the opportunity in front of us continues to expand. We maintain strong relationships with leading industry partners including, for example, a nearly 30-year partnership with Porsche. This quarter, we reached a memorable milestone with them. As of February, UTI has now graduated over 1,000 technicians from the Porsche training centers we run that are serving more than 200 Porsche stores nationwide. We also recently announced a new three-year partnership with Fuji Auto, who will provide professional-grade equipment for the collision repair and aviation programs on UTI campuses across the US. Long-standing industry partnerships are a cornerstone of the success of our graduates and our company, and we continue to pursue additional such opportunities across automotive, aviation, health care, and other high-demand industries. Similarly, we are actively exploring potential B2B opportunities with military programs, state workforce initiatives, and employers to help address critical labor shortages across the economy. As we look ahead, our confidence in the business continues to strengthen as our North Star moves into full implementation mode. We have built a durable and repeatable growth engine, supported by strong demand, disciplined execution, a very healthy balance sheet, and meaningful long-term macro tailwinds. Organically, we will continue to optimize our campuses and program portfolio, drive operational excellence, and expand both capacity and program offerings to meet demand. At the same time, we will continue to evaluate inorganic opportunities that align with our strategy, particularly in health care, where we see significant long-term potential. Our priorities remain focused on executing our North Star strategy with discipline, as well as deploying capital with purpose to position the divisions to deliver sustained growth and value. And we are already starting to discuss what 2029 and onwards looks like for the company. We will share more on that as our plans unfold. With that, I will turn the call over to Bruce, our CFO, to review our second quarter financials and provide additional details on our guidance. Bruce? Bruce Schuman: Thank you, Jerome. I will start by saying we are pleased with how the business has performed through the first half of the year. The results we are reporting today reflect a strong start to fiscal 2026, with solid revenue growth, continued momentum in enrollments, and leading indicators across the business that remain very encouraging. In the second quarter, total average full-time active students grew 7.2% year over year to 26,385, while total new student starts increased 13.8% to 7,569, in line with the expectations we outlined last quarter and reflective of recently launched new campuses and programs starting to ramp. The Concord division grew average full-time active students 10.2% year over year for the second quarter, driven by consistent demand trends across our dental and allied health programs. Within the UTI division, average full-time active students grew 5.3% year over year, reflecting steady performance across the program portfolio, underpinned by strong demand and recently optimized campus capacity. Turning to our financial performance, second quarter revenue on a consolidated basis increased 6.7% to $221.4 million. Concord contributed $78.7 million, an increase of 7.5% over the prior year quarter, while the UTI division contributed $142.7 million, an increase of 6.3% over the prior year quarter. Shifting to profitability, consolidated net income for the second quarter was $400,000, or $0.01 per diluted share, which was in line with the outlook we shared last quarter. Baseline adjusted EBITDA for the second quarter was $25.1 million. Including $11 million in growth investments, our SEC-reported adjusted EBITDA for the quarter was $14.1 million. At the end of the quarter, we had 55 million shares outstanding. Total available liquidity at the end of the quarter was $202.4 million, including short-term investments and remaining capacity on our revolving credit facility. Year-to-date capital expenditures were $52.7 million, or approximately half of our expected spend for the year. Turning to our full-year outlook, based on our performance in the first half and the visibility we have into the second half, we are pleased to reaffirm our fiscal 2026 outlook. We continue to expect consolidated revenue to range from $905 million to $915 million for fiscal 2026, or approximately 9% year-over-year growth at the midpoint. As I shared last quarter, we expect mid to high single-digit revenue growth in Q3 as we saw in Q2. Q4 is still anticipated to be the highest revenue growth quarter in the low to mid double-digit range. Net income is anticipated to be between $40 million and $45 million, with diluted earnings per share of $0.71 to $0.80. As I also shared in prior quarters, the net income contraction in Q2 will improve in Q3, though we still expect year-over-year contraction. In Q4, we expect strong net income growth. Our baseline adjusted EBITDA is anticipated to exceed $150 million. Including approximately $40 million in growth investments, our SEC-reported adjusted EBITDA is expected to be $114 million to $119 million. Similar to net income, as we make our significant growth investments this year, the adjusted EBITDA contraction in Q2 will improve in Q3; we still expect year-over-year contraction. In Q4, we expect robust year-over-year adjusted EBITDA growth. Total new student starts are expected to be between 31,500 and 33,000. We anticipate high single-digit growth in the remaining quarters as our base business performs and our growth initiatives continue to ramp. Looking at the broader North Star financial framework, our expectations remain unchanged. We continue to target more than $1.2 billion in revenue by fiscal 2029 with a 10% CAGR throughout that period, and adjusted EBITDA approaching $220 million in that year. Beginning in fiscal 2027, we expect revenue to accelerate and are targeting modest EBITDA dollar growth and more meaningful EBITDA margin expansion in fiscal 2028 and 2029. To support the new campuses and programs driving this growth, we continue to plan for $100 million or more of annual capital expenditures. Overall, we view the first half of the year as a strong start, reflecting solid execution, improving demand trends, and continued progress against our North Star strategy, giving us increased confidence in the repeatability and durability of our model. We are investing from a position of strength with clear visibility into the path ahead. The actions we are taking in 2026 are intended to support faster scaling, higher utilization, and stronger long-term returns, including predictable and sustainable cash flows and increasing profits for years to come. At the same time, we are creating additional opportunities to expand margins through increased operational efficiency and greater leverage as the company further grows, reinforcing our confidence in delivering on both our fiscal 2026 guidance and our longer-term financial objectives. In addition to this earnings call transcript, we encourage everyone to review our press release, financial supplement, investor presentation, and upcoming 10-Q filing. These materials include the latest updates on our consolidated and segment results, strategic initiatives, and guidance. Thank you to our students, team, partners, and investors for your ongoing support. I would now like to turn the call over to the operator for Q&A. Operator? We will now open the call for questions. Operator: 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 comes from Mike Grondahl with Northland Securities. Please go ahead. Mike Grondahl: Hey, guys. Congratulations on the progress. Maybe the first one for Jerome. You talked about data centers a little bit more this call. Are you seeing incremental opportunities there? And are you able to start new programs? How are you responding to that, and what are you seeing? And then maybe one for Bruce. When you were talking about UTI’s enrollment up 5.3% year over year, you mentioned recently optimized campus capacity. Could you explain that a little bit? And can you speak to whether you expanded capacity a couple percent over the last six months, or is there any way to quantify that? Jerome Grant: I think the example we gave was to highlight that the sources of job opportunities for the students in the programs we already teach are growing, and in some cases accelerating. Data centers need welders, electronics technicians, and building automation specialists—skills that we have. If you have listened to some of the folks in the AI space talking about what is holding them back, it is not technology. It is their ability to get these places open because they cannot find enough workers. What we are seeing from a job standpoint is a stronger diversification of employers that are coming to the table and looking for our skilled trades workers. Bruce Schuman: Sure, Mike. Optimization has been a core foundational pillar we have been talking about for quite a while, and we continue to optimize capacity—looking for space in legacy campuses to put program replications like HVAC, welding, and aviation, using some of our legacy campuses to roll that out. That work continues and is improving our margin outlook. If you look at our core business last year, we delivered roughly 100 basis points of expansion. We would have delivered similar if it were not for the growth investments. More than half of that comes from the optimization pillar of our strategy. That is the best way I can explain it. Operator: Our next question comes from Raj Sharma with Texas Capital. Please go ahead. Raj Sharma: Hi. Congratulations on the execution, and thank you for taking my questions. I was just trying to understand: revenues were up about 7% year over year, operating expenses were up 16%, and even if I take out the growth OpEx of $11 million, OpEx was still up about 10%. Was that all the increase in advertising? And then I know you reaffirmed the fiscal guidance. Is it fair to assume that you are looking for starts growth to perhaps be higher for the year given your first half performance? I know that does not impact the current year numbers, but just to clarify. And finally, any new opportunities that could expand your current growth plan, or do you think you are set for now until you get to the next North Star strategies? Bruce Schuman: Hey, Raj. I can address that. A lot of it is timing as we execute the full year. I would remind you the vast majority of the margin contraction was from the growth investments. There were a few other things: timing, our medical, for example, was up a little higher than planned, and we chose to invest a bit more in marketing to make sure we are on track for our second-half revenue and starts. But it is really timing. We have offsets for that in Q3, and we feel very confident in the full-year profitability we guided to. Jerome Grant: On starts, as a leading indicator, we are very happy with what we are seeing, primarily the overachievement of the new campuses and the new programs we are putting into place. Yes, that monetizes mostly over 2027 and beyond. We have a lot of confidence that this will continue. Will San Antonio continue to sit at 60% higher than what we had in the model? Not likely, but it is a very strong start, and we think it will continue to move past our models, as will the programs we are moving on. We feel confident that starts will not fall below and could be in the top part of the range. On opportunities, remember we are in 2026, two years into a five-year strategy, set up primarily as an organic strategy of two to five campuses a year and 12 to 20 new programs a year, with modest same-store growth of 2% to 5%. We are expressing a high level of confidence in executing the plan as is. Anything beyond that would be upside. There are a lot of great conversations going in the B2B space right now. I would not count out opportunities during this five-year timeframe that could have upside impact. Nothing to announce today, but many employers and manufacturers are seeing the same supply-demand problem growing, not shrinking, and that brings them to the table for constructive conversations. We feel good that some of that will come in line during this plan period, not after. Operator: The next question will come from an Analyst with Lake Street. Please go ahead. Analyst: Just a two-parter here. San Antonio looks like you have a terrific start there—up 60% versus your internal expectations. Anything different you did there in terms of go-to-market or advertising that you could share? And second, that is a high standard San Antonio has set. What kind of demand trends are you seeing at the new Atlanta campus, and would you put that on par with San Antonio? Jerome Grant: I will answer in reverse. We are really happy with what we are seeing in Atlanta. We do not like to talk about pre-start numbers because we want to make sure that we get people comfortably in their seats and moving forward. But the trends we are seeing in terms of contract pace for the timeline—remember, we still have until July to get this open—make us confident that Atlanta is going to be a winner for us. When we report in August, we will have solid numbers for you, and we are optimistic about what we will see there. Texas has been a very strong market for us. Austin blew away our projections quickly, and our thoughts about San Antonio were that could happen again. We did not want to get ahead of ourselves, but what we are seeing is quite true: there is strong demand in Texas for what UTI is bringing. When we are picking new sites—Salt Lake City is coming up, followed by subsequent sites—we think about the same metrics: can we see a way to beat our models, and might we be able to ramp the fastest? So far, we are happy with what we are seeing with the first two—San Antonio and Atlanta. Operator: Up next, we have Jasper Bibb with Truist. Please go ahead. Jasper Bibb: Hey, good afternoon, everyone. A quick clarification: I heard high single-digit growth in starts in the next two quarters. I think you had guided to mid to high single-digit growth for those quarters on the last call. Should we think the year ends up at the upper end of the range on starts? Bruce Schuman: Yes, that is correct. That is how we are thinking about how the year is shaping up. Jasper Bibb: Makes sense. Then some of your online education peers have talked about the consumer shift to GenAI over search and algorithm changes at Google impacting the top of the funnel on student acquisition. Starts are obviously strong for you, but are you seeing something similar and how are you managing through that? Jerome Grant: That is one of the reasons we wanted to underscore the collaboration between the two divisions, specifically in areas like acquisition and marketing. There is a significant shift in how people are searching for opportunities. Much in the same way TV moved to streaming very fast for 18- to 24-year-olds, information is moving rapidly to AI engines from traditional search. We want to be on the leading edge of capturing that as those advertising platforms harden over the next months and years. We are ensuring our digital organizations work in unison so we do not overspend researching these things between the two divisions, and so each can take advantage of the opportunities by beginning to invest in these areas. We feel well positioned to get the most out of that transition. Jasper Bibb: Last one for me. You mentioned ongoing discussions for B2B partnerships and potentially opportunities with the military or state workforce development programs too. Are you seeing a broadening in the types of B2B partnerships coming to you and potentially a different structure versus, say, what you already did with the Heartland campus? Jerome Grant: The short answer is yes. There is a broadening of who is approaching us, whether it is municipalities, parts of the military tied to onshoring activity, hospital chains, and others thinking they should act in concert with larger partners like us. The incoming is on the rise and broadening. Two years ago, we were not getting calls from construction companies opening data centers around the country looking for HVAC techs, welders, electricians, and building automation specialists. Now we are. These are opening doors for us to look at training models in unique and innovative ways. These things take time. Nothing to announce specifically, but we are staffed up and diligently focused on it because we think these will be opportunities over the next couple of years. Operator: Our next question comes from Steve Frankel with Rosenblatt. Please go ahead. Steve Frankel: Good afternoon. Thank you for the opportunity. Maybe give us an update on what kind of incentives employers are offering these days—tuition payback, working while you are going to school, etc. Does that pace continue to climb with more people trying to do that, or in the current economy have they backed away? Jerome Grant: They have not backed away. There is a lot of conversation around student debt and leaving college with large student loan balances. Even in the trades, there is press around graduates coming out with debt. The programs we started in auto and diesel a number of years back have gotten us to a point where somewhere in the neighborhood of 6,000 employers nationwide are offering incentive packages for our graduates. Those are continuing to proliferate as we expand into the skilled trades. This is a new concept to HVAC, electronics, and aviation companies, and the TRIP agreements, as we call them, are something we are working to broaden across the entire portfolio. We are seeing good responses. Employers are not backing away from incentives because the problem is getting more acute. Steve Frankel: Any early learnings from Heartland that would lead to changes in the way you might do the next one? Jerome Grant: Heartland is a case where you have an employer who has become a strong partner, has a big problem, and is willing to co-invest to solve that problem around the country. The time it takes to get others on the same page is usually tied to them wanting to see outcomes from partnerships we already have. Heartland is very happy, the cohorts we started were very strong, and we anticipate doing similar deals with other partners very soon. Steve Frankel: Lastly, any early peek into what you think the high school class is going to look like this year? Jerome Grant: High school looks good. High school students tend to gravitate toward automotive and diesel—you just got your driver’s license and may not know much about HVAC or welding. It is primarily focused in auto, and we are seeing strong returns. We feel very strong about our guidance and coming in within the range we have. Half of our starts on the UTI side come in the fourth quarter, and it is mostly high school. We want to make sure those come in as strong as the leading indicators show. Operator: This concludes our question and answer session. I would like to turn the conference back over to Jerome Grant, CEO, for any closing remarks. Jerome Grant: Thank you, operator. Just some brief remarks. First, I would like to thank everyone who attended today. As always, Bruce, Matt, and I are available for follow-up questions. We encourage as many of you as possible to come out and visit one of our campuses. If you are interested, please let us know. We would be happy to host you. We look forward to speaking with you on our fiscal third quarter investors call in August. Thanks, and have a great evening. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Ethos Technologies Inc. Q1 2026 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Aaron Turner, Vice President of Investor Relations. Please go ahead. Aaron Turner: Good afternoon. Welcome everyone to the Ethos Technologies Inc. Q1 2026 Earnings Call. We will be discussing the results announced in our press release issued after the market closed today. With me today are Ethos Technologies Inc. CEO, Peter Colis, and our CFO, Christopher Capozzi. Today's call is being webcast and will also be available for replay on our Investor Relations website investors.ethos.com. A slide presentation that accompanies this call can be viewed in the Events section of our Investor Relations website. During this call, we will make forward-looking statements within the meaning of the federal securities laws, including statements regarding our financial outlook for 2026, our expectations regarding financial and business trends, impacts from go-to-market initiatives, growth strategy and business aspirations, and product initiatives, including future product releases and white label platform arrangements, and the expected benefits of such initiatives. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends. These forward-looking statements are subject to a number of risks and other factors. For a discussion of these risks and other factors, please see the information under forward statements in our financial results press release issued today and our presentation materials, as well as the more detailed discussion in our SEC filings available on our Investor Relations website and on the SEC website at www.sec.gov. Although we believe that the expectations reflected in the forward-looking statements are reasonable, our actual results may differ materially. All forward-looking statements made during this call are on information available to us as of today. We do not assume any obligation to update these statements as a result of new information or future events except as required by law. In addition to U.S. GAAP financials, we will discuss certain non-GAAP financial measures. While the company believes these non-GAAP financial measures provide useful information, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. A reconciliation to the most directly comparable U.S. GAAP measures is available in the presentation that accompanies this call and can be found on our Investor Relations website. Now let me turn the call over to Peter. Peter Colis: Good afternoon, everyone, and welcome to our first quarter 2026 earnings call. Q1 is our seasonally strongest quarter and this was an exceptional one. We delivered $193 million in revenue, representing 104% year-over-year growth, more than doubling our top line year-over-year. This is on the back of three straight years of over 50% revenue growth. We generated adjusted EBITDA of $34 million and we protected over 88,000 new families, bringing our cumulative total to over 600,000 activated policies to date. We also achieved a Rule of 40 score of 121, a result that reflects both the velocity of our growth and the discipline of our execution. Put simply, this quarter demonstrated that Ethos Technologies Inc. is a business that gets better as it gets bigger. Our goal at Ethos Technologies Inc. is to become the largest provider of life insurance in the world and we built a vertically integrated platform that owns the full consumer journey from marketing and application through underwriting, policy issuance, policy administration, and long-term servicing. That control lets us deliver a level of speed, accessibility, and approval rates that simply do not exist in the legacy life insurance industry. Turning to the business highlights that drove this quarter's performance, in our direct channel, the virtuous data cycle is spinning faster than ever. By continuing to refine every layer of our vertical stack, from initial user experience to our core underwriting algorithms, we have driven meaningful compounding improvements in our conversion rates, and maintained strong unit economics at higher levels of ad spend. Q1's direct revenue growth of 136% reflects that compounding advantage. In our third-party channel, the agencies we added through 2025 are now ramping in a meaningful way. Those newer agencies now represent a double-digit percentage of third-party revenue, and their contributions are accelerating. Revenue in the third-party channel reached $47 million in Q1, representing 42% year-over-year growth, demonstrating that our agency recruitment strategy and onboarding is translating directly to results. On the product front, we saw early indicators of product-market fit for our accumulation indexed universal life insurance product, which continues to exhibit healthy growth in our third-party channel. And we deepened our relationship with Banner Life to launch two new whole life products, a simplified issue whole life and guaranteed issue whole life. These products expand our coverage of the final expense market. We also demonstrated our ability to rapidly launch new products as we went from concept to launching in market in under five months. With these additions, Ethos Technologies Inc. now offers 12 products across six carriers, including multiple term life, multiple whole life, and multiple IUL products. That breadth strengthens our value proposition to both consumers and agents and expands our addressable market, and improves the redundancy of our product portfolio. We also announced our new partnership with Liberty Mutual, one of the most recognized insurance brands in the country. Liberty Mutual will leverage Ethos Technologies Inc.'s proprietary underwriting engine and platform to deliver a digital-first life insurance experience—instant decisions, no medical exams, and just a few simple health questions. When companies with the scale, resources, and brand recognition of Liberty Mutual select Ethos Technologies Inc. as their partner, it speaks directly to the strength of what we have built. And most recently, we became the first life insurance provider to build a dedicated experience directly inside the world's most used AI, ChatGPT. We are focused on removing the friction that people experience throughout the life insurance purchase process and meeting people where they are to initiate that purchase. As more consumers turn to AI to get answers, Ethos Technologies Inc. will be there for them. As we look to the rest of 2026, we remain focused on three durable growth vectors. First, growing our ecosystem by bringing more consumers into our direct channel and recruiting more agents to our platform. Second, enhancing our platform by making agents more productive and increasing our share of their sales. And third, expanding our product portfolio to broaden our addressable market. Every new client improves our risk models, client and agent experience, and the machine learning models that power our advertising spend. Better risk models improve our pricing and unit economics for our clients, our carrier partners, and Ethos Technologies Inc. More scale and underwriting experience allows us to grow our product portfolio and carrier panel. A broader product portfolio enables us to capture more of an agent's sales and recruit different types of agencies. Our unified end-to-end platform captures and analyzes granular data across the consumer and agent journeys. And while the legacy industry is hindered by on-prem technology and manual processes, our vertically integrated digital platform fuels a virtuous data cycle that is spinning faster and faster. With that, I will pass it to Chris for a review of our first quarter 2026 financial results. Thanks, Peter, and good afternoon, everyone. I will begin with a review of our first quarter results, then walk through our outlook for the second quarter and the full year 2026 before opening up for questions. Christopher Capozzi: As Peter noted, Q1 was an exceptional quarter. We more than doubled revenue year-over-year, achieved strong profitability, and raised full-year guidance, all while absorbing a one-time non-cash charge I will walk you through in detail. Before reviewing the details of our results, I would like to remind everyone that some of the financial measures and metrics I will discuss today are presented on a non-GAAP basis, which we believe provides additional insight into our performance. With that in mind, let me walk you through the details behind our results. In the first quarter, we delivered $193 million in revenue, representing 104% growth from the same period last year. In our direct channel, first quarter revenue increased to $146 million, representing 136% year-over-year growth. This performance reflects the compounding advantage of our vertically integrated platform. By continuously refining everything from the initial user experience to our core underwriting algorithms, we have expanded the universe of consumers that we can profitably reach. In the first quarter, we more than doubled our advertising spend versus 2025 while maintaining consistent efficiency, demonstrating that our unit economics scale with our growth. In our third-party channel, first quarter revenue was $47 million, representing 42% year-over-year growth. This growth was driven in part by new agencies onboarded throughout 2025, which accounted for a double-digit percentage of third-party revenue in Q1. Moving to our non-financial metrics, we activated 88,373 policies in the first quarter. The average revenue per policy was $2,185. Our first quarter contribution profit was $59 million, representing a 30% contribution margin. Included in this result is a one-time non-cash charge of $16.5 million related to third-party agent compensation expense, which flows through the sales and marketing line on the income statement. This charge reflects updates to our agent compensation expense and persistency estimates reflecting both maturing cohort experience and the impact of recent operational improvements. As these cohorts matured, and additional observed experience was accumulated, we were able to identify that early-stage policy persistency was better than had originally been projected, and that there were opportunities to increase the precision of our clawback billing and the methodology for estimating clawback events. Together, these factors resulted in lower agent compensation clawbacks and therefore higher agent compensation expense than had originally been projected for policies activated through the company's third-party channel in 2024 and throughout 2025. Collectively, these factors are positive developments for the long-term health of our third-party business. To understand why fewer compensation clawbacks lead to higher compensation expenses, it helps to briefly walk through the mechanics. When a third-party policy is activated, we record the gross compensation paid to the agent as an expense and then estimate and book an offsetting amount representing the portion of that gross compensation that we expect to recover through a clawback of unearned compensation if the policy lapses within the first year. That offsetting amount is carried on the balance sheet as a prepaid asset. As previously disclosed, these estimates and the process for arriving at them involve a degree of judgment and complexity, particularly in our third-party channel, which has scaled rapidly and where our ability to predict agent compensation clawbacks continues to mature alongside our growing cohort history. In this case, the combination of additional observed experience and a series of operational improvements resulted in a lower rate of estimated compensation clawbacks than we had originally projected for these cohorts, requiring a $16.5 million reduction in our prepaid asset balance, which is the source of the one-time non-cash charge. The updated agent compensation expense estimate is embedded in our go-forward guidance. For modeling purposes, we expect blended contribution margins to be in the mid-30% range going forward. Moving to adjusted EBITDA, our first quarter adjusted EBITDA was $34 million, representing a margin of 1,742% year-over-year growth, both of which reflect the impact of the $16.5 million charge I discussed earlier. Combined with our 104% revenue growth, this quarter's Rule of 40 score of 121 demonstrates that even in a quarter that included a one-time charge of this magnitude, our underlying platform economics remain exceptionally strong. Regarding stock-based compensation, our Q1 SBC and related taxes were $196 million. Included in this amount, $183 million related to a vesting condition that was satisfied upon the completion of our IPO in January. As of 03/31/2026, our cash, cash equivalents, and investments totaled $224 million, including $33.5 million in net proceeds from the IPO. We ended the quarter with a commission receivable balance of $345 million, up 19% from the prior quarter, representing estimated future cash flows already earned but not yet received. This balance is a direct reflection of the scale and quality of our activated policy base. We view it as an important indicator of the embedded cash generation potential of our platform. Our Q1 cash flow from operating activities was $31 million, representing 189% year-over-year growth. During Q1, we amended the payment terms with one of our carrier partners, which provided a one-time $13.9 million timing benefit to CFOA. Excluding this item, CFOA was approximately $17 million. Now I will walk through our expectations for the second quarter and full fiscal year 2026. Our updated guidance reflects the revised agent compensation expense assumptions that I walked through earlier. The strength of our Q1 performance and our confidence in the trajectory of both channels give us the conviction to raise our full-year revenue and adjusted EBITDA outlook. For the second quarter of 2026, we expect total revenue in the range of $114 million to $118 million. At the midpoint, this represents 31% year-over-year growth. We also expect adjusted EBITDA in the range of $20 million to $22 million. For the full year 2026, we are raising our total revenue guidance and now expect revenue in the range of $5.61 to $565 million. At the midpoint, this represents 45% year-over-year growth. We also expect adjusted EBITDA in the range of $103.107 billion. In 2026, we are focused on driving sustainable revenue growth by further diversifying our revenue sources through the continued ramp of our new product lines, the strategic expansion of our third-party channel, and the continued market share gains in our direct channel. Our new partnership with Liberty Mutual is an early proof point of a broader opportunity: licensing our proprietary underwriting engine and platform to established brands that want to compete in the digital-first life insurance market. By deepening our brand recognition and leveraging the inherent efficiencies of our vertically integrated platform, we are well positioned to capture significant market opportunity while meeting our profitability targets. With that, I will turn the call over to the operator to begin the Q&A session. Operator: Thank you. We will now open the call for questions. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Our first question comes from the line of Colin Sebastian of Baird. Your line is now open. Colin Sebastian: Hey, guys. Thanks very much for taking the question. Impressive results in Q1. I was hoping you could unpack a bit more the incremental marketing spend or the unlocks that you were able to find that allowed you to add scale and customer acquisition spend. And I guess, given the Q2 guidance, that implies that maybe you sort of hit the upper limits of that ROAS or maybe there were more seasonality factors that I think Peter you might have mentioned. But if you could go into that, that would be helpful. Thank you. Got it. And maybe one quick follow-up on the average revenue per policy expanding. Was that specifically related to the new accumulation product or is there something broader in the platform that you are seeing? Peter Colis: Hi, Colin. Thanks for the question. It is important to remember that Q1 is one of our strongest seasonal quarters and Q2 one of the less strong ones. I will say that we have set a prudent guidance philosophy. We are still early into Q2, but we have seen continued strength and momentum throughout April and early May into Q2. Generally, when I think about what drove the outsized direct growth, it is more than just marketing innovations and spend unlocks in and of itself. Because we are a vertically integrated end-to-end technology company, we have a lot of real estate to keep optimizing. It could be marketing, but it also could be gains in data infrastructure, the end-to-end conversion funnel, underwriting, pricing, persistency, mortality—all these things eventually influence our unit economics, and then, as you described, our ability to reinvest in incremental spend. So we do not think that we are encountering the upper bounds of spend. In short. Christopher Capozzi: Colin, that is primarily attributed to channel mix. As you note, if you contrast sequential performance Q4 to Q1, you will note that direct mixed up as a percentage of revenue, and that is generally going to be the driver of the increase in ARPU that you are seeing there. We have seen some early signs of product-market fit with that accumulation IUL product that we launched with Salmons back in the fourth quarter, but still too nascent to materially impact ARPU at this point. Ross Sandler: Hey, guys. Two questions. Could we talk about the advertising cost in the first quarter, like what the expense was? And then the efficiency that you saw in the DTC channel—what was the key driver of that? I know we had sort of an easy comp from 1Q a year ago when Meta made some of those policy changes. So just walk us through the upside that you saw in DTC—what was the driver of that? And then I have to ask the obligatory ChatGPT question. So we saw the app-within-the-app concept from a couple days ago. Just overall thoughts on what you want to accomplish with this new channel and how important you think it will be to Ethos Technologies Inc. in the future. Thanks a lot. Peter Colis: Hey, Ross. Thanks for the question. I will take the ChatGPT one first. Generally, as the end-to-end digital buying platform, I think we are best positioned in the industry to capture any changes of consumer behavior. At the minimum, I expect LLMs will play a bigger and bigger role in consumer research ahead of a purchase, and it could be one day a material source of client origination for us. We do have a sophisticated GEO initiative focused on taking advantage of this. We are excited about the app. We will have to wait and observe how the LLMs' monetization strategy evolves and how they augment the customer experience. What I would point to is historically, including the Meta change that you referenced last year, our data models and our intelligent acquisition engine have an exceptional track record of adapting quickly at the cutting edge of changes in the digital acquisition landscape, so I think we are best prepared for whatever does come at us. Life insurance funnels generally are very complex. We have identity verification, reflexive questioning, third-party data pulls for underwriting—really lengthy funnels where chat may not be the best interface for client engagement. So it is not necessarily intuitive that the entire transactional process will move into LLMs as the default, but we are excited to experiment with this and see where it goes. Christopher Capozzi: Then Ross, in terms of the return on ad spend, we will plan to disclose that going forward on an annual basis. But to help frame up the Q1 performance, I would highlight that our return on ad spend was consistent on both a sequential and year-over-year basis. And as we noted earlier, we were really pleased by our ability to more than double the ad spend on a sequential basis while maintaining unit economics, demonstrating, of course, that we are not only able to scale revenue, but profits as well. Operator: Alright. Thank you. Our next question comes from the line of Eric Sheridan of Goldman Sachs. Your line is now open. Eric Sheridan: Thanks so much for taking the question. I wanted to know if we can go a little bit deeper in how you are thinking about the product pipeline evolving over the next twelve to eighteen months. What visibility do you have into that pipeline today? How much might be assumed in some of your forward commentary and how much could potentially be upside, dynamic relative to forecast, and what you would expect the receptivity to that pipeline to be against the broader end-demand market? Thank you so much. Peter Colis: Thanks, Eric, for the question. We have a track record of launching around three to four new products per year. The team is hard at work on new products that we are not yet ready to disclose. What I would say is it is important to understand our guidance philosophy. We ascribe very little revenue in our forecast to newer, less-proven products. We like to see it before we put it into the plan. If we look at our last couple of products, accumulation IUL is off to a great start. It is demonstrating early signs of clear product-market fit within a variety of different third-party agencies. Just as a reminder, that is a permanent life insurance product with very compelling investment feature performance and delivering that Ethos Technologies Inc. ten-minute purchase process. And then we also recently launched a cancer insurance product with Aflac. That is still in the early innings of testing and iteration, so it is too early to make a judgment call on its impact. Cancer insurance is typically not sold outside of the workplace in the U.S., but we think it is a really compelling value proposition given the rate of cancer diagnoses. So more to come over the subsequent quarters on the new product front. Ronald Josey: I wanted to follow up. I think, Peter, you were just talking about IUL off to a great start, particularly with the third-party partners here and other days with the cancer product. But talk to us a little bit more about IUL in terms of the results so far, what lessons learned you have here so that as newer products launch, you can implement to see continued overall strength. And when it comes to, obviously, direct had a pretty impressive quarter, and I know we talked about channel mix and marketing spend. Any additional insights on perhaps newer channels that you went after this quarter would be helpful. Peter Colis: Great questions. So on IUL, if you take a step back, IUL is the largest subcategory within life insurance. It combines the ability to grow investment returns with tax-deferred properties while also delivering protection for your family. It has been more of a product dedicated to the high-net-worth market, and with Ethos Technologies Inc., we are making it more and more accessible to the mass affluent market, which is really important because there is not only demand from clients, there is demand from agents for this. Whenever we launch a new complicated product like accumulation IUL, there is some period after launch of iteration and testing and refinement and then launching day-two features that are fast follows that are requested from agents. We have been going through all those motions and just watching very clear month-over-month sequential growth with the product. We are happy with the early experience. We are very happy with the agent receptivity. Also worth noting, we have a direct-to-consumer IUL selling initiative that we are excited to roll this product out to as well, which has been a nice growing part of our direct business. On the direct marketing mix, what I would say—we talked about last quarter—is over time, a larger and larger percentage of Ethos Technologies Inc.'s marketing spend has been shifted towards what I call top-of-funnel channels, where clients are not necessarily looking for life insurance, but we are approaching them and presenting the concept of life insurance and showing them that they can buy easily and quickly. These are channels like television, radio, social media, etc. In Q1, we saw a continued trend where more and more of the spend is able to shift into those upper-funnel channels while not compromising on ROAS and efficiency. We love that because it is really showing that it is a scalable model that is not constrained by the implicit number of people who have intent to buy life insurance on a given day. We are able to generate demand. Our teams are hard at work at continuing to improve marketing and open up more channel scale within those large top-of-funnel channels, and then continue to be the winner in all bottom-funnel channels, like search and affiliates. Michael McGovern: Hey, guys. Thanks for taking my question. Could you just talk about the big beat in revenue that you had in Q1 relative to the rest of the full-year guidance, which kind of implies a deceleration in revenue growth from here? I hear you that you are not encountering the upper bound in marketing spend, but is there anything else driving a level of deceleration in revenue growth from here? Any sort of pull-forward or macro change or anything to call out there? Got it. Thank you. And can you speak to the Liberty Mutual partnership a little bit more when it comes to licensing your proprietary engine to them? And when does that layer into the model more meaningfully? And given it is such a meaningful carrier, can you just discuss how that impacts the flywheel overall from here? Thank you. Christopher Capozzi: Nothing to call out on the macro front. We are really pleased to see the level of acceleration in both channels here in the first quarter. As Peter noted, the quarter is off to a strong start. We have got a good April behind us here. I think what you are seeing in the go-forward revenue guide is really just us navigating the seasonal deceleration as we transition from the first quarter to the second quarter and of course an appropriate level of prudence in terms of our forward guide. Peter Colis: Mike, great question. We are excited about it. Strategically, this allows us to reach more customers by utilizing Liberty Mutual's brand awareness and trust that they have built up in the marketplace, and it allows them to amortize the technology and the product suite and the incredible life insurance experience that we have built. Even though it is early days, it is contributing nicely. Both of us are excited to keep growing together. I think thematically, Ethos Technologies Inc. simplifies life insurance buying so much that it allows non-life insurance experts like Liberty Mutual to confidently sell the product, knowing that it is going to deliver a great experience. It is going to have high approval rates, great prices. It is going to be fast and easy, so they do not have to worry about disappointing their customers where they have an existing relationship and financial incentive to do well by. Ethos Technologies Inc. uniquely unlocks a lot of potential partnerships like this, and we are excited to keep digitally embedding our experience on other platforms, which we think is a fairly replicable model, and we will seek more partnerships like this in the future. Pablo Singzon: Hi. Good evening. First question, the change in assumption that resulted in the charge—did that have any effect on revenues, or are you using a different schedule for revenues and, I guess, agent comp? Makes sense. And then the question I had was on the guidance. So I think revenues, roughly speaking, went up—full-year revenue guidance went up by like 9% to 10%. EBITDA went up by 4% to 5%. Is the drag there mostly from this change in assumptions for clawbacks, or are there other parts of the operations, like marketing efficiency overall or just general investments, that are contributing to the drag in EBITDA? Thank you. Christopher Capozzi: Yeah, Pablo, it did have a small effect on revenue this quarter. We did record a small favorable persistency adjustment to revenue. We did not call it out because it was not material—think of it as a low single-digit percentage effect on revenue. But then as you think about that $16.5 million one-time non-cash charge that we alluded to in our prepared remarks, improved early-stage persistency was one of multiple contributing factors to the charge. The largest factor, I would say, was just the absence of substantial experience, which of course we gained over the course of the first quarter and what ultimately informed our decision to update our estimate. Other contributing factors were some of the operational enhancements that I alluded to earlier in my comments specific to how we bill chargebacks to agents, as well as increasing the overall precision of our forecasting methodology now that we have a more substantial base of accumulated experience. That is correct on the EBITDA point. If you were to back out the one-time charge, contribution margins would have been 39%. You back that one-time charge out in the EBITDA line, we would have reported 26% EBITDA. And as we mentioned earlier, as you think about the go-forward run-rate contribution margins, we think mid-30% makes sense there, which reflects a couple of points of erosion due to the change in estimate. That is the go-forward run-rate impact. But otherwise, excluding that charge, incredibly strong margins here in Q1. Analyst: Yes. Hi. Just a quick follow-up on the Liberty Mutual deal. Can you comment if there is any exclusivity around this deal or do you think you can strike similar deals with other carriers? Thank you. Peter Colis: That is a great question. There is not exclusivity around this deal. Operator: Thank you. I am showing no further questions at this time. I would now like to turn it back to management for closing remarks. Aaron Turner: Great. Thank you all for joining us today, and we will speak with you again next quarter. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good morning. Welcome to Voya Financial, Inc.'s first quarter 2026 earnings conference call. All participants will be in a listen-only mode. After today's presentation, we will follow up with Q&A. Please note this event is being recorded. I would now like to turn the call over to Mei Ni Chu, Head of Investor Relations. Please go ahead. Mei Ni Chu: Good morning and thank you for joining today's call. We will begin with prepared remarks by Heather Hamilton Lavallee, our Chief Executive Officer, and Michael Robert Katz, our Chief Financial Officer. Following their prepared remarks, we will take your questions. Also joining the call are Jay Stuart Kaduson, CEO of Workplace Solutions, and Matthew Toms, CEO of Investment Management. As a reminder, materials for today's call are available on our website at investors.voya.com. As noted on slide two of our analyst presentation, some of the comments during today's discussion may contain forward-looking statements and refer to certain non-GAAP financial measures within the meaning of federal securities law. GAAP reconciliations are available in our press release and financial supplement found on our Investor Relations website. I will now turn the call over to Heather Hamilton Lavallee. Heather Hamilton Lavallee: Good morning and thank you for joining us today. Let us turn to slide four. Building on our 2025 performance, we are off to a strong start in 2026. In the first quarter, we delivered significant growth in revenues, earnings, and cash flows. We grew adjusted operating EPS by 13% year-over-year through strong execution across the enterprise while continuing to deliver a return on equity above 18%. And we generated approximately $200 million of excess capital, returning that same amount to shareholders through repurchases and dividends. Executing on our priorities, we are building on our strong momentum, maintaining robust margins in Retirement and Investment Management, and continuing to drive margin and earnings improvement in Employee Benefits. Our momentum is clear and our advantage comes from our diversified, resilient business model built to perform across markets and business cycles. I would like to touch on a few highlights from the quarter. In Retirement, we generated over $200 million in adjusted operating earnings, delivering trailing twelve-month margins of 39% while continuing to invest in future growth. We continue to expect positive net flows for the full year, more than offsetting the exit of a large recordkeeping plan in the first quarter, which was expected. Revenues grew year-over-year supported by more than $50 billion in annual recurring deposits, giving the business a resilient foundation across market conditions. Our acquisition of OneAmerica has been a strategic and operational success. It has meaningfully strengthened both the scale and earnings power of our Retirement business, which now serves nearly 10 million retirement accounts. We expect to complete the integration in the second quarter. And we are building on that strong foundation by expanding the advice, guidance, and planning we provide through our Wealth Management business, helping customers better meet their financial needs. In Wealth Management, expansion remains on track, with first-quarter revenues up more than 12% year-over-year. In Investment Management, we entered 2026 with strong momentum driven by continued demand from clients across both institutional and retail markets. We remain confident in our ability to deliver 2%+ organic growth this year. We drove margin expansion by continuing to scale key strategies across insurance, private and alternative assets, and international retail markets. These are the channels where we have clear competitive advantages and are seeing strong commercial momentum. Our investment performance shows we are delivering for our clients, with 78% of assets outperforming peers or benchmarks over three years, and 82% outperforming over ten years. In Employee Benefits, we generated significantly higher operating earnings through disciplined execution across the portfolio. Across all lines within the business, decisive underwriting and pricing are resulting in higher margins. In Stop Loss, the pricing, underwriting, and reserving actions we took last year have us firmly on the path to full margin recovery in this business. Our near-term focus on restoring the profitability and earnings power of this business is the most value-accretive path we can take for shareholders. And this value is already emerging in the results we delivered this quarter. Michael Robert Katz will provide additional detail in a moment. Our strong results this quarter reflect the durability of our cash generation, our strong earnings power, and our continued commitment to disciplined execution. With that, I will turn it over to Michael Robert Katz to walk through the financials in more detail. Michael Robert Katz: Thank you, Heather. Financial results this quarter were strong, providing a solid start to the year. In the quarter, adjusted operating EPS was $2.26 per share. On a trailing twelve-month basis, adjusted operating EPS totaled $9.11 per share, representing growth of over 20%. EPS growth highlights our consistent execution and capital discipline. We generated higher revenues across all segments, and our continued expense discipline is sustaining our robust margins in Retirement and Investment Management while expanding margins meaningfully in Employee Benefits. In the quarter, GAAP net income was lower than adjusted operating earnings primarily due to non-cash items. Overall, our results highlight the durability of our business mix and the resiliency of our capital generation. With that, let me turn to our segment results. Turning to Retirement on slide seven. Retirement continues to demonstrate the strength of our scaled franchise. We generated $209 million of adjusted operating earnings in the quarter and $960 million over the trailing twelve months, representing a 14% year-over-year increase. Higher net revenues were primarily driven by an 8% increase in fee-based revenues. Fee-based revenues have grown meaningfully over the last several years and now represent close to 60% of total net revenues for the segment. Spread income remained resilient, reflecting disciplined portfolio management and continued focus on risk-adjusted returns. Margins remained strong at over 39%. Looking ahead, we expect expenses to step down in the second quarter due to normal seasonality and, as the year progresses, we anticipate further reduction in spend as the OneAmerica integration work concludes and the organization transitions to steady-state operations. Turning to flows. Our outlook for flows remains unchanged. We expect strong net inflows in the second quarter and full year supported by healthy retention and a robust pipeline. The first-quarter commercial result was primarily timing-driven and as expected. Reinforced by disciplined execution, Retirement is delivering strong profitability and is well positioned for continued growth. Turning to Investment Management on slide eight. The business’s differentiated client-focused solutions continue to deliver investment performance and financial results. We generated $46 million of adjusted operating earnings in the first quarter, up 12% year-over-year and up 8% on a trailing twelve-month basis. Overall net revenues drove the result, supported by higher institutional and retail fees. Our trailing margin of 28.6% reflects the benefit of these higher revenues and expense discipline. Net flows were positive in the first quarter and the pipeline remains healthy. In institutional, we continue to see strong demand from clients for private market strategies including private fixed income and commercial mortgage loans. Clients continue to value high-quality investment grade private credit solutions where we have a long track record, and we see structural demand for the asset class. In retail, international demand for our differentiated income and growth strategy remained resilient, which helped to offset industry-wide headwinds in the U.S. market that affected domestic flows. Over the past year, we generated approximately $7 billion of net inflows. And with a healthy pipeline in place, we remain confident in building on that success and driving strong organic growth at attractive margins in 2026. Turning to Employee Benefits on slide nine. We continue to execute a deliberate strategy to expand margins, which has meaningfully improved run-rate earnings in Employee Benefits. Our progress is clear in both the $63 million of adjusted operating earnings we generated in the first quarter and the $169 million we reported over the last twelve months. The key driver of the year-over-year improvement was strong net underwriting results. In Group Life, claims experience was favorable in the quarter, driven by lower frequency and severity. And in Voluntary, results are tracking in line with our expectations. In Stop Loss, the actions we have taken with underwriting and risk selection have us well positioned to return margins back to target levels. In the quarter, we released $25 million of reserves. 2024 is now behind us, which drove the majority of the reserve release. We also released a portion of the reserves for the 2025 blocks as experience improved in the first quarter. We are now over 90% complete with the 2025 business and are well reserved heading into the second quarter. The work we did last year has positioned the 2026 business for meaningful improvements. We strengthened the team with new leadership and specialized resources, improving risk selection through more selective quoting and deeper clinical reviews. That discipline, combined with an industry-wide repricing environment and an increase in RFP volumes, helped drive approximately 24% rate increases while keeping in-force premium flat. With pricing and underwriting actions now firmly embedded, we are on a clear path to restore Stop Loss margins back to long-term targets. Looking ahead, our first-quarter results reflect continued progress in improving earnings power, and we remain confident in the path to further margin expansion in Employee Benefits. Turning to slide 10. This was another strong cash flow quarter as excess capital generation was approximately $200 million. We continue to convert cash at 90%+ levels. In the quarter, we returned approximately $200 million of capital to shareholders through a combination of share repurchases and dividends. And we are executing an additional $150 million of share repurchases in the second quarter, underscoring the durability of our cash generation. Our business mix and earnings growth are driving a return on equity of over 18%. In summary, our balance sheet remains a strength supported by durable free cash flow generation that positions us well to drive long-term shareholder value across a range of market conditions. Turning to slide 11. This view looks beyond any single quarter and reflects how execution supports capital deployment over time. We have steadily grown dividends over the past five years and at the same time we have returned significant capital through share repurchases. This has reduced diluted shares outstanding by roughly 14% since 2022. Our ability to consistently repurchase shares allows us to increase dividends each year while maintaining a payout ratio of approximately 20%. Importantly, these returns have been balanced with ongoing investment in our business to enhance customer and client outcomes and support future business growth. In closing, we delivered a strong quarter driven by consistent execution, high free cash flow, and disciplined capital deployment to create long-term shareholder value. We are executing on our strategy and our priorities are unchanged: grow the franchise, maintain balance sheet strength, and return excess capital to shareholders. With that, I will turn it back to Heather Hamilton Lavallee. Heather Hamilton Lavallee: Thanks, Mike. Turning to slide 12. Looking ahead, our priorities are clear and compelling and are driving tangible financial results. We are growing excess cash generation while maintaining balance sheet strength and flexibility. We are advancing commercial momentum across Retirement and Investment Management, and we are laser focused on realizing additional margin improvement in Employee Benefits. Together, these priorities define how we run the company with unwavering focus on creating long-term shareholder value. Before we close, I want to share that we are encouraged by the recent legislative and regulatory momentum that is expanding access to retirement savings for Americans who have historically been underserved, especially workers at small and mid-sized employers who have lacked a clear path to workplace savings. These policy initiatives include coverage mandates, mandatory auto-enrollment, and protections for caregivers and non-traditional workers. These important measures will help address the overwhelming need for additional retirement savings, particularly among the most vulnerable segments of our workforce. Voya Financial, Inc. is a leader in providing retirement security to the American worker and their families. We welcome these policy developments and are among those companies best positioned to serve the growing demand for financial solutions that will allow more Americans to retire securely. I want to thank our employees, who relentlessly work to create better financial outcomes for the customers and clients we serve, which is always our number one priority. We remain focused on executing our strategic priorities, returning capital to shareholders, and driving outcomes for our customers over the long term and across market cycles. With that, I will turn it over to the operator so we can take your questions. Operator: We will now open the call for questions. Our first question is from an Analyst with Morgan Stanley. Please proceed. Analyst: Hi, good morning. My first question is actually on the Group Life business. Group Life loss ratio was very favorable, 70 versus a long-term target of 77 to 80. It has been trending fairly favorable over the past four quarters, and the industry does look like that is where things are going. Can you maybe give us a little bit more detail about what you are seeing there? Generally, first quarter tends to be the worst quarter for the loss ratio for Group Life. Are we thinking the 77 to 80 maybe is not where we are going to land this year? Maybe give us a little bit of color on that? Michael Robert Katz: Hey, Bob. It is Mike. Look, I think you are thinking about it right. And we do typically see Group Life running a little higher than the 77% to 80%. Q1 usually is the worst mortality quarter for Group Life. So we are certainly very encouraged by what we are seeing in the quarter and it has been a good trend for us. We are spending a lot of time. We talk a lot about Employee Benefits and the margin expansion there. Group Life is another area we are focused on. I think it is a little early right now for us to suggest a lower loss ratio for the balance of the year. If you factor in the first quarter from a calendar-year perspective, certainly we would expect to be better than the 77% to 80% given the result in the first quarter. But right now I think the base case is back to range in the second, third, and fourth quarter. Analyst: Okay. Got it. Really helpful there. Thank you. My second question is on the net flows. You gave some decent color in terms of where things are going. But if we think about Investment Management, net inflow was about $65 million for the quarter. If we are thinking about positive flow, we are looking at probably $6 billion or $7 billion of net inflows in the rest of the year. Is that ballpark sound about right? Can you give us a little bit more color on how to think about Investment Management flows going forward into the rest of the year? Matthew Toms: Sure, Bob. This is Matt. I will unpack that a little for you. Looking back, the trailing twelve-month number is right in that ballpark that you referenced. That is a $7 billion number and that is roughly a 2% organic growth rate for the trailing twelve months. As you acknowledged and as we mentioned, the flows in the individual quarter this quarter were a little light. But as we look forward, our confidence around maintaining that growth level is driven by, in the institutional space, our continued strength in insurance. We saw a good first quarter in insurance, and we have good visibility into the second quarter and the rest of the year in insurance. And again, that is a channel that has demonstrated really nice growth over recent years, a differentiated value prop, and one where you can see volatility quarter to quarter but feel very good on the forward look. More broadly on the institutional side, we see opportunities we have been working on for some time internationally on the fixed income side. And then domestically, CLO creation is likely to improve into the second quarter and the rest of the year. On the retail side, a little bit more detail there. The income and growth franchise internationally continues to be a stalwart for us. Nice performance first quarter. We think that continues for the year. Where there is some in broader equity markets, where we had market volatility, was in thematic equities internationally. We are already seeing, with stronger markets in the second quarter, some bounce back there. We will see where that ends. Obviously, there is a lot of dynamism in the broader markets. But broader strength, including U.S. fixed income, makes us feel pretty good about the forward look. Bottom line, organic growth expectation, the 2%+ for the remainder of the year remains intact. Operator: Our next question is from an Analyst with TD Cowen. Please proceed. Analyst: With regard to the Group Stop Loss business, if I am reading slide 43 of the supplement correctly, it appears that the 2026 loss pick is 87%. And my sense is, given all the rate increases you have attained, that it is a pretty conservative loss pick and perhaps we could see releases as we are seeing for the 2024 and 2025 years. Am I thinking about that right? Do I have the number for the loss pick right? Michael Robert Katz: Hey, Andrew. It is Mike. Maybe first on the reserving part of this. We continue to set reserves on the high end of reasonable outcomes. And so I think you are thinking about it right from that perspective. What gives us a lot of confidence around how the 2026 business is really going to perform are some of the things I mentioned in my remarks. When you look at this from a price perspective, getting 24% on that book of business, we feel really good about that. But more importantly, the work we did last year around strengthening the teams, ensuring we got the best risk selection, and getting to do that with even more RFPs. RFPs continue to build in Stop Loss. So we are getting a look at a lot of different things. This is really the best we have felt around Stop Loss in quite some time. We feel good about the 2026 business. Stepping back, we are seeing improvement now. That is encouraging, but we think there is more to come. Analyst: Got it. Thank you for that, Mike. And then it is pretty clear in the media we have been hearing about an activist and the talk has been around their interest in you either divesting Group Stop Loss and/or putting the company up for sale. So it has been out there. Hate to ask about it, but maybe you could comment a little bit about that. Heather Hamilton Lavallee: Yes. Good morning, Andrew. It is Heather and I certainly appreciate the question. We are regularly engaging with our shareholders. And at the end of the day, our actions and how we deploy capital are guided by what is in the best long-term interest of our shareholders, as well as our customers. As part of our normal governance with our Board, we are constantly evaluating different strategic options that we can pursue across the whole portfolio to drive shareholder value. But where we have aligned very clearly is that the path we laid out eighteen months ago—continuing to grow Retirement and Investment Management, where we had a terrific 2025 and are off to a great start—and importantly, the earnings improvement in Stop Loss, where we demonstrated real value in 2025 and again are off to a great start. That is where we have full alignment and full conviction. And there is no daylight between the Board and management on the strategic path forward. What we have laid out very clearly in the presentation and what you heard Mike and me talk about in our prepared remarks, we have tremendous conviction in our ability to deliver on that and drive further shareholder value. Operator: Our next question is from Ryan Joel Krueger with KBW. Please proceed. Ryan Joel Krueger: Hey, thanks. Good morning. I wanted to come back on Stop Loss. Last quarter, you said you expected calendar-year improvement. The Stop Loss loss ratio was 84% last year. I think just mathematically, if I take a loss pick of 87% and your 1Q loss ratio, it would imply it would be higher than 84%. So the only way to get that is more reserve releases. Am I looking at that right? Are you still confident that you will get calendar-year improvements this year? Michael Robert Katz: Hey, Ryan. It is Mike. That is the base case. Maybe just first: when you think about claims experience and the emergence of claims that we saw 2024 into 2025, or what we are seeing now from 2025 to 2026, claims are coming in faster. When we were in the fourth quarter, we were only two-thirds complete. Now, as you look at the 2025 business, we are about 90% complete. And as Andrew was asking, we still are on the high end of reasonable outcomes from a best-estimate reserving perspective. So the base case, if that gets to more middle or low end of the range, absolutely we would expect the calendar-year loss ratio to perform better than 84%. One way you can look at that is seeing where the reserves were set a year ago on the 2024 business versus where we have 2025 right now. It is a couple points better. That is what we are seeing. We are seeing that through April. If we continue to see that in May and June and in the third quarter, that is exactly what is going to happen. Heather Hamilton Lavallee: And, Ryan, it is Heather. The only add that I would have is I quite honestly have not been this confident on Stop Loss for eighteen months. For all the reasons that Mike laid out, we have real conviction in our ability to drive continued margin improvement and get this business back to the full earnings potential we know it can generate. Ryan Joel Krueger: Thanks. And then this is slightly different, but also on Stop Loss a little bit. How intertwined is your Stop Loss business with the Voluntary and other group products in Employee Benefits? In other words, as you have been pulling back on Stop Loss to reprice the business and improve profitability, to what extent is this having a negative impact on the growth of the other product lines in that business? Or are they not that interrelated at this point? Jay Stuart Kaduson: Hi, Ryan. It is Jay. I will take this one. We see Stop Loss right now as another important risk transfer solution. It is rising in demand from our employers. While we are not seeing Stop Loss and broader Employee Benefits in a bundled sale today, it is another important solution for our employers and, even more importantly, for brokers who are actively looking to grow their Stop Loss books given the heightened demand in the market. So Stop Loss we see as a door opener for new brokers who are entering the space as the demand is increasing. It is also driving tighter alignment and value with the existing Employee Benefit broker relationship. Since I joined sixteen months ago, we have been focused on the workplace strategy, structure, and the people. I could not be happier with the new workplace leadership team, specifically for Stop Loss. We focused on bringing in strong leaders with deep expertise, and what you are seeing today is a really tight flying formation with our leaders in risk, pricing, underwriting, and distribution. As you can see in our results, the new team is already driving meaningful change. Our commercial momentum and results, as you referenced and talked about the impact it is having in our Employee Benefits business—Employee Benefits sales are up 8% year-over-year with persistency remaining strong. In our Supplemental Health and Voluntary business, where we continue to grow from a top-three provider position, we are really pleased with the results to start 2026. Our pipeline is up 10%. Sales are up 13% over prior year. And that has resulted in block growth of 4%. Overall, the positive commercial momentum we are seeing in Employee Benefits is deepening our relationships with our intermediaries and our customers through this connection point on additional risk transfer and Stop Loss. Heather Hamilton Lavallee: And, Ryan, if I can just add, it is Heather again. Three additional points on Stop Loss and why it is so important. First, we are seeing increasing demand from employers for Stop Loss. RFP volumes are up 200% year-over-year, and it shows there is a real need in the market for this, but there is also limited supply. And why that is so important is if you think about that increased RFP activity, we can continue to be selective when we are doing our underwriting. That limited supply also holds up the hardening market and our ability to get price for this business. Operator: Our next question is from an Analyst with JPMorgan. Please proceed. Analyst: First question is for Mike on Stop Loss. You had mentioned that Stop Loss claims are coming in faster. Is there something you changed in your operations that is driving that? Or is it claim amounts being larger and therefore hitting retentions faster? I think one of the difficulties with Stop Loss is your excess position, but I was wondering if you are getting better line of sight into the claims even before they break retention level. Michael Robert Katz: Hey, Pablo. I think it depends if you look at it from a reported or paid perspective. If you are looking from a paid perspective, absolutely, the operational effects matter and we are turning through claims faster. We have got more people. Jay just talked about the talent we brought in. We are excited about that. What we are trying to get at more is around the reported side and what we are seeing from 2024 to 2025 and now again 2025 to 2026, where the claims experience is coming faster. We have talked a lot about cell and gene therapies. We have talked a lot about the severity of claims coming in and, frankly, some of the health care providers trying to move that through the system because they are thinking about their P&L faster. Stop Loss is a tail product. We would typically see that more on the later side. Q4 2025 was the first time we saw that. As we were sitting here in the fourth quarter only two-thirds complete with experience, we were not sure if that was necessarily going to be a trend once again. So you are certainly going to want to be on the higher end of a best-estimate range being put in that position. The good thing now that we are 90% through, we are seeing that again. We think this is the new normal post-COVID. That is a good thing. Again, we are running a couple points better when we look at it from a reported perspective year-over-year. You can see that through the reserves and the disclosure. That has us feeling really good. And April has us feeling really good. This is, as Heather was mentioning, a big part of the cash generation expansion story for us in 2026 and beyond. We are really looking forward to letting the experience speak for itself, and we expect it to in the balance of the year. Analyst: Thanks for that. And my follow-up is also on Stop Loss. Taking a step back, if you look at results of other insurers you compete with in the market, they have historically reported loss ratios in the low 70s. You have run high 70s, low 80s in a more normal environment. And then you have the health insurers that run much higher. Given the experience of the past couple of years, does that entail a change in your approach to pricing, given the fact that maybe there is more volatility in this business than previously appreciated? Maybe running at an 80% ratio is not the right level considering the volatility. Thank you. Michael Robert Katz: Hey, Pablo. I think you are thinking about it very similarly to how we do. Maybe just the only caveat is that sometimes when you are looking at other companies, they do have captive businesses. That is different than more fully insured Stop Loss. Sometimes that can conflate what you are looking at. But as far as where is the end state on this, I think we are thinking about it exactly like you are. Operator: Our next question is from an Analyst with Raymond James. Please proceed. Analyst: Hey, good morning. From some of the healthcare insurers’ 1Q 2026 reporting, it sounds like medical trend is moderating somewhat. Still high and, of course, it has been unprecedentedly high over the last couple of years, but maybe rising at a more modest pace. Are you seeing any of that? And just talk about what you are planning for for this year. Thanks. Michael Robert Katz: We are definitely seeing a bit of that. I think it is really early. It is a good sign. Yes, if you look peripherally at some of the healthcare companies out there, you are definitely seeing some of the turnaround there. That is very encouraging for us. It is really early though for us to in any way declare that that is going to come through results in a big way. But as we have been talking about, the fact that we got 24% on this 2026 business, everything Jay talked about on the team, the risk selection we are getting, as Heather mentioned, the number of RFPs we are getting a look at—I think these are all very good signs around the trajectory of where this business is headed. We are encouraged by that. We are going to let the results play out and that will illustrate the progress. Analyst: Okay. Thank you. And then this kind of goes back to the question on the activist a little bit, but we think Voya Financial, Inc.’s management team is strong and we think you are doing a great overall job running the company. But results were a bit soft across a few important metrics this quarter. Of course, there is a lot of volatility in the market and also medical inflation. Could you give us some visibility into the coming quarters and some of the areas where you plan to show progress on growth? Thanks. Heather Hamilton Lavallee: Let me start, and first appreciate the support. We do not necessarily look at progress on a quarter-by-quarter basis, but really on a full-year basis. We are pleased with the results in the quarter with earnings up, but let me toss it to Jay to talk a little bit about the commercial momentum, specifically what we are seeing in Retirement. I think Matt answered the commercial momentum question, but if not, we could certainly circle back to that. Jay? Jay Stuart Kaduson: Thanks. I will highlight a little bit of what we are seeing in Retirement and Wealth. I talked briefly about Employee Benefits and where we were seeing the growth. I am happy to answer any follow-up questions on that. As it relates to Retirement, as I referenced last quarter, we expected strong flows in 2026 with most of that growth back-half weighted. We had visibility into the planned first-quarter outflows, which are largely timing-driven in OneAmerica and due to a known single large plan outflow. We equally have visibility into the known plan implementations in 2026 and that is going to result in positive net flows not only in Q2, but for the full year. Our full-year 2026 outlook is unchanged. We are on track for a fifth consecutive year of positive organic DC net flows. It is worth noting, our sales momentum remains solid across our key segments. In large recordkeeping, our wins are scheduled to begin funding in Q2 and Q3. Additionally, in Q1, we saw full-service sales in Emerging Markets, which is an important market for us, up 13% year-over-year. And in Government, where we are a leader, we were up 200% year-over-year. In addition to all that, I also look at plan retention and see that our plan retention was over 95%. A reminder, this includes the expected impact of OneAmerica surrenders. All of that speaks to the strength we have right now with our sponsors and intermediary relationships. Overall, in Retirement, I am seeing really strong commercial momentum for the business in 2026. Translating that over to Wealth Management, we are starting to see early days in the build, but I am seeing success. I am pleased with the team, and they have achieved meaningful growth year-over-year of 12%. That is both on a revenue and an asset view. In addition, we have seen really strong adviser productivity, particularly those we have onboarded in 2025 and 2026, as we have been stepping up our recruitment of advisers. Stepping back on the Wealth Management build, it is embedded in the Retirement business’s strong 39% margin. This is a really solid result. Our clients are increasingly asking for more advice and guidance at the workplace. We are well positioned to fill this demand. Overall, I am pleased with the Wealth Management build and the overall growth, particularly in alignment with our Retirement business. Heather Hamilton Lavallee: And if I can add one other perspective from the enterprise: if you think about the collection of points made today about commercial momentum in Investment Management, the confidence we have in the Employee Benefits earnings outlook, and the Retirement momentum Jay just talked about, all of those collectively give us the confidence in further growing cash generation, which is one of our number one priorities, and our commitment to returning that capital to shareholders. Operator: Our next question is from Thomas George Gallagher with Evercore ISI. Please proceed. Thomas George Gallagher: Good morning. Just a few follow-ups on Stop Loss. Heather, if I listen to your comments about everything, including the activist and the way you are thinking about things, is it fair to say that you think Stop Loss is a core part of the long-term Voya Financial, Inc. franchise? Or is that something you would consider divesting if the situation was attractive enough? Heather Hamilton Lavallee: Good morning, Tom. Thanks for the question. We have talked about seeing the earnings improvement in Stop Loss as the most immediate source of value creation for shareholders. We have already made great progress with $100 million earnings improvement in 2025 on a year-over-year basis and $140 million earnings improvement on a trailing twelve-month basis if you just look at the first quarter. It is very valuable for us in terms of earnings and cash generation. More broadly across the portfolio, we see this as a valuable part of our portfolio. There is a lot of client demand, growing client demand, limited supply, hardening of the market, and the ability to get price. We see this as continuing to be an earnings grower for the firm. At the end of the day, Stop Loss is one where it is going to be value creation for shareholders, and it is also a strategic asset for Voya Financial, Inc. at the enterprise. Thomas George Gallagher: Got it. Thanks for that. And then based on your description of what you are seeing, it sounds like you are more constructive on where this business is headed. As you approach the midyear 2026 renewals, are you thinking about leaning into growth now? Or are you still at the part of your process where you need to further reselect and you may not grow yet? Heather Hamilton Lavallee: The quick answer is no, we are not pivoting to growth. We continue with our focus on margin improvement in Stop Loss and being very disciplined with pricing. Frankly, we are focused on margin improvement across overall Employee Benefits. So right now, steady as she goes on that margin improvement plan and delivering on the earnings that we know we can deliver with this business. Operator: Our next question is from Wesley Collin Carmichael with Wells Fargo. Please proceed. Wesley Collin Carmichael: Hey, good morning. Thank you. A couple of follow-ups as well. One question on Stop Loss and loss trend. Any update on how that is tracking relative to your 24% rate increase? You mentioned that claims are coming in faster. Are you seeing any change in trends in the type of claims that are inflecting inflation? And, Mike, I think you made the comment that maybe the range of outcomes for the business has kind of doubled—maybe that was last quarter or the quarter before. Do you still have that view? Michael Robert Katz: Wes, it is Mike. First, we are pricing everything to get back to target. As you alluded to, at the end of the fourth quarter with two-thirds complete, there definitely was a wider range of outcomes. That has narrowed for the 2025 block as we get into the first quarter, now 90% complete. As I mentioned, we are running a couple of points better than where we were a year ago relative to 2024 business. That is a good sign. And what we are seeing in April is also a good sign. If this continues, then we will see some reserve release in 2025. Similarly, we feel well reserved on the 2026 business, given all the actions we have taken. We are heads down on it, and we are going to take the same approach in the middle of the year and let the results speak for themselves. We believe this is going to be a big part of that cash generation expansion story for Voya Financial, Inc. at the franchise level that we have been talking about. We are in the second year of the journey, and we like where we are right now. Wesley Collin Carmichael: Got it. Thanks. Switching to Retirement, during the quarter it looks like there were some elevated outflows. I know you spoke to the net inflows for 2Q and the full year, but what are you seeing in terms of shock lapses from OneAmerica in the quarter and how long that should continue? Jay Stuart Kaduson: Thanks, I appreciate that question. On the OneAmerica integration, we are near complete. We are really pleased with where the retention is landing. OneAmerica’s retention is embedded into the comments around positive net flows in Q2 and for full-year 2026. This transaction has enhanced our scale and our distribution. On distribution, we have onboarded the Edward Jones relationship and are fully engaged in this new distribution relationship. On completion, the team is nearing completion of the final migration wave later this month, which will include approximately 3 thousand plans. I am focused on the team’s execution on this integration. The value we are delivering for our customers and our intermediaries that we have onboarded through this integration has been really strong. You are seeing the results of that. I am really pleased with where we are on overall retention and OneAmerica’s embedded outcomes. Heather Hamilton Lavallee: And, Wes, on the finer points specific to OneAmerica: we had always expected to see higher surrenders than our normal book—the shock surrenders—through the migration period, which ends at the end of the second quarter of this year. After that point is when we should expect things to moderate, but you are seeing those in the first quarter. Operator: Our next question is from Joel Hurwitz with Dowling & Partners. Please proceed. Joel Hurwitz: Another one on Stop Loss. Mike, you mentioned you are running a couple of points better on 2025 at this point, but I think you might have pointed to the loss ratio on that. Can you talk about paid trends? Are paid trends at this point running a couple of points better year-over-year? Michael Robert Katz: Paid is roughly a point better. It gets to the question earlier around operations. Year to year, it is one of the things you always have to be careful with on paid. Our staffing levels are much higher in 2025 than they were in the prior year, and that will have an effect on paid. That is why I would point you to reported and why we are trying to anchor you to approximately two points better at this point in the journey. Joel Hurwitz: Got it. And then back to Retirement. How much of the full-service redemption pressure is OneAmerica? Can you comment on how the legacy Voya Financial, Inc. full-service book has been performing from a retention standpoint? And sounds like the pipeline is very strong for the back half. Any color on the mix between recordkeeping and full service there? Jay Stuart Kaduson: What we are seeing right now is with the OneAmerica planned surrenders and outflows, we are still sitting at over 95% retention, which is a really strong number. On the back half, I talked about where we see flows coming in and it being back-half weighted last quarter. A positive development is we are seeing some early funding in Q2, and we will be seeing positive flows. On the mix of business, I do not think you are going to see a materially different mix of business between full service and recordkeeping. As a reminder, providing advice and guidance in Wealth Management—those recordkeeping plans provide tremendous value to us as we are bringing advice and guidance, and plan sponsors are looking for that. There is value through the ecosystem in those recordkeeping plans. You should see a very similar mix as we complete the year with a high retention rate. I am pleased with where that is, and you should see a fifth consecutive year of positive flows through the end of the year. Operator: Our next question is from Joshua David Shanker with BofA Securities. Please proceed. Joshua David Shanker: Thank you for taking my question. Much of it has been answered. One more Stop Loss question. Given that you are marking the new book at 87% combined with double-digit rate increases and 2% premium decline, I am trying to better understand the unit volume. As Mike said, it is being booked with the hope that it is conservative, so it might later yield favorable development. How should I think about that 100 to 300 basis point reduction in the benefit ratio against the backdrop of double-digit price increases? Michael Robert Katz: Josh, I would just think of it as—and this is what Heather was talking about—we are being really careful about what we let into our block. That includes what already exists in our block and new business that could potentially be in our block. We are being very selective with risk selection coming out of this health care cycle. We understand that the relative value of a point of margin is meaningfully better than a point of growth. So even into the middle of the year, it is the same philosophy. We want to make sure the block is as clean as possible. We think that is the most productive and fastest way to the earnings expansion that we have been talking about and the progress in the second year of this two-year journey. Heather Hamilton Lavallee: And, Josh, it is Heather. I would reiterate the parts and pieces: the 24% rate increase, reserving on the high end of the range, and the strengthening of the underwriting. Those are all the components of why we feel so confident in our ability to get continued margin improvement within 2026. Joshua David Shanker: Is there any relationship between policy renewal persistency and the potential for adverse selection in you putting up such a conservative mark? With these amount of rate increases, presumably, the year-over-year improvement in the margin should be much better, but maybe you are somewhat worried that you have a book of business that is at greater risk. Michael Robert Katz: Not really, Josh. Not to get too deep into this on an earnings call, but happy to get into it deeper with you afterwards. We look at the block under different risk dimensions. There are parts of the block that are going to get rate increases much higher than 24%. There are parts of the block that are getting rate increases that are much lower than 24% because we like that risk and we want to keep it on the book. Think of the 24% as an aggregate and think of us as being very selective around what we like and what we think requires much higher rate increases. It is the right question thinking about it in aggregate, but we really dive into this to make sure the block is as healthy as possible. Operator: Our next question is from Suneet Kamath with Jefferies. Please proceed. Suneet Kamath: Thanks. I wanted to go to Stop Loss again, specifically the comment about the most value-accretive path is to return it to full margins. Does that imply that you tested the market in terms of interest from external parties when you make that statement? What is behind that? Heather Hamilton Lavallee: Suneet, as I mentioned, with our Board we are always looking at different options across all of our portfolio. We are laser focused on the earnings improvement as the most immediate and value-accretive action that we can take for this book of business. Suneet Kamath: Okay. Sticking with the Board, and I appreciate the comments about alignment between management and the Board and all the commercial momentum you have shown over the past couple of years, including the first quarter here. But if I look at the stock’s P/E, it is at a significant discount to what I would consider to be your peers. That has occurred despite the fact that you have exited some risk businesses like CBVA and Individual Life, and that was even before Stop Loss had issues. When you think about these conversations with the Board, how do you explain that? And what is the path to try to get a better valuation here? Heather Hamilton Lavallee: It all comes down to execution. If you go back and look at the priorities we have laid out, our focus is on executing every quarter, every year, and delivering shareholder value. I would look to the proof points. First, it starts with how we are delivering for our customers, and our customers are voting with their feet. Look at the commercial momentum—we are coming off two record years in Investment Management, strong margins, great investment performance, and the confidence we have in continuing to drive that growth. As Jay mentioned, five years of positive flows in Retirement and margins that are industry-leading. We have a lot of confidence in continuing to grow. The proof points we have delivered already on Employee Benefits—$100 million earnings improvement in 2025 and $140 million on a trailing twelve-month basis. The collection of those businesses ties back to our focus on continuing to drive growth in our free cash flow generation and then returning and deploying that into the most accretive opportunities, including returning capital to shareholders. We think doing all of that will continue to drive our share price and the value of the franchise. Operator: Our next question is from Michael Augustus Ward with UBS. Please proceed. Michael Augustus Ward: Thanks. Good morning. In Retirement, can you give us an update on the inorganic pipeline potential? Heather Hamilton Lavallee: Good morning, Mike. Thanks for the question. We have been active and vocal on how pleased we are with OneAmerica—the integration and adding new clients—and delivering over a 30% return on that acquisition. We are active and looking for Retirement roll-ups, but we do not see anything imminent. That goes to what Mike and I have been talking about: with the excess cash we generate, the expectation is that we will deploy it into the highest value, which is buying the company we know—Voya Financial, Inc.—through share repurchases. Michael Augustus Ward: Thanks, Heather. And then on the Wealth business, you said revenues up 12%. How is that going so far and how much of that is driven by organic conversion versus markets? Overall, how is the reception in terms of turning on the advice switch? Heather Hamilton Lavallee: You are right. Our focus there is on revenue growth, and that is the metric we are looking at for success. It has been just ten months since we stood up this office and we are really pleased with what we are seeing. I will turn it to Jay to elaborate. Jay Stuart Kaduson: If we look at the Wealth business and where we have a right to win—between the roughly 10 million customers we have through our Retirement business and equal that through our Employee Benefits and benefit-focused business—and looking at the request for advice, in my career this is probably the loudest employers have been in seeking advice at the workplace. We are well positioned. When we service our customers the right way through Retirement and Employee Benefits, we build their trust. That trust translates to the ability to bring advice to the workplace. Because that advice is being sponsored by employers and plan sponsors, and we have an existing relationship and solution with that client, we think we have a unique advantage to continue to build lifetime value for our customers. That also allows us to connect into Matt’s business where he is helping us build some unique solutions in the marketplace. When you look at the overall Wealth Management business and how we have been building it, we have been building it through recruitment of our advisers. We are happy with the early development and productivity of those advisers. The tools we have onboarded have helped us create efficiencies. There is more and more demand for digital self-service, which is a future component of our build. I like where we are at. I also like that the build is sitting inside our 39% margin in our Retirement business. Overall, a really productive build for us and aligned with where our employers and plan sponsors are looking for advice and guidance. Operator: Our next question is from Alex Scott with Barclays. Please proceed. Alex Scott: Hey, thanks for taking it. I have one follow-up on Stop Loss. I heard a comment that we are two years into a two-year journey, and that sounds like next year you would be back at targeted margins. I want to understand if I am hearing that correctly and the timing associated with that comment. Maybe help us understand how we get there. Even if we give you the benefit of the doubt on some of the reserve development, it still seems like we are a decent amount above where you would be targeting right now. Do I have that right? Anything you can tell us about the IBNR or something you are seeing to help us put numbers behind your optimism? Heather Hamilton Lavallee: Alex, thanks for the question. I will start with the thematics and then toss it over to Mike. You are right. When all of this started coming out of COVID and we saw the impact on the broader industry, we have always said we expect this to be a two-year journey and not something that was done in one year. We really like the progress. As Mike mentioned, we are pricing the business to be back within target loss ratio. That is the goal we have laid out. We will see how things progress through the year, but we are confident in seeing that improvement. Alex Scott: Follow-up question related to a couple of peers engaged in a merger of equals. Both of them were much smaller peers in terms of their group retirement businesses, but it does indicate an increase in importance on scale. Where is Voya Financial, Inc. situated relative to that competitive positioning? As a result of some peers scaling up, do you see any more fee compression in the competitive environment? Are you expecting to see that? Heather Hamilton Lavallee: I appreciate the question because it gives me an opportunity to highlight that our businesses are firing on all cylinders and the scale we have. In Retirement, we are a top-five provider in the space. The acquisition we did last year with OneAmerica now serves close to 10 million participants. We would not be a scaled provider if we could not operate at a 39% margin for ten years. The expansion into Wealth Management is the right strategy where we are building on a core foundation. In Investment Management, two years of outpacing the industry in terms of organic growth, delivering strong investment performance, fees holding up well, and improving margins—those are signs of scale. It is really about client demand in the market and the fact that we are winning, retaining business, and delivering for them. In Employee Benefits, you are still seeing sales growth in the core business while we are on this margin improvement plan. We like our position in the market. It is also supported by a solid balance sheet. We do not have a lot of noise in our balance sheet. We generate a lot of free cash flow, and we have scale where we play. Operator: You have reached the end of our question and answer session. This will conclude today’s conference. You may disconnect your lines at this time and thank you for your participation.
Operator: Good morning, ladies and gentlemen, and welcome to the Flotek Industries, Inc. first quarter 2026 earnings conference call. At this time, all lines are in listen-only mode. If at any time during this call you require immediate assistance, please press 0 for the operator. This call is being recorded on Wednesday, May 6, 2026. I would now like to turn the conference over to Mike Critelli. Please go ahead. Mike Critelli: Thank you, and good morning. We are thrilled to have you with us for Flotek Industries, Inc.’s first quarter 2026 earnings conference call. Today, I am joined by Ryan Ezell, chief executive officer, and Bond Clement, chief financial officer. We will begin with prepared remarks on our operations and financial performance followed by Q&A. Yesterday, we released our first quarter 2026 results, full-year 2026 guidance, and an updated investor presentation, all available on our investor relations website. This call is being webcast with a replay available shortly afterward. Please note that today’s comments may include forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from our projections. For a full discussion of risk factors, please review our earnings release and most recent SEC filings. Please also refer to the reconciliations in our earnings release and investor presentation for non-GAAP measures. With that, I will turn the call over to our CEO, Ryan Ezell. Ryan Ezell: Thank you, Mike, and good morning to everyone. We appreciate your interest in Flotek Industries, Inc. and your participation today as we review our first quarter 2026 operational and financial results. In 2026, Flotek further positioned its industrialized pivot and transformational growth storyline through the continued execution of its corporate strategy. Driven by the power convergence of innovative real-time data and chemistry solutions, as shown on slide 3, Flotek has laid the foundation for a data-driven growth trajectory built on diverse recurring revenue, high-margin services, and proprietary technologies that create value for our customers and improve returns for our shareholders. The strategic transition of the company into a data-as-a-service business model continues to gain momentum while expanding the total addressable market for the company. As a result, Flotek’s data analytics segment grew exponentially while our differentiated chemistry segment outpaced the market in a challenging environment through an unwavering commitment to safety, service quality, innovation, and total value creation. Now, before I discuss the company’s vantage point on the evolving geopolitical and macroeconomic dynamics within the sector, I would like to touch on some key highlights for the first quarter referenced on slide 4 that Bond will discuss later in the call. Company total revenue grew 27% compared to 2025, highlighted by 295% growth in data analytics, which was the highest quarterly revenue for data analytics in the company’s history. Industry technologies revenue increased 13% despite three-year lows in completions activity in North America, which was also the highest quarterly revenue in over seven years. Company gross profit climbed 25% versus 2025. It is impactful to note that data analytics accounted for 50% of the company’s gross profit versus 8% in the prior-year quarter, marking a major milestone in Flotek’s transformation. Total company adjusted EBITDA grew 44% year over year. Flotek’s XSpec Analyzer was named Product of the Year at the 2026 Analyzer Technology Conference. Finally, 2026 guidance builds upon a multiyear trend of revenue and profitability growth as the company executes on its strategic initiatives to provide long-term resiliency and profitability as shown on slide 5. Most importantly, these results were achieved with zero lost-time incidents in the field operations. I want to thank all of our employees for their hard work and commitment to safety and service quality in achieving these outstanding results. Now turning to the larger picture for the energy and infrastructure sector, we share the viewpoint that the ongoing situation in Iran will have impactful and potentially long-term implications on global supply and energy security that will demand action. The structural disruption in the Middle East has catalyzed a fundamental shift in supply-side dynamics, establishing a higher baseline for energy security and recalibrating the risk profile for regional supply. As cumulative production deficits and reductions in strategic reserves are trending towards 1 billion barrels, we expect increased investment in localized oil and gas developments, while geographies that do not possess resources look to rapidly diversify energy security exposure. All of these factors point towards a fundamentally tighter energy market than what existed just 60 days ago and support a stronger commodity pricing environment for increased upstream activities. Layering in the expanding power demand driven by AI, data centers, and industrial reshoring, combined with the reliability issues of an aging transmission infrastructure, the expectations for tailwinds within the energy sector further strengthen. North America is already showing early indicators of recovery. Completions activity white space has all but disappeared for 2026, with spot work interest increasing throughout the remainder of the year. Our legacy pressure pumping customers continue to capitalize on the portfolio diversification opportunity provided by the demand for remote power generation. Flotek is poised to support emerging customers with products and services that help protect their assets while optimizing their operational performance and fuel efficiency. With multiyear waiting lists for turbines and reciprocating engines, protecting these capital-intensive investments is critical along with enabling reliability standards that exceed the greater than 99% uptime requirements. Transitioning from the macro view, let us dive into the details starting with slide 9. I want to spotlight the remarkable progress in our data analytics segment. We saw service revenues increase 785% in 2026 versus the first quarter of 2025, driving gross profit margin to 75% versus 38% in the prior-year period. This strong growth is powered by our flagship upstream applications Power Services and Digital Valuation, both of which are generating significant contracted wins and a robust recurring revenue backlog shown on slide 10. Highlighting these wins are: first, 21 Power Services measurement units added since closing our original PowerTech deal. These are in addition to the primary long-term PowerTech contract assets. There is a 27-unit order from a large OFS customer with an expanding distributed power fleet to monitor field gas for power generation and digital evaluation of fuel quality and consumption. A 15-unit order from a major midstream customer for real-time crude and condensate quality measurement. And also a deployment of a smart skid rental to a major IOC to optimize gas quality with real-time blending of field gas and CNG, which is one of the first applications of its kind. We also deployed rental assets to support our large utility recovery power contract in Montana. This momentum has accelerated with these new contracts, expanding our expected backlog for the remainder of 2026 to $34.1 million and our three-year expected backlog to more than $90 million. Power Services led this growth, further reinforcing our shift towards high-margin recurring revenue streams. Flotek’s Power Services has evolved from a novel analytical approach into a transformative platform for the energy infrastructure sector that we call PowerTech. What began as advanced analytics has grown into a comprehensive end-to-end fuel management platform, redefining performance standards and operations within the sector as shown on slide 11. Our expanding portfolio of patents and field-proven use cases position Flotek as a leader across the natural gas value chain. When considering the velocity of our measurement, we deliver unmatched real-time fuel monitoring, conditioning, blending, and engine control to optimize performance and safety for behind-the-meter distributed power operations. The success of Flotek’s Power Services applications is expanding rapidly as we expect to have proprietary real-time analyzers on more than 50% of the currently active North American e-frac and natural gas-powered fleets by year-end. Additionally, on March 3, 2026, Flotek announced its first contract within the utilities infrastructure sector, seen on slide 12. Leveraging our patented PowerTech platform, Flotek will partner with leading distributed power providers to coordinate installation of up to 50 megawatts of state-of-the-art power generation equipment, including advanced gas distribution and smart conditioning systems, to support critical federal disaster recovery initiatives. We are pleased to announce that we have initiated phase one of the project, which includes the mobilization of 12 megawatts of distributed power combined with our proprietary gas conditioning and distribution skids to the in-field staging area while the site prep work is completed. First power is expected in 2026. Now let us transition to slide 13 and dive into our second upstream application, digital valuation. This groundbreaking use case sets a new standard in the oil and gas industry, delivering unprecedented transparency and minimizing enterprise risk for producing wells like never before through real-time digital twinning of the custody transfer process. In 2025, Flotek reported a historic milestone in natural gas measurement. The XSpec spectrometer became the first optical instrument to achieve the stringent reproducibility and repeatability requirements of the oil and gas industry standard for custody transfer, GPA 2172, also known as API 14.5. We believe the XSpec’s speed, accuracy, durability, and qualification under the rigorous measurement standards outlined in GPA 2172 will provide a significant advantage in discussions with prospective customers as we aggressively expand its manufacture and field deployment. In March 2026, the XSpec Analyzer was named Product of the Year at the 2026 Analyzer Technology Conference, further exemplifying its differentiated capabilities. Since completing our digital valuation pilot program in 2025, we exited the year at 25 active units deployed. Furthermore, 2026 is off to a great start with that number more than doubling to 57 units currently deployed or contracted for delivery. It is clear that execution of our transformational strategy to grow the data analytics segment with upstream applications is gaining traction. What is most important is what it means for our stakeholders and investors. First, our DAS-driven strategy ensures predictable, recurring revenue and cash flow, delivering stability and long-term value. Secondly, our proprietary data technologies and superior measurement accuracy enable velocity and decision control that establish a high barrier to entry, secure client loyalty, and support our value-based service model. Finally, long-term, high-margin subscriptions position Flotek for sustained growth and margin expansion, driving significant shareholder value over time. Lastly, let us move to our chemistry technology segment, which continues to deliver robust performance driven by the differentiation of our Prescriptive Chemistry Management services and our expanding international presence. Slide 15 highlights the resilient performance of our 13% increase in total revenue for 2026 compared to 2025 despite a 21% decline in the average North American frac fleet count over the same period according to Primary Vision data. As mentioned earlier, we believe we have reached the trough of the cycle and see encouraging indicators for cautious optimism in the second quarter of 2026 and beyond. We continue to closely monitor operational and supply chain risks to our international operations amid the ongoing conflicts in the Eastern Hemisphere. It is evident that our chemistry team has executed our strategy flawlessly. As we move into the second quarter of 2026 and beyond, the opportunities leveraging the convergence of Prescriptive Chemistry Management and data services move to the forefront through high-margin services that improve operator ROI. These advanced services include smart chem-add units, real-time flowback monitoring, and implementation of prescriptive geological targeting. Looking ahead, I am more confident than ever in Flotek’s momentum and our ability to drive sustained, profitable growth as we execute our transformative corporate strategy. We are firmly positioning Flotek as a high-growth technology leader in the energy and infrastructure sectors, accelerating innovation through the powerful integration of real-time data analytics and advanced chemistry solutions that are tailored to precisely meet our customers’ evolving needs. Now I will turn the call over to Bond to provide key financial highlights. Thanks, everyone, and good morning. Bond Clement: Our first quarter results build upon a record-setting 2025. We issued our initial guidance for 2026 that points toward continued strong growth in revenue and adjusted EBITDA. Quarterly highlights included achieving our highest quarter of total revenue since 2017, driven by the largest quarterly contribution from ProFrac in the more than four-year history of our supply agreement, and the second consecutive quarter in which our data analytics segment surpassed $10 million in revenue. Total revenues for the quarter increased 27% year over year and 4% sequentially, driven by continued strength in related-party revenue, which increased $21 million, or approximately 70%, compared to the year-ago quarter. Of that increase, roughly $14 million was related to chemistry revenue, while approximately $97 million was attributable to the PowerTech lease agreement. External customer chemistry revenue declined 33% year over year but was flat on a sequential basis, which we view as an encouraging sign. As Ryan touched upon earlier, we expect external chemistry revenue to increase in the second quarter amid improving customer engagement, reinforcing our belief that completion activity levels are stabilizing and may be in the early stages of recovery as we move through the year. Data analytics delivered another strong quarter with service revenue increasing significantly compared to the prior-year period. As highlighted on slide 9, service revenue accounted for 82% of data analytics revenue this quarter, up sharply from the year-ago quarter, helping to drive first-quarter data analytics gross profit margin to 75%, a 200 basis point improvement sequentially. Data analytics segment revenue represented 15% of total company revenue in the first quarter, significantly up from 5% in the year-ago quarter. As highlighted in the earnings release, we began mobilizing equipment related to our disaster recovery Power Services contract. As a result of this incremental revenue, we are forecasting sequential growth in data analytics during the second quarter. As noted on slide 12, we currently expect 2026 revenues from this contract to total approximately $12 million before consideration of the contract extension. Gross profit increased 25% as compared to the year-ago quarter. First-quarter gross profit as a percentage of revenue totaled 22%, which equated with the year-ago quarter despite the nearly $5 million reduction in the order shortfall penalty as compared to the first quarter of last year. SG&A expenses increased 10% year over year, primarily driven by higher non-cash stock-based compensation related to the timing of our long-term incentive grants. For context, our 2026 grants were issued in the first quarter, whereas the 2025 grants were made in the fourth quarter. On a sequential basis, SG&A declined 9%, reflecting lower legal and professional fees. As revenue continued to scale this quarter, we saw meaningful leverage in our G&A expenses. Excluding stock compensation, G&A declined to 8.7% of revenue, down from 10.5% in the year-ago quarter. That nearly 200 basis point improvement below the gross profit line reflects the efficiency of our cost structure and was a key driver in the year-over-year expansion in adjusted EBITDA margin in the first quarter of this year. Net income for the quarter was $4.7 million, or $0.12 per share, compared to $5.4 million, or $0.17 per share, in the prior-year quarter. The year-over-year decline was primarily driven by higher depreciation and interest expense related to the PowerTech acquisition that closed during 2025, as well as a higher effective tax rate. For the first quarter, our effective tax rate was approximately 26% compared to only 1% in the year-ago period, reflecting adjustments that we previously discussed related to our valuation allowance on deferred tax assets. As an update to our prior expectations, we now anticipate our effective tax rate to be in the range of 23% to 26% going forward, the vast majority of which will be non-cash, and that incorporates estimated state taxes on top of the 21% federal rate. Per-share metrics for 2026 as compared to the year-ago quarter also included a higher share count as a result of the 6 million shares issued in conjunction with the PowerTech acquisition in the second quarter of last year. The earnings release yesterday included our guidance for 2026. As shown on slide 4, we are estimating total revenue in a range of $270 million to $290 million and adjusted EBITDA in a range of $36 million to $41 million. The midpoints of these metrics imply growth of 18% and 17%, respectively, as compared to 2025. As a reminder, our adjusted EBITDA numbers presented in the release and the presentation, including our guidance, do not add back non-cash amortization of contract assets, which totaled $2.2 million in the first quarter and are expected to total $6.2 million for the remainder of 2026. On the balance sheet, you may note a new line item called “equipment credit—related party.” As part of the settlement of the 2025 order shortfall penalty, we agreed to receive a $12.5 million allowance from which we can place orders for construction of Power Services equipment. We have already placed POs for approximately $10 million of additional distribution and conditioning assets that we expect to have in service throughout 2026. We expect to fully utilize the equipment credit in 2026, which will represent the bulk of our estimated capital expenditures budget. We believe 2026 is shaping up to be a significant year for Flotek. Importantly, we have been able to deliver consistent growth metrics while maintaining a disciplined balance sheet and low leverage. As shown on slide 16, using the midpoint of our 2026 adjusted EBITDA guidance, our leverage ratio is approximately 1.0x based on net debt outstanding as of March 31. When you factor in the estimated $8.4 million in 2026 non-cash amortization of contract assets, we are less than 1.0x levered. We believe that this ultimately positions us to continue investing in growth while maintaining financial flexibility. With that, I will turn it back to Ryan for closing prepared remarks. Ryan Ezell: Thanks, Bond. Our first quarter 2026 results extend our multiyear track record of consistent improvement as we continue transforming Flotek Industries, Inc. into a data-driven technology leader. The data analytics segment delivered strong growth, highlighted by triple-digit increases in service revenue, expanding recurring revenue streams, and a robust multiyear backlog. Together with our resilient Prescriptive Chemistry Management services, Flotek is well positioned to gain additional market share and drive further top- and bottom-line improvement with substantial upside opportunities in our data-driven services. We remain committed to shaping the industry’s digital and sustainable future by leveraging chemistry as our common value creation platform. With our proven execution, expanding high-margin capabilities, and clear pathway to scaled growth, Flotek is poised for the next phase of value creation for our investors. We will now open the call for questions. Operator: Thank you. Ladies and gentlemen, to ask a question, please press star then 1. [inaudible] One moment, please. We will begin the Q&A. Operator: Our first question comes from Jeffrey Scott Grampp. Your line is open. Jeffrey Scott Grampp: Hey, good morning, guys. Wanted to start first, Ryan. The data point to get to 50% of your units on e-frac is impressive. As I recall, that was how things initially started with the ProFrac relationship and the value you brought there and then obviously scaling that to a much larger deployment with them. Is that kind of the goal or outcome on some of these deployments, or where are we in terms of traction or state of conversations to potentially expand the market opportunity with some of these customers? Ryan Ezell: Yeah, Jeff, that is a great question. I will try to give you some tangible color on our approach. In our Power Services business, we have taken a very methodical approach. Our background in monitoring hydrocarbon flow through our data analytics group has over 15 years of experience. We evaluated all the different basins, hydrocarbon and gas quality, and geography to look at where frac fleets are going to be, where potential data center locations will be, and other power generation sites, and we built our equipment and measurement techniques for those specific locations. We executed a pursuit plan of proving out our measurement, then moving into control, and then finally the distribution piece. What you are seeing now is we targeted our primary experienced customer base around e-frac and natural gas power. Most of these customers are now aggressively moving to other behind-the-meter distributed power platforms. Looking at our original work that started back in 2022 with ProFrac and the continued growth of North America’s e-frac and natural gas fleets, the team has done a great job working with a multitude of clients to get our Varex or XSpec units on location to start measuring gas quality, whether for evaluation and volume or for potential conditioning. That is always the first step in our sales process. We are proud to announce that between currently awarded work and recent POs we have received, by the end of the year we will have an analyzer on location for over 50% of these higher-tech fleets, which is a phenomenal step. We hope that evolves into our ability to further advance their conditioning and optimization, whether reciprocating engines, turbines, or even their natural gas pumping fleets. That is part of our execution of the sales process. Jeffrey Scott Grampp: Got it. Thanks for those details. My follow-up on the utility infrastructure side, appreciate you putting some data on the impact in 2026. Where do you think it potentially builds beyond this phase one and the 12 megawatts you put out? Are there additional phases under consideration, or is that your best guess for steady-state work on that contract? Ryan Ezell: Right now, after our initial assessment, there are two primary sites, which are phase one and phase two. Phase one is moving forward. We have mobilized the first 12 megawatts to location with our proprietary conditioning and distribution equipment and plan to have that site active in the back half of the year. We believe with the success of that project we will initiate phase two, which will probably be an additional 15 to 20 megawatts. The timing on that at best would be the very end of the year, probably more into the 2027 timeframe, given site prep requirements. We do expect this work to continue past just our six-month measurement part of the contract, but we will be conservative until we officially lock that down. We expect this project in the end to be between 25 to 30 megawatts with all of our gas distribution equipment on location. Another point to note, while our primary goals are growing Power Services in oilfield power, we are now seeing our tentacles stretch into other areas around data center growth and other behind-the-meter power generation opportunities. We are seeing line of sight into 200-plus megawatts of power generation and conditioning opportunities coming into the pipeline that we are actively pursuing through the back half of the year and into 2027. The pipeline is continuing to grow. We also have Varex units on two different large turbine gas-fired power plants where we are monitoring fuel quality, ethane percentage in natural gas, and optimizing fuel. A lot of exciting things are happening in Power Services for Flotek, which offer potential upside to our numbers in the back half of the year, particularly rolling into 2027. Operator: Thank you. Our next question comes from Rob Brown with Lake Street Capital Markets. Please go ahead. Rob Brown: Good morning. Congratulations on all the progress. Following up on the 200 megawatt pipeline you discussed, how does the cadence of quotes in that market work, and how does revenue flow through for you as those come into the mix? Ryan Ezell: Our primary goal is around gas conditioning and fuel optimization services. They come in different ways. Traditionally, we are the primary gas conditioning equipment for emergency power startups or peak power support because they are using very raw field gas that could be wet or otherwise out of spec. Often there are power shortages, so we can leverage relationships with current customers to help pass through or greenlight some of those power generation assets. Moving into data centers, those are longer-term plays where we improve fuel efficiency and, depending on geographical location and gas or pipeline quality, we come in heavily. Those tend to be on the longer end of our sales pursuit cycle due to engineering, proving out, gas testing, and sampling. Given we are already into May, those are more likely 2027 revenue-generating opportunities. However, there are opportunities to pull some forward, particularly where power assets are already on location and having gas quality issues. We are being pulled in to fix those problems. Rob Brown: Great. On the 57 units you have deployed or on order, how is the order book pipeline looking for that product? How do you see that building? Ryan Ezell: When we talked a few weeks ago, those numbers have more than doubled on issued POs, contracted deliveries, and field installations. It is not linear. We are seeing double-digit orders of units, we get them installed, and then amplified opportunities follow. We are having a lot of conversations with midstream providers, our main target audience. Once we get solid acceptance, we have two major midstream customers right now who, on any scale purchases, could triple the current active number with a couple of POs. We expect growth in a nonlinear fashion. Our target is roughly 150 units by year-end, which is within striking distance for custody transfer, with potential upside. Operator: Thank you. The next question comes from Gerard J. Sweeney with ROTH Capital. Please go ahead. Gerard J. Sweeney: Thanks for taking my call. On digital analytics, lots of opportunities are starting to emerge. As you look at the playing field, what do you need to solidify some of these orders and get the product out there further? Any choke points? Do you need more investment in sales, or is it more time-oriented and more testing? Ryan Ezell: Breaking down Power Services into phases—measurement, conditioning, then control and distribution—we are making great headway. The majority of measurement POs are already received, and we are manufacturing and deploying analyzers. The next revenue growth step is conditioning. We mentioned our first modified smart blending skid that monitors volumes of CNG to field gas for a flat BTU quality every five seconds—the first of its kind. Once analyzers are on location, adding equipment like that is the next step. As Bond mentioned, we have already issued POs to build out $10 million dedicated to the next generation of conditioning and distribution assets. We expect a big majority online by midyear, then you will see impact and uptake. We are investing at least $12 million into capital assets for conditioning, with potential for more as business cases arise. We have amplified our sales force and have open positions to put more salespeople on the ground. We picked up a couple of large-scale engineering firms involved in data center design-builds that are getting comfortable with our equipment. Lastly, we are in in-depth conversations with OEM engine providers—most are sold out for the next three years and are doubling or tripling capacity. We are far along on the ability to control engines by methane number and Wobbe index. Look for exciting things on that front, which could provide additional upside depending on distribution schedules in the back part of the year. Gerard J. Sweeney: Are those conditioning skids that you are building and expect to be available at midyear all factored into your guidance, or are they layered in as you go through the year into next year? Ryan Ezell: They are layered in conservatively. As they come online, we have objective utilization rates, with room for higher utilization and earlier in-service dates. This is a new frontier for us, and we are getting a better understanding. We lean conservative with opportunities to push asset utilization and returns. We have a positive outlook for the back part of the year. Operator: Thank you. Our next question comes from Donald Crist. Please go ahead. Donald Crist: Hope you all are doing well. Ryan, I wanted to ask about your comment on the U.S. pressure pumping business, either on the third-party side or with ProFrac. What are you seeing out there? We are hearing that a lot more pressure pumping is going to work. Thoughts around that and chemical sales, domestically or through ProFrac? Ryan Ezell: We break the year into first half and second half. A lot of potential items in the first half have now solidified. The majority of the spot-call white space is gone, particularly with our target customers using Tier 4 dual-fuel, direct-drive natural gas, or e-fleets. We are starting to see an uptick. Our expectation is external chemistry customers will continue to strengthen from Q2 onward. Visibility is improving for the back half, with spot work increasing. Availability of upper-tier equipment is almost gone now, which is good for the market. In chemistry, you have seen that play out with our related-party revenues with ProFrac. These fleets have moved into a lot of gas basins where they have strong positioning, and we picked up a lot of chemistry. We expect that to translate to other customers. Our external business was slightly impacted by weather in early Q1 and some normal repair and maintenance cycles, and now businesses are picking up. Importantly, there is a lot of optimism for our frac business in the Middle East. We got through trial stages and expect large deployments of our chemistry to hit the ground this quarter. We are now on two operating fleets and looking to pick up one to two more by the end of the year. You will see a lot of stage work coming from the Middle East, which will bolster our external chemistry revenue mix. Bond Clement: Don, to give you some numbers, when you look at first-quarter external chemistry revenue in 2025 of $22 million, we are obviously down this quarter. We believe by the end of the year we could see those kinds of numbers again on a quarterly basis—getting back to where we were last year—which would be a big growth driver from here. Donald Crist: That was my next question—whether the Middle East impacted the $14 million you generated this year or not. Any comments around that and getting chemicals into the Middle East, including logistics? Ryan Ezell: International business was extremely light in Q1 due to logistics delays. I have been very pleased with our team’s logistics plan. In Q2, we are seeing chemicals get on the ground a few weeks earlier than expected. Our biggest customer there is pleased, and we are seeing a pickup in total stages. Domestically, our chemistry team has done a phenomenal job finding opportunities and growing the business. We are seeing the convergence of our data and chemistry businesses play out, with opportunities to utilize our XSpec units and dual-channel Varex units for flowback control, crude, and gas quality, as well as our advanced real-time chem-add units that use micro-dosing on concentrates. These drive differentiation and significant growth opportunities for chemistry and high-margin data services. Operator: Thank you. Our next question comes from Gaushi Sriharan with Singular Research. Please go ahead. Gaushi Sriharan: Good morning, and thank you for taking my call. On gross margins coming in at about 22%, with data analytics already at 50% of gross profit, as the shortfall penalty mechanism resets through 2026 and data analytics share continues to grow, how should we think about the pace of gross margin expansion? Is a 25% to 27% range realistic by 2026, or are there other offsets we should model? Ryan Ezell: We have continued to see overall gross margin improvement even with reductions in the order shortfall penalty, which is now minimal. The factor that will play the biggest role is how much distributed power revenue runs through the P&L. When we pass through distributed power with one of our big customers, we typically have a minimal markup, which can dilute profitability, for example on our Montana contract. By contrast, our conditioning skids alone can come in at roughly 80% gross margin. Depending on how many additional megawatts move into the back half, it could dilute the consolidated margin. Bond Clement: In the back half, we expect margin expansion, but it is hard to forecast precisely because we also expect a sizable increase in external chemistry revenue, which carries lower margins, while data analytics grows at higher margins. We think 25% by the end of the year is possible, and we are forecasting gross margins to continue to move up. Gaushi Sriharan: Thanks. One more. On the Q1 deck, you flagged EPA flare monitoring enforcement being rolled back. Given that Veracal was generating around $2 million to $2.5 million at around 60% gross margin in 2025, how much of that demand has deteriorated versus what you originally expected? Is that business pivoting toward voluntary or international regulatory frameworks to offset that headwind? Ryan Ezell: There has been some softness domestically. We still have a fleet staying relatively busy, but as a rapid growth mechanism in the U.S., it has slowed. International deployments are picking up. In the U.S., New Mexico and Colorado are advancing utilization even as Texas softens. We are seeing customers move from mobile 14-day test pad use to ongoing operational efficiency and real-time tuning of flares to achieve lower emitter status and operational efficiency targets. That trend is occurring domestically and internationally. Operator: There are no further questions at this time. I will now turn the call back over to Mike Critelli for closing remarks. Mike Critelli: Thank you. Join us at our upcoming investor events. In May, you can catch us at the Louisiana Energy Conference for meetings and an investor presentation. In June, we will be at the Planet MicroCap 2026 conference at the Bellagio in Las Vegas. In August, we will be at EnerCom Denver at the Westin, featuring an investor presentation and one-on-one meetings. For all other events and the latest information, please see the events section of our website. Ryan Ezell: Thanks, everyone, for your time today and your questions. We will speak to you soon. Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.
Operator: Hello, everyone. Thank you for joining us, and welcome to Natural Resource Partners First Quarter 2026 Earnings Conference Call.[Operator Instructions] I will now hand the conference over to Tiffany Sammis, Investor Relations. Tiffany, please go ahead. Tiffany Sammis: Thank you. Good morning, and welcome to the Natural Resource Partners First Quarter 2026 Conference Call. Today's call is being webcast, and a replay will be available on our website. Joining me today are Craig Nunez, President and Chief Operating Officer; Chris Zolas, Chief Financial Officer; and Kevin Craig, Executive Vice President. Some of our comments today may include forward-looking statements reflecting NRP's views about future events. These matters involve risks and uncertainties that could cause our actual results to materially differ from our forward-looking statements. These risks are discussed in NRP's Form 10-K and other Securities and Exchange Commission filings. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. Our comments today also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP measures are included in our first intend to discuss the operations or outlook for any particular coal lessee or detailed market fundamentals. Now I would like to turn the call over to Craig Nunez, our President and Chief Operating Officer. Craig Nunez: Thank you, Tiffany, and good morning, everyone. I would like to start off by apologizing in advance for my voice. I'm a little under the weather today, and I will do my best to speak clearly so you'll be able to understand me. NRP generated $34 million of free cash flow in the first quarter of 2026 and $167 million of free cash flow over the last 12 months before accounting for the $39 million capital investment we made into our soda ash business during the quarter. Metallurgical and thermal coal producers continue to operate in challenging conditions, while soda ash producers are struggling amid what is arguably the most significant global supply glut in a generation. To date, we have not experienced any material impact on our Mineral Rights segment from the war in Iran. However, the closure of the Strait of Hormuz has caused some European countries to look at delaying coal plant phaseouts to ensure power security, similar to ongoing discussions in the United States. U.S. metallurgical coal prices are realizing a modest benefit from increased demand for safe haven domestically produced steel. At the same time, sharply higher diesel and shipping costs are compressing producer margins and any slowdown in global industrial activity resulting from elevated energy prices could put downward pressure on steel demand and metallurgical coal pricing. There is another second order effect worth noting. Higher oil prices may also lead to increased U.S. oil production and greater volumes of associated natural gas. Given the limits of LNG export capacity, a portion of this gas may become stranded domestically, placing downward pressure on North American natural gas prices and in turn, on thermal coal demand and pricing. Commodity markets have a way of solving one problem by creating another. In the soda ash market, higher energy and transportation costs, combined with war-related slowdowns in construction activity, particularly across Asia, have worsened condition for an industry already burdened by oversupply. While lower-cost U.S. producers may ultimately gain market share as higher cost competitors struggle, we have not yet seen clear evidence of this shift. In short, the war in Iran has taken an already difficult outlook for soda ash and made it worse. Despite these headwinds, NRP continues to generate substantial cash flow and remains on track with our deleveraging strategy. Although outstanding debt increased to $73 million during the quarter as we funded the $39 million investment in Sisecam, Wyoming. we subsequently reduced debt to $60 million by quarter end and have paid it down to $45 million as of today. Our objective is straightforward: pay off debt so that more cash can ultimately flow to unitholders. Before the conflict in Iran, both metallurgical and thermal coal markets were showing early signs of stabilization. While we cannot say with confidence that coal prices have reached a cyclical bottom, there are indications that the worst may be behind us. Looking ahead, my primary concern remains our soda ash business. Despite being one of the lowest cost producers globally, Sisecam Wyoming is currently struggling to generate positive free cash flow. While we were early to call for a soda ash downturn, I underestimated both its severity and duration. Our prior stress testing did not envision a decline of this magnitude. Had you asked me a year ago whether we would be making a capital infusion earlier this year, I would have said no. We are reevaluating our assumptions regarding global soda ash markets in general and Sisecam Wyoming in particular. Recent events have demonstrated that even low-cost producers like us are not immune to prolonged adverse conditions. Since acquiring our interest in Sisecam Wyoming 13 years ago, NRP has received $0.5 billion in distributions so far. Annual distributions have ranged widely from a low of negative $39 million to a high of $81 million, averaging roughly $38 million per year. As of today, those distributions already received have already delivered to NRP an 11% compound annualized return and a 1.6:1 multiple on our investment. Those calculations assign 0 residual value for our interest in Sisecam, Wyoming. In reality, the reserve information filed with our Form 10-K indicates that at current production levels, Sisecam Wyoming has approximately 50 years of remaining reserves. Simply extrapolating historical average distributions over the 50-year remaining reserve life would equate to roughly $1.9 billion of potential future distributions to NRP, an unusually long runway for a natural resource asset and an important component of NRP's intrinsic value. While our internal evaluation of our interest in Sisecam Wyoming is more detailed than that, incorporating projected pricing, cost, capital expenditures and the time value of money through discounted cash flow and internal rate of return calculations, these high-level numbers give you an idea of our view of the economic characteristics of that investment. Before turning it over to Chris to cover the financial results, I'd like to leave you with 3 key takeaways. Number one, NRP's financial health is not dependent on the success of Sisecam Wyoming. Our balance sheet is strong, liquidity is ample and free cash flow generation is exceptionally robust at this stage in the commodity price cycle. Preserving this hard-earned financial strength is our top priority. Number two, we remain on track to increase NRP unitholder distributions this year, but continue to caution that challenging environments for all 3 of our key commodities, particularly soda ash, increase the likelihood that some event or combination of events could push that timing back. I expect we will increase distributions in November, but will not be surprised if something happens to cause that to be delayed. We will continue to update you each quarter with our latest thinking. And number three, decisions to invest additional capital in Sisecam Wyoming will be evaluated through the same lens we would apply to all investments, maximizing NRP's intrinsic value per unit while maintaining a conservative bias and an appropriate margin of safety. Put simply, every dollar invested is a dollar that cannot be distributed to NRP unitholders today, and that trade-off must be justified by compelling returns on capital and the expectation of higher unitholder distributions in the future. For those of you who are new to NRP, I refer you to the unitholder letters in our annual reports for more information on our investment philosophy and approach to capital allocation. With that, I'll turn it over to Chris now to cover the financials. Christopher Zolas: Thank you, Craig. For 2026, NRP generated $20 million of net income and $33 million of operating cash flow. NRP's free cash flow in the first quarter of 2026 was negative $5 million, which takes into account the $39 million capital investment into Sisecam Wyoming. Of these consolidated amounts, our Mineral Rights segment generated $34 million of net income, $42 million of operating cash flow and $43 million of free cash flow in the first quarter. When compared to the prior year first quarter, Mineral Rights segment net income decreased $12 million and operating cash flow and free cash flow each decreased $1 million. The decrease in net income was primarily due to lower metallurgical and thermal coal sales volumes as compared to the prior year period and increased depletion rates at certain thermal properties. The declines in operating and free cash flow were also primarily due to lower metallurgical and thermal coal sales volumes, partially offset by higher recoupments of prior period minimum payments in the first quarter of 2025 compared to the first quarter of this year. Regarding our met thermal coal royalty mix, metallurgical coal made up approximately 65% of our coal royalty revenues and 45% of coal royalty sales volumes in the first quarter of 2026. For our soda ash segment, net income for the first quarter decreased $12 million compared to the prior year quarter. This decrease was driven by lower sales prices and volumes due to the oversupplied international soda ash market and weakened demand for flat glass. Operating cash flow decreased $3 million and free cash flow decreased $42 million when compared to the prior year period. These decreases were due to not receiving a distribution in the first quarter of 2026 as compared to receiving $3 million of distributions in the first quarter of 2025. In addition, free cash flow was further impacted by the $39 million capital investment made in Sisecam Wyoming in the first quarter of 2026. In March of this year, NRP and Sisecam Wyoming's managing partner made a capital investment into Sisecam Wyoming and NRP's pro-rata share was just $39 million. NRP does not expect distributions from Sisecam Wyoming to resume until soda ash market demand rebounds or there is a significant supply response to this weakened market. Moving to our Corporate and Financing segment. Q1 2026 net income, operating cash flow and free cash flow each improved $3 million as compared to the prior year period. These improvements to the Corporate and Financing segment were due to less debt outstanding, resulting in lower interest costs and less cash paid for interest. Regarding our quarterly distributions, in February this year, we paid the fourth quarter distribution of $0.75 per common unit. In March, we paid a special cash distribution of $0.12 per common unit to help cover unitholder tax liabilities associated with owning NRP's units in 2025. And today, we announced our first quarter distribution of $0.75 per common unit to be paid later this month. And with that, I'll turn the call over to our operator for questions. Operator: [Operator Instructions] Our first question comes from the line of Stephen Bols with Yellowgate Investment Management. Steven Balsam: Can you discuss the minus $7.8 million loss on the equity and earnings from the soda ash segment? Was that a cash loss? Or does it include interest? Maybe if you could just give a little bit more detail on that. Christopher Zolas: Sure. No, that was -- that was our proportionate share of their net income during the first quarter. So that was their operating results. That includes all cash and noncash amounts. That's the U.S. GAAP number. Steven Balsam: Understood. So that means the total loss would have been double that. And I guess I'm trying to get a sense of whether that included any impairments or whether that was sort of represented by -- I guess, maybe if you have an idea, I know it comes in the financial statements, what the gross loss would have been like... Christopher Zolas: Yes. We have a footnote in our 10-Q that you'll see later here today that will disclose anything significant, but there was no significant onetime items that were in the net income amount. Steven Balsam: Okay. I'll take a look for that. Also talked that coal sales volumes this quarter were down about 20%, 21% versus the prior year, also down versus fourth quarter. Just my quick look, it looks like Illinois Basin was down a lot, Northern Powder River and Gulf Coast. Was that anything there that you see going forward? Do you have a sense of -- obviously, you guys don't have the production forecast, but do you have a sense of -- was there anything in particular going on there or what you think what things should look like for the year ahead? Craig Nunez: Well, as you know, we don't talk about any lessees particularly. And when we talk about Illinois Basin, we only have one lessee. But we didn't see -- there was not a systemic problem in Illinois Basin that resulted in lower production. It was really an issue of mining on adjacent land that was not owned -- had minerals that were not owned by us during the period, and you'll see that happen sometimes. You'll see our production volumes drop and increase rather dramatically from period to period as the operator moves from adjacent property on to us and back off of us again. Steven Balsam: Got it. So nothing systematic. Craig Nunez: Correct. Steven Balsam: Great. I just wanted to have another financial statement question, a quick one is in the cash flow statements for cash flow from financing, there was $8.6 million spent during the quarter just on other items net. Can you talk about what that was? Christopher Zolas: Sure. The biggest item there is taxes associated with equity awards. So when we settle equity awards, they get net settled and those taxes get paid by NRP. Craig Nunez: That happens every first quarter. Steven Balsam: Got it. Okay. And I guess that's also just the payables are probably also just catching up with the bonuses or other payments from the prior year. One last quick question is just noticed there's noncash, but there was a major increase in depreciation. I think you mentioned that there was increased depletion rates in certain thermal coal. Anything else, the number went from $4 million to $7.6 million this quarter. Christopher Zolas: Yes. You picked up on it. I mean that's exactly right. We continually do evaluations of our economic tons estimates that drive that depletion calculation. And as we get information from our operators and our lessees about their future mine plans, it can cause some adjustments to our -- those estimates of economic tons. And that's what happened last year. There wasn't just want to add there. You noticed there wasn't any associated impairment that was recorded as a result of those adjustments. So... Craig Nunez: Again, that's something that fluctuates from time to time. Your estimated reserve quantities will go up, they'll go down. And as they do, it affects your depletion rate each year on your financial statements and on your tax returns. Operator: Our next question comes from the line of David Spier with Nitor Capital Management. David Spier: Regarding the soda ash JV following the contribution, how much debt now remains at the JV? Craig Nunez: $60 million? David Spier: $60 million in total, not to NRP share. Craig Nunez: Correct. David Spier: Got it. And then earlier, when you mentioned you're potentially reevaluating the soda ash business, is it possible to further elaborate on potential options? Craig Nunez: Well, let me tell you what I mean by reevaluating. So those of you who follow us for a long time, you know that we are very focused on scenario testing, stress testing our business, trying to evaluate every possible thing or a combination of that could undermine our results. We do the same thing on soda ash. And quite frankly, the environment that we find ourselves in now is one that is worse than we had envisioned in our stress testing. So we have gone back to the drawing board and said, okay, let's start from scratch because since this scenario, this market situation has fallen outside of what we had envisioned was realistically possible, we need to correct our thinking. And so we're just reevaluating everything along those lines. As far as what are the possible scenarios going forward with respect to Sisecam Wyoming, two reasons I don't have a lot of meat to give you on that. The first is that we don't yet know what the operator of the venture is going to do. They are working, they're evaluating, they're making their decisions of what they would like to propose as a plan going forward. And the second thing is this is a very competitive market that we're in, in the global soda ash business right now, even more competitive now than during normal times. So I don't want to elaborate too much on the possible avenues that the operator may be considering because it could give competitors information that would not be helpful for us for them to have. David Spier: And I'd still imagine even in the current depressed environment, it's the partnership's view that this, the JV is still a large component of the company's value right now. Craig Nunez: It is our view that this is a world-class asset that has a very long life to it with very significant cash-generating potential in the future that's going through a very difficult time right now. And so yes, I mean, look, the concern that we have that you should have, I think that everyone should have is, are there signals here that this asset has lost the the investment characteristics that attracted us to it in the first place as it is the future going to be materially worse than the past. This asset has been operating for over 60 years. And is the next 50 going to be materially worse than the last 60? And are we unrealistically cleaning to bright memories of the past, allowing ourselves to be misleaded misled into making more investments into the future that shouldn't be made. And we're trying to be very careful that we don't fall into that trap. Operator: We have reached the end of the Q&A session. I will now turn the call back to Craig Nunez for closing remarks. Craig Nunez: Thank you very much, operator, and thank you, everyone, for your participation on the call and the questions. And I wish you a very good day and look forward to speaking to you on our next call. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Greetings. And welcome to the electroCore, Inc. First Quarter 2026 Earnings Conference Call. At this time, all participants have been placed in listen-only mode. Please make sure to mute yourself. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. Earlier today, electroCore, Inc. published results for the first quarter ended 03/31/2026, and the press release is available on the company's website. Before we begin, I would like to remind everyone that members on the call will make forward-looking statements within the meaning of the federal securities laws made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements that are not historical facts should be deemed to be forward-looking, including without limitation any guidance, the company's outlook on second quarter and full-year performance, and its path to profitability. These statements involve material risks and uncertainties that could cause actual results to differ materially from those anticipated. For a list of risk factors, please see the company's filings with the Securities and Exchange Commission. electroCore, Inc. disclaims any obligation to update these statements except as required by law. This call contains time-sensitive information accurate only as of today, 05/06/2026. Joining us on today's call are Doctor Thomas Errico, one of the company's founders, investor, and independent chairman of the board of directors; Joshua S. Lev, interim president and chief financial officer; and Mike Fox, recently appointed chief operating officer. It is now my pleasure to turn the call over to Doctor Thomas Errico, electroCore, Inc.'s founder and independent chairman, for opening remarks. Doctor Errico. Thomas Errico: Good afternoon, everyone, and thank you for joining electroCore, Inc.'s first quarter 2026 earnings call. This is the first earnings call since we announced our leadership transition, and I want to take a moment to share how encouraged I am by the progress we have made executing that transition and by the momentum we continue to see across the organization. Since stepping into the role of interim president, Josh has provided steady, disciplined leadership while maintaining his focus on financial rigor. The alignment between our operational priorities and our financial strategy has been evident, and the organization has responded with focus and urgency. The strategy has not changed. The execution has not slowed. If anything, the focus across the organization has sharpened. At the same time, Michael Fox joined us as chief operating officer on April 13, bringing more than 35 years of commercial leadership experience across complex healthcare markets, including extensive work within the federal systems and the U.S. Department of Veteran Affairs. In just three weeks, his depth of experience has already provided valuable insights to strengthen our execution, particularly as we continue to expand our presence within complex government channels. He will introduce himself shortly. Importantly, this transition has not slowed us down. It has reinforced our foundations. We remain firmly committed to our strategy: driving growth within our covered entities, advancing our clinical and scientific leadership in noninvasive vagus nerve stimulation, and expanding our reach into the consumer wellness market. And we are doing so with discipline, managing the cost base, expanding the margin, and protecting our path to profitability. In our clinical work, we continue to invest in the evidence base that underpins our portfolio. That evidence remains a key differentiator as we engage with providers, payers, and partners globally as well as domestically, and it positions us to expand into new indications over time. In the VA, we have built a credible commercial presence over many years. We believe we have a meaningful long-term opportunity. Our commercial leadership is leveraging Mike's experience to identify new ways to be more targeted and more effective, particularly within a system where we still have substantial room to penetrate. On the consumer side, we are building a scalable, direct-to-consumer channel with increasing brand visibility, improving unit economics, and a growing network of influencer and affiliate partners that resonate with audiences seeking nonpharmacologic, science-backed wellness solutions. The early traction we are seeing reinforces our belief in the broader applicability of our technology and its relevance to everyday wellness. What gives me the greatest confidence is not just the progress itself, but how it is being achieved—with discipline, alignment, and a clear sense of purpose across the organization. We are building a strong foundation, and we are doing so in a way that positions the company for durable, long-term growth. While our search for a permanent CEO continues, I am confident that the team we have in place today—Josh, Mike, and the broader leadership group—is the right team to execute against our priorities and carry our strategy forward. I look forward to updating you on our continued progress in the quarters ahead. With that, I would like to introduce our new chief operating officer, Mike Fox. Mike, thank you. Good afternoon, everyone. I joined electroCore, Inc. for one reason. Mike Fox: I saw science-based platform technology with proven, published clinical outcomes data that support a credible commercial foundation and significant room for growth, particularly within the federal channels where I spent most of my career. Three weeks in, my conviction has only strengthened due to my greater exposure to the existing and future datasets being gathered. I have also had the opportunity to meet a vast number of talented colleagues within the company who are dedicated to the mission and the patients we serve. So rather than walk through my background, let me tell you what I have been focused on and where the opportunity exists. My major priority is the VA and Department of Defense markets. We have just scratched the surface of penetrating the addressable VA headache market. Though we have patients being treated with our products in VA medical centers across the country, we are not attaining the utilization level that meets the needs of our veterans and the dedicated providers caring for these military heroes. The majority of new patients identified and prescribed our products in Q1 are not spread across the country as expected or needed. That tells me two things: we have built real distribution, and we are nowhere near saturation. My focus is moving from facility breadth to facility depth—more prescribers per site, more patients per prescriber, more consistent customer experience across the system. My second priority is the broader federal channel. The VA is our largest entry point, but it is not the only one. The Department of Defense, across all service branches, represents an underdeveloped opportunity for both our prescription products and for TACSTIM. Given the heightened tempo of U.S. military operations abroad, the demand environment for noninvasive, drug-free, performance-supporting solutions has only intensified. I spent the last three and a half decades building relationships in these channels, and I intend to put them to work for this company. My third priority is operating discipline. Josh and the team have built a high-margin business—87% gross margin in Q1. You are starting to see operating leverage show up in the numbers. My job is to make sure that as we scale, incremental revenue translates to incremental bottom line, not incremental cost. I intend to grow this business efficiently while we establish electroCore, Inc. as a partner of choice to ensure market stability in the years ahead. At three weeks in, I trust that my experience in developing company growth and success is from decades of learnings and proven execution strategies. I am truly excited about the opportunity presented to me here at electroCore, Inc. There will be much more for me to share over the coming quarters, but I am convinced what is in front of us is real. I am truly grateful to be a part of this team. With that, I will turn the call back over to Josh to walk through the quarter. Josh? Joshua S. Lev: Thank you, Mike. Before I get into the details, let me tell you what this quarter represents for electroCore, Inc. We just delivered our highest revenue quarter ever—$9.6 million, up 43% year over year. Gross margin expanded to 87%. GAAP net loss was $5.3 million, and adjusted EBITDA loss improved by 24% to $2.3 million. That combination—accelerating top line, expanding margin, and improving adjusted EBITDA loss in the same quarter—is demonstrating operating leverage, and it is the clearest signal yet that we are executing on our strategy. We are reaffirming our full-year 2026 revenue guidance of approximately 30% growth. As I will discuss in a moment, the catalysts in front of us for 2026 give us conviction in that outlook. Now to the details. VA prescription device revenue grew 48% year over year to $7.9 million. Within that, prescription gammaCore grew 26%, and Quell sales surpassed their first $1 million quarter. Since we acquired the Quell assets from NeuroMetrix in May 2025, Quell fibromyalgia has generated $2.5 million in cumulative revenue, and we are still in the early stages of placing that product across the VA system. As of March 31, approximately 15 thousand VA patients have received the gammaCore device, which we estimate represents roughly 2.5% penetration of the addressable VA headache market. The underlying patient population continues to expand. A 2024 study published in JAMA Network Open of nearly 500 thousand U.S. veterans found that 8.2% of male and 30.1% of female veterans report a history of migraine—roughly three times the rate observed in the civilian population—and that approximately half of veterans with migraine also meet criteria for PTSD. The U.S. Department of Defense has reported more than 485 thousand service member traumatic brain injury diagnoses since 2000. Combining that with the Veterans Health Administration's emphasis on non-opioid first-line treatment for chronic pain, we believe the runway for prescription gammaCore adoption inside the VA is long and we are still early. Turning to our consumer wellness channel. Revenue reached $1.6 million in the quarter, up 44% year over year, with TruVega contributing $1.5 million, up 38% from Q1 of last year. This quarter, we deliberately tempered top-line growth in favor of efficiency, and the results are showing up in the unit economics. Our return on advertising spend, or ROAS, was approximately 2.37 in the period, a 14% improvement over the prior quarter. In plain English, every dollar we spent on TruVega-related media generated nearly $2.37 of revenue. That improvement was driven by a concentrated shift toward affiliate and influencer partnerships that reach consumers already interested in wellness and in vagus nerve stimulation specifically. Return rates remain in the 12% to 15% range, consistent with prior periods. We believe the macro environment for our consumer wellness offering is meaningful. The Centers for Disease Control reports that 24.3% of U.S. adults experienced chronic pain in 2023, up from 20.4% in 2019. Independent industry research projects the global noninvasive vagus nerve stimulation segment will expand at a low double-digit CAGR through 2030, supported by aging demographics, the regulatory and clinical pivot towards non-opioid pain management, and rising consumer awareness of the vagus nerve. We believe TruVega is well positioned to capture a meaningful share of that growth. Onto TACSTIM, our human performance product. While quarterly TACSTIM revenue has historically been variable, the underlying demand environment for cognitive performance and fatigue mitigation in the active-duty military and federal channels is robust and getting more robust. Given the heightened tempo of U.S. military operations abroad—particularly around remotely piloted aircraft, drone defense, and other extended-duration mission profiles—the need for noninvasive, drug-free solutions to support warfighter alertness, focus, and resilience has only grown. TACSTIM is the subject of ongoing research and evaluation across U.S. Air Force Special Operations Command, U.S. Army Special Operations Command, and the Air Force Research Laboratory, and was previously selected by AFRL for inclusion in the Real-Time Assessing and Augmenting Cognitive Performance in Extreme Environments program, a program designed in part to support multi-day transoceanic operations and long-duration remotely piloted aircraft missions. With Mike now leading our commercial operation, we see a meaningful opportunity in 2026 and beyond to deepen our engagement and to pull TACSTIM through as a more consistent revenue contributor. Now to the financials. Net sales of $9.6 million represented 43% growth over the prior year, driven by gammaCore and Quell within the VA and continued growth in TruVega. Gross profit was $8.4 million, with gross margin expanding to 87%, a 200 basis point improvement year over year. Research and development expense was $740,000, up modestly from the prior year, primarily reflecting work on the Acacia PTSD study. Selling, general, and administrative expense was $12.9 million. That number includes approximately $1.9 million of nonrecurring leadership transition costs and $300,000 of legal expense related to the ongoing IP litigation. Excluding those items, the year-over-year increase was driven by approximately $1.6 million of variable expense supporting our $2.9 million revenue increase—a clean illustration of how the cost base scales with the top line. Other expense of $276,000 includes interest associated with the convertible term debt financing we put in place with Avenue Venture Opportunities Fund. GAAP net loss in the first quarter was $5.3 million compared to $3.9 million in the prior-year period. This increase was driven primarily by the $1.9 million in nonrecurring leadership transition costs. Net loss per share was $0.59 compared to $0.47 per share in the same period last year. Excluding the leadership transition expenses, net loss per share was $0.37. And now I want to draw your attention to the 24% improvement in our adjusted EBITDA loss, which I believe is an important indicator of the operating leverage we are building. Adjusted EBITDA loss for Q1 was $2.3 million compared to $3.1 million a year ago. That improvement happened in a quarter where we incurred $1.9 million of nonrecurring leadership transition expenses. Strip those out and the operating leverage in this business is even more evident. Revenue grew 43%, adjusted EBITDA loss narrowed 24%. As we scale further, that gap is what gets us to profitability. A reconciliation of GAAP net loss to non-GAAP adjusted EBITDA net loss is provided in the financial tables in today's press release. Turning to the balance sheet. Cash, cash equivalents, and marketable securities were approximately $8.8 million at 03/31/2026, compared to $11.6 million at 12/31/2025. One important note on cash: Q1 is historically our highest cash-burn quarter of the year. This year, certain working capital items—primarily the timing of inventory and capital improvements to our Rockwell facility—may extend a portion of that burn into the second quarter. We are managing the balance sheet with discipline and remain focused on the operating efficiencies that support our path to profitability, while also evaluating available capital resources, including our existing shelf registration statement and at-the-market facility. Before we open the call for questions, I want to spend a minute on the catalysts ahead of us in 2026, because the runway from here is significant. First, R&D and nVNS as a platform technology. We continue to work towards a platform of products that can be sold through our established sales channels. This comes in the form of indications, products, and features. The body of evidence supporting the therapeutic potential of nVNS continues to expand. A new publication in Frontiers in Neuroscience entitled “Adjunctive noninvasive vagus nerve stimulation for chronic mild traumatic brain injury with comorbid post-traumatic stress disorder: a post hoc analysis” highlighted findings on the potential benefits of adjunctive noninvasive vagus nerve stimulation in patients with mild traumatic brain injury and PTSD. Additionally, approximately 20 participants have enrolled in the clinical study conducted by Acacia Clinics in collaboration with the Vagus Nerve Society designed to evaluate the safety and effectiveness of electroCore, Inc.'s gammaCore nVNS device as an adjunctive treatment for symptoms associated with PTSD. PTSD is a Breakthrough Device designation for us, and as the data matures, we expect it to become an increasingly important part of the platform story. Work on our next-generation TruVega and Quell mobile platform is underway. We are developing a mobile application designed to complement our consumer products, deliver more personalized features and user experiences, and—if done right—open the doors to recurring revenue, deeper engagement, and richer real-world data. Second, we remain focused on opening additional commercial channels for our products. Beyond continued VA penetration, Mike's mandate includes expanding our commercial and federal channel presence. This includes areas such as Kaiser, federal workers' compensation programs, TRICARE, and broader adoption within active-duty military and the Department of Defense. With TACSTIM already engaged across Air Force Special Operations Command, Army Special Operations Command, and the Air Force Research Laboratory, we see meaningful opportunity for additional federal contract activity. Quell continues gaining adoption through our current sales channel and primarily within the VA. Sales of the Quell product line surpassed $1 million in quarterly revenue for the first time in Q1 2026, bringing cumulative Quell revenue to approximately $2.7 million since the acquisition from NeuroMetrix in May 2025, including $2.5 million of Quell fibromyalgia sales in the VA. We have a small cohort of legacy Quell over-the-counter users and expect to relaunch the over-the-counter Quell Relief for lower-extremity pain later this year. Earlier this year, in January 2026, we launched TruVega in the United Kingdom, and as that business scales, we expect to evaluate additional markets. And third—perhaps the most important catalyst of all—our path to profitability. The math is straightforward: mid-80s gross margin, accelerating top line, increasingly disciplined cost base. We are not yet ready to provide a specific quarter for breakeven, but the trajectory is clear, and Q1 is the strongest evidence yet that we are on it. Taken together, these catalysts underpin our reaffirmed full-year 2026 revenue guidance of approximately 30% growth, which translates to roughly $9 million to $10 million of incremental revenue versus our $32 million in 2025. We expect the majority of that growth to come from continued VA prescription growth, where Q1 alone delivered prescription device revenue growth of 48% year over year. TruVega, growing in the high-30% range and improving in efficiency, is our next meaningful contributor. Quell Relief and our international launch represent newer contributions that we hope to scale through the back half of the year. TACSTIM, while historically variable, represents potential upside as Mike deepens our federal engagement. And our next-generation mobile platform is a 2027 contributor that opens the doors to recurring revenue over time. In short, three catalysts, a clear 30% growth bridge for 2026, and a longer runway into 2027 and beyond. With that, we will now open the call for questions. Operator? Operator: Thank you, Josh. We will now open the call for questions. For those joining via Zoom, there are two ways to participate. First, you may raise the hand icon located at the bottom of your screen. Selecting this will alert the operator that you would like to ask a live question, and you will be placed in the queue. Please note that you will remain muted until your question is called. Second, you may submit a question using the Q&A widget, which allows you to type your question directly. We will monitor and take questions submitted there as well. If time does not permit us to address all questions during today's call, a member of the Investor Relations team will follow up directly. With that, we will pause briefly to allow the queue to form. Our first question comes from Jeff Cohen at Ladenburg. Jeff, can you hear me okay? Oh, is this Destiny? Yes. Hi. This is Destiny on for Jeff. Thank you for taking our questions. Analyst: I just wanted to touch on the VA channel a little bit. And this is going to be a multipart question. But I am wondering, as you move away from breadth and more towards depth in this channel, could that—and does that—change the structure of your sales in terms of W-2 versus 1099? And then how are you balancing expanding into new sites versus additional patients treated, I should say? Joshua S. Lev: Hey, Destiny. Thanks so much for the question. Really appreciate it, and appreciate you being on the call today. I think the best person to answer that question will be Mike. Mike, why do you not jump in and let everyone know what your strategy is? Mike Fox: I think the question is a really good one because I do not believe it is an either-or. In my experience, we definitely want to expand breadth. We do have VA utilization across the country, but the depth in various specialties and within various patient-segment groups is not where it needs to be. I am a fan of the 1099 model. I am a fan of the W-2 model. In my history, as long as we have strong performers that are aligned to the strong mission to help our veterans, we can build a really strong opportunity around that. So I do not see this being a big change as much as just an internal alignment and opportunity for us to ensure that we are setting appropriate expectations and really holding people accountable to exceeding those expectations for both our gammaCore line and the Quell line. Destiny, does that answer your question? Analyst: It does. I think I would also just be curious, what is your target for number of clinics for 2026? Perhaps a range from that 200 number? Mike Fox: That depends as of right now when you say clinics—really like centers. Sorry. Yeah. The VA medical centers. It depends on what number you want to utilize. I have always been of the belief that if we are not helping at least 75% of the facilities across the country help the vets, we are not doing our job. I do not know about an exact number, but we need to get really active and have consistent utilization of our products in treating veterans in at least 75% of those accounts on a monthly basis. Analyst: Got it. And then as you go into these other DoD channels, how does that process compare to the VA centers? Is it similar in terms of timing? Mike Fox: It probably will be a different story altogether because, as you know, they are both under FSS, but the Department of Defense accounts, like the military health centers that also include the TRICARE component—so there are different segments. From a timeline perspective, the VA usually takes a long time to get things established due to FSS and working with our customers like Level Government Services for some things. On the Department of Defense side, I would expect by sometime Q3, Q4, with our plan in place, that we will start seeing additional revenue. Analyst: Okay. That is really helpful. Thank you. And then I guess transitioning over to wellness and TruVega, you had really strong ROAS this quarter, which I think is fantastic. I am just wondering if there were any changes to the marketing channels that played into that stronger ROAS. Joshua S. Lev: That is a great question. It is not so much a change in the marketing channels. It is more a function of where we are deploying and investing our resources. We made a more concerted effort to work on affiliate programs and influencers. You may have seen that Miranda Kerr posted about us earlier. That is a co-marketing opportunity that we have. Those are opportunities where we can utilize and leverage the marketing budget of other people so that they are actually the ones that are putting out the marketing messaging, and really what we are doing is using that halo effect to help lift our efficiency. So it is not so much a change per se. I would not say that we cut out any of the other channels or media that we have done before—just reallocating the resources and looking at it slightly differently. Analyst: Okay. And have you noticed any differences in repeat purchase behavior or anything of that nature compared to last year? Joshua S. Lev: Not yet, but we also have not given any formal guidance on that either. But I would say not yet for the time being. Everything seems to be business as usual. Analyst: Got it. Alright. That does it for me. Thank you for taking the questions and great quarter. Joshua S. Lev: Thanks. Operator: Okay. Our next question comes from Brookline. Analyst: Hi. Can you hear me? Joshua S. Lev: Yes. Perfect. Well, give me one second. Alright. First, Mike, thank you for joining the call and coming on board. We look forward to engaging with you. My question is on the Frontiers study on PTSD patients, which was very compelling. I was wondering if you can just remind us how this study is aligned with the ongoing Acacia trial. Is it set up the same, whether the outcomes are actually designed to capture the same kind of endpoints that were published in Frontiers, or something different? Joshua S. Lev: It is something slightly different. Both of them are there to capture patients with PTSD and the effects of utilizing noninvasive vagal nerve stimulation on patients with PTSD. The actual protocols themselves are slightly different, and you can look those up on the IRBs if you would like. But in essence, the idea here is how do you aggregate different data points that have PTSD being tested through a patient population. But the populations themselves may be slightly different. Analyst: Okay. And then I have a follow-up question. You know, there is a Breakthrough designation attached with PTSD. Are there any ongoing discussions with the FDA at this point? Joshua S. Lev: In previous quarters, we have given information and spoken about how we have gone back and forth with the FDA in terms of the best way to approach expanding the Breakthrough designation to what would be a formal PTSD label. What we are doing with a lot of the work now—primarily with the Acacia study and what you just referenced a moment ago—is really aggregating more data points and information that we can bring to the FDA to have a full rollout of what would be a PTSD indication and a full label. And we are doing that in conjunction with them in that they have identified, or articulated to us, what they are looking for. Based off that information, we are looking to take that and aggregate the dataset to provide to them to ultimately apply for the full-form PTSD label with them. Analyst: Thank you. Joshua S. Lev: Great. Thanks. Operator: Okay. Our next question comes from RK Ramakanth at H.C. Wainwright. Swayampakula Ramakanth: Good afternoon, Joshua. Welcome aboard. Michael Fox, hopefully, you guys are able to hear me. Joshua S. Lev: Yeah. You are great, RK. Swayampakula Ramakanth: I have two or three questions. So, Josh, just starting off—thanks for reiterating the 30% growth for 2026. But during the first quarter, there was a gain of 43%. What is it that is keeping you being more careful than needed? Do you see something that makes you—I am not going to use the word concerned—but makes you think that you need to wait for at least one more quarter to change that guidance? Joshua S. Lev: That is a great question, RK, and very astute. The answer is no. More than anything, we have internal projections, as you know, and the guidance that we provide to The Street is really based off what we believe organic growth could look like based off of, I would say, an outdated model, if you will. And what I mean by outdated is Mike, with all of his experience coming to the organization, has utilized strategy and tactics which have helped grow his former businesses three to four times in terms of top-line revenue. Mike has only been here since April 13. So it is not really necessarily “fair” to expect any more sort of direction or tactics as it relates to how he is going to be able to expand or accelerate that growth, what the timing of that growth is going to look like, and the resources required—which is the reason why we keep on going back to: we are going to provide more detailed guidance when it becomes available and more appropriate. It just has not been enough time for Mike to get his feet wet fully to be able to map out and say, okay, I think that we can grow by X, but it is going to take this amount of time. Swayampakula Ramakanth: Okay. Thanks for that. And Michael Fox, as I said, welcome aboard. I have a quick question for you. As you were doing your due diligence and trying to get on board, gammaCore has been marketed to the VA facilities for quite a while now, and we have about 200 centers actually not only acquiring but also stocking the product. From what you have done in the past, what are the easy pickings in the VA market to move that to a larger number of centers? And also, outside of the VA, can you name one or two additional federal centers where you think this can be an easy sell? Mike Fox: RK, that is a really good question. I would say from what I have seen in my experience in the VA, the best way to adjust within the VA is to work with them. The VA has a lot of standardizations. They have a lot of requests for algorithms and treatment protocols, medical necessity. I find a lot of companies do a lot of great things one account at a time, but they are not working with the leadership at the VISN level or national level to really place where this product fits and get support from the top down. I believe this company has done a phenomenal job of generating support from the bottom up. What I can do is continue to work with that information, that data, the patient-provided outcomes, and the information gathered by our providers in the VA to generate more opportunity for us to standardize treatment and put a really strong position for gammaCore within the federal space. On the second part of your question—outside of the VA—I know there is a large federal workers' comp opportunity with the number of headaches and migraines within that space. Within the Department of Defense, whenever you say Department of Defense, you have to think of places like Walter Reed, Sampson, Portsmouth Naval, and Balboa. There are so many medical facilities that treat patients post-deployment that come back with various things that we can definitely assist them with. It is early in my evaluation of where we will be able to start, but I promise for the Department of Defense it will be with key opinion leaders within the headache space on those active military bases, with a focus on the larger centers first—probably closer to the East Coast where we are based. Fantastic. Does that answer your question okay? Swayampakula Ramakanth: Yes. Yes. So if I can, one more question for you, Mike. In terms of Kaiser Permanente, this is one of those entities where you really need to generate internal KOLs that can drive the growth of the product. In terms of your experience, do you see that as a real way to do it, or are there any other levers that need to be pulled? Because I believe once you can get that going, it can be a good draw of the product. Mike Fox: That is a phenomenal question. I think a lot of companies ask the same thing about Kaiser because everyone knows the importance of a place like that for business. I cannot say all the details of our proposition to date with Kaiser. I have been on numerous calls. I am very excited about what we have going on in the key opinion leader support within Kaiser. It is a phenomenally well-organized and standardized group. So within the foundation, I know there is a lot of support. The work is definitely being done in the California market. We are going to address some other outside-of-California market opportunities. I do not want to get too deep into the Kaiser description of what is going to happen, but we have a very favorable position now that we need to really understand what is holding us back so we can generate that necessity from the customers. But you are right—we need internal providers requesting it. I can tell you from my early meetings, we have national headache and migraine experts already doing that. So we are in a good spot. We just need to tie a bow a little bit and figure out what is missing, but we have a lot of momentum there. Swayampakula Ramakanth: Perfect. Perfect. On the Quell fibromyalgia—you have $2.5 million cumulative in the VA market. How big is the opportunity within the VA for Quell, and is there any opportunity outside of the VA? Because it looks like it does not sell much on the over-the-counter sort of product. You have quite a bit of experience now with TruVega, and I am just trying to understand how that can be translated into Quell OTC, if I can call it that. Mike Fox: That is a great question, RK. Within the VA, obviously, we are treating some of the multidisciplinary types of patients with multifactorial disorders. Fibromyalgia, as a percentage, is a large population in the VA. I think there are some recent statistics—just on even active military, it is very low before they go on deployment, but upon return from deployment, it is about 11% just on active duty. So the veterans as a whole are always exposed to greater and bigger issues. It is a market by itself which is very scalable for a product like Quell. Outside of the VA, I think we all have family members and friends that have been dealing with fibromyalgia. It is a big opportunity outside there. But I would say—we talked about Kaiser a little bit earlier—I think those are the markets that would be the first ones to address as we continue to explore maybe some opportunities to talk with TriWest and Optum for some of the active military. That would be the plan at least for the immediate future, but we still have to verify what is the best spot. Joshua S. Lev: And look, RK, it is also definitely worth noting as we look at the number of facilities that are out there prescribing our products: the fibromyalgia product, Quell, is being prescribed in roughly a third of the number of facilities that are prescribing gammaCore. If you think about that in the context of overall runway—yes, we acquired the company a year ago. We have been able to grow that to about $2.5 million within the VA system. But within that VA system, it is kind of concentrated in one area of the region. We just need to spend more time being out there and selling. So there is a lot of opportunity, I think. Swayampakula Ramakanth: I do not mean to hog the call, but one last question. On TruVega, what learnings can you take from the U.S. to the U.K.? Joshua S. Lev: That is a great question. Right now, we have only launched in the U.K. with our TruVega 350. We have had a lot of inbound interest coming from the U.K., and people are expressing the need or the desire to get more access to noninvasive vagal nerve stimulation for the wellness space. It is early days there. We really just launched it in January, a soft launch, and what I mean by that is we are not actively putting any media dollars behind it right now. Really, what we are trying to get a better understanding of is what is the uptake for that TruVega 350 unit, and does it make sense? What is the business opportunity more broadly not just in the U.K., but also in other areas outside of the U.S., to go ahead and launch next-generation products like the TruVega Plus. Thanks, RK. Operator: Okay. Josh, our next questioner comes from Jeremy Perlman from Maxim. His first question is actually for Mike. He says, where does Mike see the easiest wins, lowest hanging fruit, and what are his longer-term plans to drive increased utilization? Mike Fox: Thanks for the question, Jeremy. In my vast four weeks of experience, the low-hanging-fruit opportunity is, as we discussed, the federal space. I think the VA and the unmet needs with our veterans is a key focus for us. We know we have a really strong opportunity there, and other federal channels like we discussed with the Department of Defense. I think long-term plans—it is a good starting spot, but we all know that it is a good place to help our veterans, and we have to go beyond. That is where I think the longer-term plan will be to continue to work on the commercial side and figure that system out as a way for us to expand beyond the FSS and GSA opportunity. So that is still in development, still being identified, but that is the long-term plan. We can develop the revenue for the long term. Operator: Okay. Jeremy's next question is: what does the Quell Relief commercialization rollout look like—target markets and users? Joshua S. Lev: Yeah, so great question. First and foremost, there is a small cohort of users of the Quell over-the-counter product that we inherited when we acquired the NeuroMetrix business. You may recall that when NeuroMetrix was at its peak, it was doing somewhere to the tune of $12 million of over-the-counter related business. A lot of that went away after the company decided to do a strategic pivot, had the FTC issue, and moved to a medical device called the fibromyalgia product. From our point of view, we are really focused on, number one, making sure that we can still service those legacy consumers that have been using the product or that may want to have continued using the product but it is no longer available. That is number one. And then number two is we need to do it in a way that makes sure that we have addressed all of the concerns that NeuroMetrix had regarding the FTC. In terms of overall rollout and commercial strategy, the answer is that it is going to be slow. It is going to be well defined, but it is going to be deliberate in that we are purposely going to make sure that we have addressed the concerns that NeuroMetrix had earlier in their iteration as an over-the-counter product so that we can go ahead and do it in a way that is balanced between offering Quell fibromyalgia—an FDA-cleared product—and then also a consumer product as well. Operator: Okay. And our last question from Jeremy: what are your leading indicators—pipeline, reorder rates, device utilization—that give confidence in continued acceleration and guidance? Joshua S. Lev: Again, Jeremy, great question. I tried to really focus on it at the end of my remarks, but we look at this in terms of three main categories of catalysts. The first is R&D-related—so that could be additional indications, right? PTSD, putting out additional information about how the studies are going. If you look and you follow our IR page, you will note that we put out recent press releases noting the Acacia study, noting some other publications where data is coming out to help support what could be the makings of a PTSD label. That would be an R&D effort. Products or features—we had mentioned, as it relates to TruVega and Quell, we are investing in our next-generation mobile application. Those features will allow us to hopefully get to a point where, if done correctly, we will be in a situation that we can have a recurring revenue model. So that would be the first catalyst. The second catalyst would be commercial—being able to go ahead and announce items such as launching TruVega outside the United States, as we recently did in January; the opportunity or the probability of ultimately launching the Quell Relief, or the Quell over-the-counter product, as its own standalone consumer product; hopefully Mike coming to the table and being able to announce either further traction within places like Kaiser or new orders within the federal marketplace like federal workers' comp, perhaps TRICARE—so opening up different commercial avenues. And then lastly, which is the third catalyst, would be the operating results. We believe that we can be in a situation where these other catalysts will help drive increased total addressable market and adoption of noninvasive vagal nerve stimulation devices, and we believe that acceleration will yield higher revenue growth and be done in a way where we are managing our costs and expenses. Ultimately, can we accelerate our revenue while also reducing our overall cost to do that—whether that is sales and marketing as a percentage of revenue as an indicator, and so on. Those are really the three main catalysts that we are focused on, and we will be very mindful as we go into the remainder of 2026 and beyond to give very specific milestone updates in these different areas that we are strategically focused on. Mike, I do not know if you have anything else you want to add. Mike Fox: And, Jeremy, I would just like to add—in my opening comments I talked about what I knew about the company before I got here as far as how clinically in-depth this organization is and what they are doing to continue to enhance the strength of the clinical platform. Since joining the company and seeing Doctor Stotts and his team and all the investigator-initiated research and the resources the company is putting behind the products to prove more and to do more is one of the reasons I am extremely excited about the future. So when you talk about it, it is not just always using the same product and just trying to get momentum. It is building the platform that Josh has talked about, and that is what I believe is a really exciting factor for this company—what you will see in the future that we really cannot discuss today, but the economics and the efforts are being placed here at electroCore, Inc. to make it happen. Operator: We have now concluded the live Q&A portion of the call. With that, I will turn the call back over to Josh for closing remarks. Joshua S. Lev: Thank you. I want to take the opportunity to thank our shareholders for your patience and your continued support. To our patients, our providers, and our partners, thank you for trusting us with your care and your time. And most importantly, to our team, thank you for showing up every day with the discipline and the ambition this opportunity demands. I really appreciate everyone's participation in today's call. We look forward to speaking with you again next quarter, and I wish you all a happy afternoon. Operator: That concludes today's call. Thank you for your participation.
Operator: Hello, everyone. Thank you for joining us, and welcome to Guardian Pharmacy Services, Inc.’s first quarter 2026 earnings release 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 1 to raise your hand. To withdraw your question, press 1 again. I will now hand the conference over to Ashley Stockton. Please go ahead. Ashley Stockton: Good afternoon. Thank you for participating in today’s conference call. My name is Ashley Stockton, Vice President, Investor Relations for Guardian Pharmacy Services, Inc. I am joined on today’s call by Fred Burke, President and Chief Executive Officer, and David Morris, Chief Financial Officer. After the close today, Guardian Pharmacy Services, Inc. posted its financial results for the quarter ended 03/31/2026. A copy of the press release is available on Guardian Pharmacy Services, Inc.’s Investor Relations website. Please note that today’s discussion will include certain forward-looking statements that reflect our current assumptions and expectations, including those related to our future financial performance and industry and market conditions. Such forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. We encourage you to review the information in today’s press release and quarterly report on Form 10-Q, as well as the specific risks and uncertainties discussed in our annual report on Form 10-K. We do not undertake any duty to update any forward-looking statements, which speak only as of the date they are made. On today’s call, we will also use certain non-GAAP financial measures when discussing Guardian Pharmacy Services, Inc.’s financial performance and condition. You can find additional information on these non-GAAP measures and reconciliations to their most directly comparable GAAP financial measures in today’s press release, which again is available on Guardian Pharmacy Services, Inc.’s Investor Relations website. I will now turn it over to Fred for commentary on the first quarter results. Fred Burke: Thank you, Ashley, and good afternoon, everyone. We appreciate your continued interest in Guardian Pharmacy Services, Inc. as we report our first quarter results and, importantly, our first full quarter operating under the new IRA framework. I am pleased to report that we delivered solid results. Before David walks through the financials, I would like to take a few minutes to discuss our transition under the IRA as it has driven more change in our industry in a single quarter than we have seen in decades. Let me start with the revenue impact. Across the industry, pricing on IRA-selected drugs in 2026 declined meaningfully. For our book of business, we experienced an approximately 60% decline in pricing across our branded drug mix that was impacted by the IRA. Despite this, we were able to deliver a 2% increase year over year in reported revenue. Absent the government-mandated price declines, we would have grown revenues by low double digits. On gross profit, as we outlined previously, absent our mitigation efforts the IRA would have represented approximately a $10 million headwind. Throughout the course of last year, we proactively took coordinated firm-wide actions, including direct negotiations with our payor partners, to offset this impact. Those efforts were realized in the quarter, allowing us to deliver double-digit gross profit growth, reinforcing the effectiveness of our approach and giving us confidence in our forward momentum. Beyond pricing and reimbursement, the IRA introduced meaningful changes to the operational mechanics of how transactions are processed across the system, as well as the timing and synchronization of cash flows. For instance, post-adjudication all IRA-branded drugs are now further processed through the Medicare Transaction Facilitator, an online platform established by CMS. This has introduced additional steps into the transaction life cycle and led to a delay in the timing of certain payments. Data submission formats also varied across manufacturers, adding even more complexity to the end-to-end process. Our team navigated these changes very effectively. Lastly, the IRA created a one-time working capital reset as it altered how and when cash moves through the system, resulting in long-term care pharmacies temporarily carrying higher receivables with less offsetting payables as the system rebalanced. This was fully within our capacity to manage given the strength of our balance sheet. We believe dynamics like these may prove far more challenging for smaller operators who lack the necessary systems and access to capital, further highlighting the advantage of scale in our model. Overall, as it pertains to the IRA, I can now say with confidence and clarity that the business performed in line with our expectations. Pricing is flowing through as we forecasted. Reimbursement is tracking in line and the new payment processes, while complex, are functional. We also maintained strong service levels, preserved customer relationships, and delivered on our financial objectives. Just as importantly, we demonstrated our ability to anticipate outcomes and execute on our strategy. Successfully forecasting this complicated and unprecedented environment speaks to the expertise of our teams and the strength of our data and analytics capabilities, which gives us greater confidence in how we manage and predict the business. Across the broader industry, there has been no legislative resolution to the unintended consequences of the IRA, and we expect continued pressure on our peers as they adjust. While there is still discussion around potential legislative relief, including a bipartisan bill proposing a dispensing fee to support long-term care pharmacies, we view the likelihood of any near-term action as uncertain at best. Returning to our quarterly performance, results were driven by strong underlying fundamentals, including solid resident and script volume growth, with a portion attributable to items not reflective of the core operating run rate. Results included approximately $3 million of discrete benefits to our gross profit from favorable payor dynamics and a manufacturer inventory credit associated with the IRA. These flowed through at a full incremental margin to adjusted EBITDA. Consistent with our commentary last quarter, items such as these cannot be forecasted as recurring in our underlying quarterly run rate. Looking ahead, one area of uncertainty for both us and the broader market is fuel. Given the current geopolitical backdrop, there is potential for continued volatility. While fuel is not a dominant cost for us, it is meaningful and can represent a headwind up to a few million dollars annually if prices remain elevated. Additionally, as we continue to scale, we expect to invest further in our organizational infrastructure, particularly at the regional level, to build out our bench to support our growth. Hence, we continue to make targeted hires to support our expansion efforts. As such, labor costs are likely to trend modestly higher over the remainder of the year. While we are very pleased with our performance in the quarter, it remains early in the year, and our underlying outlook for the business remains unchanged. We believe it is appropriate to remain disciplined, particularly in light of potential fuel cost pressures and necessary investment in our leadership. That said, we are updating our full-year adjusted EBITDA guidance to include the $3 million benefit recognized in the quarter. Our updated adjusted EBITDA guidance is $123 million to $127 million, up from $120 million to $124 million. Revenue guidance remains at $1.4 billion to $1.42 billion. Before I close, I want to briefly touch on the ongoing Omnicare process. With another entity now identified as a stalking horse bidder, there is increasing clarity around our potential path forward. While the process may continue to evolve, the current backdrop appears constructive for Guardian Pharmacy Services, Inc. From our perspective, periods like this can create some dislocation opportunity, where the foundation we have built, consistent service, and financial stability matters even more. In summary, this quarter reflects the work we did throughout the last several years to proactively position the business for successful implementation under the IRA. Our ability to navigate this transition underscores the strength of our platform and the advantages of scale, enabling us to effectively advocate for the value we deliver and ensure alignment with our partners, and we will continue to do so. Lastly, I want to recognize the work of our teams across the organization. I could not be more proud of the people driving this business forward every day at every level. With that, I will turn it over to David to review the quarter. David Morris: Thank you, Fred, and good afternoon, everyone. I will now walk through our first quarter results in more detail. The underlying drivers of our business continued to perform well during the quarter. Total residents increased 10% year over year to approximately 207 thousand at quarter-end, with assisted living residents continuing to represent roughly 70% of our mix. Script volumes were also strong, increasing 10% year over year. Revenue for the quarter was $336.6 million, reflecting contributions from organic growth, acquisitions, and continued plan optimization efforts. In addition, resident reenrollment drove a modest mix shift toward more favorable payors. Reported revenue was up 2%; absent the government-mandated price declines from the IRA, revenues would have been up low double digits year over year. Gross profit was $76 million, up 19% year over year and up 14% excluding the previously mentioned $3 million benefit. Reported gross margin was 22.7%; excluding the $3 million benefit, gross margin was 22%. As we turn to SG&A, I wanted to highlight several items. This quarter includes a $3.2 million legal expense related to efforts that ensure appropriate reimbursement across our payor relationships. We actively advocate for fair payment for services we provide, which at times includes pursuing resolution through legal channels. Subsequent to quarter-end, we reached a settlement related to this matter resulting in an $8.5 million cash payment that will be recognized as other income in the second quarter and will not be included in our adjusted EBITDA. SG&A also included legal and financing costs associated with our secondary offering, a little under $1 million. Stock-based compensation was $1.9 million in the quarter. As a reminder, we expect SBC to run at approximately $3 million per quarter for the remainder of the year. Adjusted EBITDA for the quarter was $29.8 million, representing 27% year-over-year growth and an 8.8% margin. Excluding the $3 million benefit, adjusted EBITDA grew 14% with an adjusted EBITDA margin of 8%. Acquisitions completed over the past two years are collectively contributing modest profitability in the quarter but remain well below our consolidated margin profile, dampening margins by approximately 80 basis points. The effective tax rate for the quarter was 26%, in line with our expectations, and adjusted EPS was $0.29 per share. Turning to the balance sheet, cash ended the quarter at $65 million, essentially flat with year-end. Strong operating cash flow funded normal course business activities typically associated with the first quarter, including annual bonus payouts and higher private pay AR balances. We also absorbed the one-time working capital impact associated with the IRA transition. Approximately half of the working capital used in the quarter was attributable to the IRA. Importantly, this reflects a temporary timing shift rather than a structural change and does not impact the underlying cash generation of the business. We expect working capital and cash conversion to normalize over the balance of the year. With a strong cash balance and minimal debt, our capital allocation priorities remain unchanged and on track, with acquisitions and greenfield investments at the forefront. We are in active discussions with acquisition candidates we believe are a strong strategic fit and expect to continue our historical pace of acquisitions in 2026. Looking ahead, as Fred mentioned, our revenue guidance remains unchanged at $1.4 billion to $1.42 billion. We are updating our adjusted EBITDA guidance to reflect the pass-through of approximately $3 million of discrete benefits recognized in the quarter, bringing our updated range to $123 million to $127 million, compared to the prior range of $120 million to $124 million. We remain confident in our underlying growth drivers and our visibility into the impact of the IRA. As the year progresses and we gain additional visibility, we will continue to assess our outlook. Lastly, I want to acknowledge our non-dilutive secondary offering priced in the quarter. The offering was for 6.9 million Class A shares, including the full exercise of the underwriters’ over-allotment option, and was priced at $31 a share. This transaction enhanced the liquidity of our stock and broadened our investor base. It also fully utilized the capacity under our prior Form S-3. As a normal course of business, today we filed a new shelf registration statement to maintain flexibility to undertake additional offerings in the future. At this time, we do not have any plans to utilize the shelf. In closing, we delivered a solid start to the year, successfully transitioned into the new framework under the IRA, and continue to execute against our long-term strategy. As always, I want to thank our teams across the organization for their continued execution and commitment, and to our investors for their continued support of Guardian Pharmacy Services, Inc. Operator, we will now open the call for questions. Operator: We will now open the call for questions. Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question 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 Brian Tanquilut with Jefferies. Please go ahead. Brian Tanquilut: Hey, good afternoon, and congrats on a solid quarter. Maybe, Fred, I will start. When I look at your balance sheet, you obviously have a good bit of cash still on the balance sheet, and you are generating pretty good free cash flow. How should I think about capital allocation between M&A now and other priorities, given how accretive these transactions are? And how should we be thinking about the pipeline that is in front of you for deals, both tuck-in and scaled? Fred Burke: Hey, Brian. Thank you very much. Appreciate it. Good to have you on the call. Yes, we do have a strong balance sheet. Our plan is to continue steady as we go. As David mentioned, we have a very robust M&A pipeline. We intend to maintain the pace that you have seen recently, even in the balance of this year, and we will continue to evaluate other ideas and alternatives with respect to that cash. Brian Tanquilut: Understood. And maybe, Fred, as I think about the dynamics that we are seeing in senior housing, which underpins your business, for example, the largest player has seen occupancy declines three straight months now, kind of bottoming out in April. What are you seeing in the market, and how is that translating into your relative strength versus what we are seeing occupancy-wise in terms of your revenue line? Fred Burke: Brian, as you know, Q1 is generally, for the industry, a challenge, and it can be exacerbated by weather, which we had a lot of in Q1. So yes, I think occupancy did not increase dramatically in Q1, but the underlying drivers remain absolutely intact. We have the silver tsunami occurring before our very eyes, and we are very positive and constructive on continuing the organic growth that we have always forecast. Brian Tanquilut: Awesome, Fred. Thank you so much. Fred Burke: Thank you. Operator: Your next question comes from the line of John Ransom with Raymond James. Please go ahead. John Ransom: Hey, guys. I am going to dazzle you with some SEC math, so, David, buckle up. If I look at the quarter, you got the $3 million good guy, but then you also called out a $3 million legal fee. So I assume that was included in adjusted EBITDA so that the two of those things would have been a push. Is that right, or am I missing something? Or did you add the $3 million of legal back to adjusted? I am sorry if you said that; I must have missed it. David Morris: Well, the $3.2 million legal is added back. And the $3 million good guy is included. John Ransom: Okay. Alright, thanks for clarifying that. And just secondly, Fred, stepping back, I know you talked about some of the second-order impact of the IRA on the competitive climate, but did this end up being a win, a tie, or a loss in terms of your relationships with your PBMs? And are we at least starting conversations around getting paid for some of the good value-based care work that you do, with interdicting script problems? Did any of those conversations come? Are they in development, or is it still, as far as the eye can see, a dispensing fee and a reimbursement-driven model? Fred Burke: John, I would characterize the discussions that we had with our payors as very, very positive and constructive. As it turned out, the IRA offered an opportunity for us to have very open and frank conversations that led to a deeper understanding of the value add that we are bringing and also an ability to start talking about the very things that you ask about. So while, in general, the reimbursement at the moment continues in the old model, we do have several things underway with respect to value-based reimbursement, and I am very pleased and optimistic that as we move forward, we will have more and more of that. John Ransom: Thanks. And just one other one. I know you have mentioned that one of the changes is the migration of profit under the new arrangement being closer to your 92/8 split between generics and branded. Are there any—just having the volumes and the gross profits more aligned—how do we think about that in terms of de-risking the business model and aligning your efforts to support relatively low-cost scripts? Fred Burke: Well, you have honed in on one of the objectives—I will call it ancillary objectives—that we had in this process, and it is something we have been working on now for years, and it came to fruition in this round whereby we would like to see the margin aligned more closely with the activity, i.e., the 90 that you mentioned. It is actually 92/8 for us, and we think that is important because, to the point you made, it does mitigate risk associated with future initiatives to lower branded price, such as NFP and, of course, the most [inaudible] as well. More importantly, it makes it a lot more runnable as a business when you align margin with activity and costs. So we are pleased with the progress we are making on that. John Ransom: Well, thanks so much. I will leave it there. Thanks. Fred Burke: Thanks, John. Operator: Your next question comes from the line of Allen Lutz with Bank of America. Please go ahead. Allen Lutz: Good afternoon. Thanks for taking the questions. For either Fred or David, it is great to see the strong performance in the quarter despite all the IRA headwinds that you talked about, Fred. As we think about the competitive landscape and some of the smaller players that were not able to go back to the PBMs and renegotiate the way that you were, I am curious—I know it is very early; we are talking about four or five months that some of these IRA changes have gone in—have any of the conversations you are having with prospects changed? Has there been more of an urgency from some competitors that might be looking to be acquired? If it has not yet, would love to get a sense of your expectations on how this evolves over the rest of the year. David Morris: Hey, Allen. It is David, and welcome. It is great to have you on here. Our pipeline, as Fred and I mentioned, continues to remain robust. I think it is early into the IRA process, and obviously there are legislative activities that have been going on, and we are advocating for the industry at large. So I would say no dramatic shift, and it is early. We are one quarter into the IRA implications, and the pharmacies that may not have some of the analytic capabilities that we have are probably still analyzing the results and impact on their business. We will continue to monitor this as we go through this year. Allen Lutz: Great. And then you raised EBITDA by $3 million. I think you called out that this is really a reflection of the discrete benefits that you received in the quarter. Fred, you talked a little bit about some of the risks from higher fuel costs and some more employee costs. As we think about what is embedded in the current EBITDA guide, is it fair to assume that those assumptions are contemplated in the guide? Or is this something that, if we get to the back half of the year and fuel costs remain high, could be a headwind? Just trying to get a sense of what is included and what is not included. Fred Burke: I think we can represent that our guidance includes what we believe will be our ability to overcome the fuel headwind, but we will have to be watching that carefully as we go. We feel very comfortable with our guide. Allen Lutz: Great. Thank you. Operator: Your next question comes from the line of Grayson McAllister with Truist. Please go ahead. Grayson McAllister: Hey, guys. This is Grayson on for Dave. I just wanted to follow up on the conversation around branded versus generic. Back to Ransom’s question, when we think about your efforts in 2025 to help get over some of the IRA impact and tie more of your economics to generics versus branded, can you give us a sense of where you are on that front and how much more runway you think there is for that to help offset the IRA impact through the rest of 2026? Fred Burke: Grayson, it is a great question. We are partially the way there. We have more work to do, but we are currently involved in doing exactly that with other of our payor [inaudible]. Grayson McAllister: And then just following up on the M&A pipeline, could you give a ballpark percentage of what percent of the pipeline is driven by national partners in certain markets that might be asking for your capabilities or asking you to expand into that market? And would it be safe to assume that has moved higher over the last year or two as the value prop has really played out? David Morris: Grayson, obviously our national accounts and their footprint and where they are asking for Guardian Pharmacy Services, Inc.’s services plays a key role in our M&A activity and targeting markets, and that is what has driven, in large part, our focus the last couple of years and continues to do so. Then we line that up with our pipeline of like-minded partners and target that and move from there. As we say, we have 13% or 14% of the U.S. assisted living market, so there continues to be a very large opportunity for us to continue to grow the business like we have historically. Grayson McAllister: Got it. Thanks, guys. Operator: Your next question comes from the line of Raj Kumar with Stephens. Please go ahead. Raj Kumar: Hey, good afternoon. Maybe just one on guidance. Appreciate the commentary on the M&A-related drag. As we think about that cohort, can you talk about what is embedded into guidance in terms of that 80 bps drag being consistent throughout the year, or any expectation of that improving as those operations continue to ramp? David Morris: Hey, Raj, it is David. Good to have you on the call. Keep in mind that this quarter it is dampening our EBITDA margins by about 80 basis points, but as the existing businesses and cohorts improve, we are going to be making additional investments and expanding continuously. So while the existing platform is getting better, we are bringing on new operators who will depress. Whether it is 80 basis points, 90, or 70, we see that trending only into 2026 and 2027 at a similar rate. Raj Kumar: Got it. And then as I think about organic growth and the opportunity ahead, any callouts from a quarter perspective in terms of new senior housing facilities additions or operational expansion in terms of growing capacity at existing facilities? Any color on that as some of these mature operations might be reaching a threshold for operational expansion? Fred Burke: I think it is steady as we go. Continuing the initiatives that we have spoken about previously will continue to bear fruit. There is, as David said, a lot of opportunity. We might be the leader in assisted living, but at 14% market share, there is a lot of opportunity out there for us. Raj Kumar: Great. Thank you. Operator: A reminder, if you would like to ask a question, please press 1 to raise your hand. We have no further questions in the queue. This concludes today’s call. Thank you for attending. You may now disconnect.
Operator: Good afternoon, everyone, and welcome to EVERTEC, Inc.'s First Quarter 2026 Earnings Conference Call. Today's conference call is being recorded. At this time, I would like to turn the call over to Loyda Montes Santiago of Investor Relations. Please go ahead. Loyda Montes Santiago: Thank you, and good afternoon. With me today are Morgan M. Schuessler, our President and Chief Executive Officer, and Karla Cruz-Jusino, Chief Financial Officer. Before we begin, I would like to remind everyone that this call may contain forward-looking statements and should be considered in conjunction with cautionary statements contained in our earnings release and the company's most recent periodic SEC report. During today's call, management will provide certain information that will constitute non-GAAP financial measures under SEC rules, such as constant currency revenue, adjusted EBITDA, adjusted net income, and adjusted earnings per common share. Reconciliations to GAAP measures and certain additional information are also included in today's earnings release and related supplemental slides, which are available in the Investor Relations section of our company's website at evertecinc.com. I will now turn the call over to Morgan M. Schuessler. Morgan M. Schuessler: Thanks, Loyda, and good afternoon, everyone. I am pleased to announce strong first quarter results that demonstrate continued execution against our strategic priorities and momentum across our core markets. Today, I will begin with an overview of our M&A framework and how it is translating into value creation across our portfolio, including the closing of the DIMENSA acquisition and an update on Sinqia and Tecnobank. Each of these reflects a different phase of the same strategy: acquiring, integrating, and scaling high-quality assets. I will then review our Q1 performance before turning the call over to Karla for a more detailed discussion of our financial results. Let me start by outlining how we think about M&A. Our framework is a disciplined approach built around a clearly defined set of criteria. First, we focus on scalable assets with transferable capabilities, which allow us to drive efficient growth while minimizing incremental costs and simplifying integration. Second, client overlap and regional footprint are also key considerations. We look to expand our services with the right financial institutions and retailers while leveraging the attractive growth characteristics of businesses with core operations across Latin America. Finally, we prioritize high-quality revenue and strong underlying economics, emphasizing profitable business models supported by recurring or volume-based revenue, with clear opportunities for accelerating growth and expanding margin over time. Consistent with that framework, I am pleased to announce that we have successfully closed our previously announced acquisition of DIMENSA. Strategically, this acquisition represents an important step forward, positioning us amongst the largest financial SaaS providers in the market. DIMENSA adds a meaningful set of new client relationships, strengthens existing key partnerships, and significantly expands our opportunities within the region as we continue to build a comprehensive one-stop-shop portfolio of services. This acquisition simultaneously supports growth and efficiency, reinforcing our leadership in existing markets while expanding our presence into new segments. From a financial perspective, DIMENSA is expected to be neutral to slightly accretive in 2026, reflecting integration timing and financing cost. We anticipate realizing synergies beginning in 2027, which should further enhance the earnings contribution over time. On a pro forma basis and inclusive of the synergies, the acquisition multiple compares favorably with EVERTEC, Inc.'s current valuation. Given we are only days into the acquisition, near-term focus is integration execution and building momentum through 2026 and beyond, as we expect DIMENSA to become an increasingly important contributor to our growth as we move forward. Turning to Sinqia, integration priorities remain focused on operational discipline, product rationalization, and go-to-market effectiveness. The commercial pipeline remains balanced between new customer wins and cross-sell opportunities, supported by our expanded product offering and modernization of existing platforms and the complementary acquisitions we have completed across Brazil. While the competitive environment remains active, our scale, local expertise, and increasingly integrated offering continue to differentiate us. As we look ahead, our focus remains on driving operational efficiency and positioning the business for sustained margin improvement over time. Lastly, Tecnobank continues to validate our M&A strategy in Brazil, strengthening our local scale and capabilities while demonstrating our ability to integrate founder-led platforms and position them for sustainable growth, reinforcing confidence in our ability to execute strategic acquisitions in the region. Now turning to slide seven, I will cover some highlights from our first quarter results. Revenue for the quarter was approximately $247.9 million, an increase of 8% compared to the prior year, driven in part by the full-quarter contribution from the Tecnobank acquisition as well as organic growth across most of the company’s portfolio. On a constant currency basis, revenue also reflected the continued stability in the underlying business momentum with approximately 5% year-over-year growth. Adjusted EBITDA for the quarter was approximately $97 million, up 9% year over year. Adjusted EBITDA margin was 39.1%, consistent with the prior year despite headwinds from the 10% discount to Popular and unfavorable foreign exchange dynamics. This performance reflects our continued focus on disciplined cost management and operational efficiency. Adjusted EPS was approximately $0.90, an increase of 3% from the prior year, driven by strong adjusted EBITDA growth and the lower share count reflecting the impact of the share repurchases completed during the current and prior year. From a capital allocation perspective, during the quarter, we paid approximately $3.1 million in dividends and repurchased approximately 700 thousand shares for a total of $20 million. We exited the quarter with approximately $130 million remaining on our share repurchase program, providing us flexibility going forward. Our liquidity remains strong at approximately $460 million as of March 31, allowing us to execute on the DIMENSA acquisition. Let me now provide an update on Puerto Rico beginning on slide eight. Merchant acquiring revenue grew 2% year over year, driven by higher sales volume despite a modest decline in spread that was consistent with our expectations. Payment Services Puerto Rico grew 6% year over year, driven by transaction growth and continued strength in ATH Móvil, primarily ATH Móvil Business. Business Solutions revenue declined approximately $6 million, or 9% year over year, primarily reflecting the 10% discount to Popular as well as a one-time hardware and software sale executed during the prior year period. Overall, economic conditions in Puerto Rico continue to remain stable, with positive trends in total employment and strong tourism performance. The unemployment rate remained at 5.6%, while consumer spending continued to demonstrate strength and stability. Turning to slide nine. In Latin America, revenue increased 32% year over year on a reported basis. Tecnobank delivered a strong full-quarter contribution in Q1, supporting revenue and EBITDA growth in Latin America and reinforcing the reacceleration we have been seeing in Brazil. We also benefited from continued organic growth across the region, including contribution from recent client wins. Results also benefited from a $6.8 million foreign exchange tailwind, primarily in Brazil. On a constant currency basis, our Latin America business grew 24% compared to the prior year. In summary, we are pleased with our first quarter performance and the continued progress across our strategic initiatives. Our diversification into Latin America continues to drive growth. Our Puerto Rico business remains resilient. And our disciplined M&A strategy continues to deliver tangible results. We remain focused on sustainable organic growth, disciplined capital allocation, and long-term value creation. With that, I will now turn the call over to Karla Cruz-Jusino, who will provide more details on our Q1 results and discuss our updated outlook for the remainder of 2026. Karla Cruz-Jusino: Thank you, Morgan, and good afternoon, everyone. Turning to slide 11, I will begin with a review of EVERTEC, Inc.'s first quarter results. Total revenue for the quarter was $247.9 million, an increase of approximately 8% compared to the prior year, driven by organic growth across most of our segments and the contribution from Tecnobank, which closed on October 1. On a constant currency basis, revenue growth would have been approximately 5%, with reported results this quarter benefiting from favorable foreign currency fluctuations primarily in Brazil. Adjusted EBITDA for the quarter increased to $97 million, up 9% year over year with a 39.1% margin, consistent with the prior year despite several known headwinds during the period. These headwinds included the full impact of the 10% discount to Popular as well as higher-than-anticipated unfavorable foreign exchange dynamics, particularly in countries where our contracts are denominated in U.S. dollars while our expenses are in the local currency, including Uruguay and Costa Rica. Our ability to maintain margin stability in this environment reflects continued execution against our cost discipline initiatives and a strong focus on operational efficiency across the organization. We continue to actively manage expenses while supporting growth initiatives, which have allowed us to absorb these headwinds and deliver consistent profitability. Adjusted net income was $56 million, broadly consistent with the $56.3 million in the prior year, reflecting strong adjusted EBITDA performance. This resulted in solid bottom line stability despite the anticipated increase in the adjusted effective tax rate to 10.9% for the quarter, driven by the continued growth in our Latin America operations, which are subject to higher statutory tax rates. Results also reflect higher operating depreciation and amortization as well as the impact of the 25% non-controlling interest from the Tecnobank acquisition. Adjusted EPS was $0.90, an increase of approximately 3% from the prior year, reflecting adjusted net income results and the benefit of a lower share count from repurchases completed during the current and prior periods. Moving to slide 12, I will now cover our first quarter results by segment. Beginning with merchant acquiring, revenue increased approximately 2% year over year to $448.4 million in sales volume. Sales volume and transactions both grew approximately 4%, with growth driven by new high-volume merchants as well as from existing customers. As expected, we did see a modest decline in spread reflecting a change in the mix consistent with more recent trends, which was partially offset by higher non-transactional revenues from pricing initiatives implemented in the third quarter of prior year. Adjusted EBITDA for the segment was $19.5 million with an adjusted EBITDA margin of 40.3%, down approximately 240 basis points from the prior year. The margin decline was primarily driven by higher processing costs related to CPI increases in our Payment Puerto Rico segment. Overall, performance continues to demonstrate stable demand and healthy underlying transaction activity. On slide 13 are the results for the Payment Services Puerto Rico and Caribbean segment. Revenue for the quarter was $58.4 million, an increase of approximately 6% year over year. Growth was driven by the continued strong performance in ATH Móvil, particularly ATH Móvil Business, which delivered double-digit growth in both volumes and transactions. We also saw solid growth in POS transactions, which increased approximately 8% year over year, supporting the overall segment performance. Results also benefited from higher services provided to our Latin America segment, reflecting organic growth and new client activity. These were partially offset by the 10% discount to Popular. Adjusted EBITDA was $34.7 million, an increase of approximately 11% from the prior year, with an adjusted EBITDA margin of 59.4%, an increase of approximately 240 basis points. Margin expansion was driven by incremental volumes, including increased volumes across merchant acquiring and Latin America. Overall, the segment delivered strong year-over-year growth and continued to demonstrate its ability to scale. Turning to slide 14, I will cover our results for Latin America Payments and Solutions, which was the largest contributor to revenue and EBITDA growth during the quarter. Revenue for the quarter was $110.3 million, an increase of approximately 2% year over year. Currency tailwinds in the quarter benefited segment growth by approximately $6.8 million, or 8%, mainly driven by the appreciation of the Brazilian real. On a constant currency basis, revenue growth for the segment would have been approximately 24%. Growth was driven by the full-quarter contribution from the Tecnobank acquisition, continued strength in Brazil, solid performance from Granada, and overall organic growth across the region. These were partially offset by the attrition impact from the MELI relationship, which will anniversary in the second quarter, and pricing actions to extend key client contracts. On a reported basis, adjusted EBITDA was $32.8 million, an increase of approximately 32% from the prior year, with an adjusted EBITDA margin of 29.7%, aligned with prior year. Adjusted EBITDA benefited from strong revenue growth but was partially offset by foreign currency headwinds from the higher-than-anticipated appreciation in markets such as Uruguay and Chile. Overall results reflect strong execution across the region, positioning the segment well for the remainder of the year. Moving to slide 15 are the results for our Business Solutions segment. Revenue for the quarter was $59.5 million, representing a decrease of approximately 9% from the prior year. This decline was in line with our expectation and was primarily attributable to the 10% discount to Popular that began in October of last year, as well as a nonrecurring hardware and software sale completed during the prior-year quarter. Adjusted EBITDA was $21.6 million, slightly below the prior year, reflecting the impact of the 10% discount to Popular. Adjusted EBITDA margin increased approximately 240 basis points to 36.3%, mainly driven by lower expenses associated with the prior-year one-time hardware and software sale, which came in at lower margins, as well as lower operating costs tied to nonrecurring projects executed in the prior-year quarter and cost-saving initiatives implemented within the segment. Overall, segment profitability remained resilient, with margin expansion reflecting disciplined cost management and the absence of prior-year one-time items. Moving to slide 16, you will see a summary of our corporate and other expenses. Adjusted EBITDA was negative $11.7 million for the quarter, representing 4.7% of total revenue, slightly below our expectations. Moving to slide 17, I will now review our cash flow performance. We continue to effectively manage our working capital, generating net cash from operating activities of $31.2 million during the quarter. Capital expenditures were $22.7 million for the quarter, reflecting ongoing investments to continue modernizing our platforms and enhancing our information security capabilities. During the first quarter, we paid down approximately $6 million in debt and returned approximately $23.1 million to shareholders through share repurchases and dividends. We repurchased 683 thousand shares for $20 million during the quarter, and as of March 31, we had approximately $130 million remaining under our authorized share repurchase program available through 12/31/2027. Our ending cash balance for the quarter, excluding cash and settlement assets, was $314.5 million, a decrease of approximately $17.3 million compared to year-end 2025. Turning to slide 18, our net debt position at quarter end was $826.2 million, comprised of $1.1 billion in total long- and short-term debt offset by $290.9 million of unrestricted cash. Our weighted average interest rate was approximately 6%, a decrease of approximately 55 basis points year over year, reflecting the benefit from debt repricing actions executed during the prior year and lower interest rates. Our net debt to trailing twelve months adjusted EBITDA was approximately 2.15 times, compared to 2.04 times a year ago, remaining at the lower end of our target leverage range of two to three times. This continues to reflect our disciplined approach to capital allocation and balance sheet management. As of March 31, and prior to closing the DIMENSA acquisition, our total liquidity, which excludes restricted cash and includes available borrowing capacity, was $450.3 million, slightly above the prior year. Turning now to our outlook for 2026 on slide 19. Based on our first quarter performance and the closing of the DIMENSA acquisition, we are increasing our full-year expectations. For 2026, we now expect reported revenue to be in the range of $1.073 billion to $1.085 billion, representing growth of 15.1% to 16.4% year over year. This outlook includes approximately 135 basis points of foreign currency tailwinds, driven primarily by the current appreciation of the Brazilian real relative to the 2025 monthly average exchange rate. On a constant currency basis, we now expect revenues for 2026 to grow between 13.8% to 15%, an increase from our prior constant currency range of 8.7% to 10%. This outlook reflects two primary factors: the inclusion of DIMENSA following its closing, and the continued solid performance across our existing businesses, which remains largely in line with the assumptions we previously shared. Starting with the legacy business, we continue to have a positive outlook supported by sustained momentum across payments, resilient performance in Puerto Rico, and continued growth across key Latin American markets. We are seeing consistent execution against our commercial and operational priorities, driven by a strong pipeline and disciplined cost management. As a result, our underlying assumptions for the core business remain intact, and in several areas are tracking modestly ahead of our initial expectations. With respect to DIMENSA, the updated outlook reflects the incremental revenue contribution from the acquisition. DIMENSA has strengthened our position in Latin America and aligns closely with our long-term strategic priorities. While the business currently operates at a modestly lower margin profile than our Latin America segment average, it has scale and strategic adjacencies that we expect to enhance our growth profile over time. For 2026, we are not assuming any synergies, as we expect the majority of cost and scale benefits to begin to materialize in 2027 and beyond. At the segment level, for merchant acquiring, we continue to expect mid-single-digit growth in 2026, supported by stable transaction activity, sales volume, and the implementation of key merchants. In Payments Puerto Rico and Caribbean, we also continue to expect mid-single-digit growth, driven by continued strength in ATH Móvil and POS volume, including processing services provided to the Latin America segment, partially offset by the impact of the Popular discount. For Latin America Payments and Solutions, we now expect revenue to grow in the high 30s on a reported basis and mid-30s on a constant currency basis. Finally, in Business Solutions, we continue to expect revenue to decline in the low- to mid-single digits, reflecting the anticipated reset following the Popular discount. Adjusted EPS is now expected to grow between 6.6% and 9.9% from the $3.62 reported for 2025, or between 5.2% and 8.6% on a constant currency basis. This outlook assumes an adjusted EBITDA margin of 39% to 40%. The updated range reflects the higher anticipated contribution from Latin America while continuing to incorporate the operating discipline and cost initiatives we have discussed in prior quarters. From an earnings perspective, our updated guidance assumes that DIMENSA will be neutral to slightly accretive in 2026, reflecting the balance between operating contributions, incremental interest expense, and integration timing. Below the line, our outlook reflects the post-transaction capital structure, financing costs, and related tax considerations. We continue to expect our effective tax rate to remain within a range of approximately 11% to 12% for the full year. Capital expenditures are also expected to remain at approximately $90 million. In addition, we expect to continue returning capital to shareholders through dividends and, when appropriate, share repurchases. Overall, our increased 2026 outlook reflects confidence in the performance of our existing business and the strategic and financial contribution of DIMENSA. While our focus in 2026 remains on integration and execution, we continue to see meaningful long-term value creation opportunities. In summary, we delivered a solid first quarter, increased our full-year outlook, and remain well positioned to execute against our priorities for 2026, supported by a strong balance sheet, disciplined capital allocation, and continued focus on execution. With that, operator, please open the line for questions. Operator: Thank you. We will now open the call for questions. The first question comes from an Analyst with Raymond James. Analyst: Hey, good afternoon. I appreciate you taking the questions. I wanted to start on the updated outlook. I appreciate the color on the expected EPS impact from DIMENSA, but as we think about the $40 million raise to the midpoint of revenue, can you give us a more detailed sense of how much of that is driven by the deal versus some of those other factors you talked about? Morgan M. Schuessler: Hey, thanks for the question. We do not break that out, as you know, historically, but let me give you a little bit of color on DIMENSA since you asked. We are extremely excited about the deal because this year it will be neutral to accretive, and our leverage ratio will still be 2.4 times or less. And in 2026, we have no synergy baked in. So what you are seeing in the guide does not include synergies, which we think we will realize in 2027 and 2028, which make the deal even more valuable. It is mostly, about 95%, recurring revenue. It gets us into two verticals we are not in today—insurance and risk—and then it also helps us double down on funds and banks. So we think there are a lot of synergies not only on the expense side, but also on the revenue side. But we cannot really break out the specifics on the numbers for the deal. Analyst: I appreciate that and the extra color. And then just a quick follow-up on the corporate revenue headwind. It grew pretty meaningfully year over year. Can you provide some color on what drove this in the quarter? And to the extent you can give any expectations, is this the right run rate for the year, or do you expect it to step down as we progress throughout the year? Karla Cruz-Jusino: Corporate revenue is impacted by, obviously, intercompany transactions that we have pulled out as part of some of the growth on some of our segments. So that is the expected run rate as we think about the next couple of quarters. Morgan M. Schuessler: Very good. Did we lose you? Analyst: That was all. Thanks. Appreciate it. Morgan M. Schuessler: Thank you. Operator: The next question comes from James Eric Friedman with Susquehanna. James Eric Friedman: Hi. I am sorry for the background noise. I want to know, Morgan, in terms of your prepared remarks and the observation on slide four about the transferability of the acquired assets, could you elaborate on that? In particular, the transferability—like in which use cases have you had the most success so far in transferring the assets either regionally or to other verticals? Morgan M. Schuessler: Yes, so what I would say is there are a couple of pieces to this. One is Sinqia specifically. A lot of what we have done in Brazil with Sinqia is primarily focused on the current market. We do have some products that we have exported, but it has been limited. PayStudio is the platform, Place to Pay is a platform, and Risk Center is a platform that we have localized throughout the region. That is what Santander is running on, that is what Banco de Chile is running on, Grupo Aval, and even BCR now in Costa Rica. Those are some of the platforms we have regionalized. In Brazil, we have done a good job of leveraging the platforms from a cross-sell perspective. Looking at this deal, they have four verticals; two of those verticals we are not in. They are in the insurance business with about 65% of the market. With the insurance companies, they are dealing with the brokers, the underwriters, and the consumers. They also have a risk management product for financial institutions. We are able to cross-sell our products to their insurance and risk customers and vice versa. On the fund side, we have a similar product with very different customers. We have the mid-size banks, and they have the larger banks. In terms of transferring capabilities, we think we can take LOT45, which is one of our products that we acquired with Sinqia, and bolt it on to the DIMENSA product. That is where we can take these products in Brazil and bolt them together. DIMENSA has a set of clients we do not have, and we have a capability they do not have, so we can broaden the value proposition. In that concept of transferability and platforms we can leverage across deals, we have those that we can leverage across the region, which are a lot of the payment products. Then within Brazil, we can combine some of these products that we have between Sinqia, DIMENSA, and Tecnobank, and there are large transferable client bases and integrations we can do to make these products work together. James Eric Friedman: That is a great answer. And then I want to ask, at a higher level, about the prospects of inflation—maybe for Morgan or for Karla. Some of the other payments companies are talking about it. Could you share your perspective on how inflation impacts the business, whether it is wage inflation or gas inflation? Any commentary at a high level on inflation would be helpful. Thank you. Morgan M. Schuessler: There are multiple impacts like in anybody's business. The good thing is that some of our payments businesses are tied to the size of the ticket, so if there is inflation in some of our merchant acquiring businesses, we actually get a lift from that. We see incremental revenue. Also, some of our contracts, particularly with banks, are tied to CPI. The way that interacts and plays is that in some ways we benefit from inflation. But just like any other business, when there is inflation and it impacts our costs, those are costs we have to absorb. I think we have demonstrated that when we have significant cost increases across our base—whether it is the $18 million discount we had to pass to Popular or inflation in general—we have done a good job of managing it and keeping our margins at about the 40% level. Operator: The next question comes from Vasundhara Govil with KBW. Vasundhara Govil: Thank you for taking my questions. Morgan, a high-level one on AI. Given the market's focus on potential for AI to reshape software economics, how do you think about that potential risk, and are you seeing appetite among financial institutions in Latin America to embed AI into their own workflows? How might that affect you? Morgan M. Schuessler: Great question, Vasu. We are bullish on AI generally—around software development and the enterprise overall. This year we have been very focused on appropriate governance and experimentation to see where we think the biggest benefits are. There are three areas where we think we will see a big impact, and that is not baked into 2026 guidance. I think that will impact us in future years. Number one is efficiency; it will change our cost structure, and we can be much more efficient in certain areas. The second is growth—the ability to add new features to improve our products so that we can grow faster. And the third is quality—the ability to have better quality and better SLAs because AI is helping how we manage service. Two examples: incident management—our Place to Pay product, which is our online gateway, is using AI to manage incidents. If there is a system problem, we can resolve the issue five to eight times faster using AI. It is better quality for our customers and keeps our systems up and running in a more durable way. On the growth perspective, in our Risk Center product—which users employ to monitor fraud—we are using AI to make it easier for users to interact with the software, so they do not have to know all the formulas to build logic. They can use natural language to create those rules more quickly. What we are seeing is 40% fewer alerts, meaning fewer false positives, and a 20% increase in fraud detection because the tools are easier to use and AI is flagging fraud more quickly. We are seeing real use cases across all those areas. We think it will help margins, help us grow faster, and improve our quality and service management. Vasundhara Govil: That is helpful. It does not sound like you think it is a big threat in terms of banks using AI themselves to disrupt some of the software products you offer today? Morgan M. Schuessler: No. I understand that theory with some software and technology companies, but we are processing financial transactions where there is reconciliation involved, settlement between financial institutions, and risk management products. We think the products that we provide we will be able to provide more quickly and more cost effectively. We actually think AI is a catalyst and a tailwind for our business. I do not see it as a negative. Vasundhara Govil: Thank you. That is very helpful color. And if I may ask a follow-up on the Banco de Chile partnership. I think last quarter you mentioned it is now operational. How is that tracking relative to your internal expectations, and how long before it ramps to its full run rate? How should we think about the revenue potential relative to the Santander relationship today? Morgan M. Schuessler: Great question. The deals we have talked about on previous calls are going as expected. Any benefits we see in 2026 are already baked into the guidance. All of the projects we have announced as far as new clients are going as anticipated. Operator: The next question comes from an Analyst with Deutsche Bank. Analyst: Hey, thanks for the question. A follow-up on DIMENSA—I get that you do not break out the inorganic contribution, so let me ask about historical performance. The former owner of DIMENSA disclosed some numbers for 2025 and 2024 in Brazilian reals. Is there any accounting consideration with net-to-gross revenue or anything we need to keep in mind when looking at the historicals? And if you look at the 2024 to 2025 growth rate they disclosed, it was pretty healthy. Was that all organic, or did DIMENSA benefit from some inorganic contributions? Any sense of how DIMENSA had been performing, leaving aside what exactly is baked into the 2026 guide? Morgan M. Schuessler: What I would say about DIMENSA is very similar to Sinqia. Some of their growth was M&A. If you look at their historical numbers, it includes some M&A. They did have some softness in their business a couple of years ago—just like we did—because of the general circumstances in Brazil. After Lula won, people were more cautious about IT spend, and they also had some legacy platforms that were outdated. Looking forward, we think there are cost synergies that are meaningful that we will take out in 2027—again, not included in 2026. We have talked to clients, and they are excited about us acquiring this asset because they want us to do with DIMENSA what we have done with Sinqia—modernizing the platforms so they can grow with the business—and they are looking forward to having multiple relationships with a vendor like Sinqia. As I said earlier, we think there are a lot of cross-sell opportunities. DIMENSA has some of the biggest banks in the funds business. We can bolt on LOT45 to provide other capabilities using some of our other products. We think the revenue synergies and the growth tailwind from combining these products, modernizing them, and cross-selling are compelling. Analyst: Got it, helpful. A higher-level one on capital allocation: You have done a bunch of acquisitions. Leverage is in a healthy spot, and you have about $130 million on the repurchase authorization. How should we think about prioritizing buybacks versus paying down debt versus other opportunities to continue building the business, especially in Latin America? Are there prospects for potential attractive deals you are looking at? How should we think about the priority of each of those in 2026? Morgan M. Schuessler: Great question. We just bought DIMENSA and we just bought Tecnobank, so we are very focused on integrating those, and that is a key priority for us. As you know, we are now a little over 45%—closer to 46%—of our revenues outside of Puerto Rico, and a lot of that has been M&A. We will continue to focus on M&A, and we continue to have a healthy pipeline, but right now we are focused on DIMENSA and Tecnobank. We believe the stock is attractive, as you can tell by our previous buyback. We are opportunistic. We understand the stock price is low compared to where it has been over the last year or two, and we will continue to balance that as we look at capital allocation. But right now, we will focus on the deals we have and continue to consider buying stock. Operator: The next question comes from Cristopher Kennedy with William Blair. Cristopher Kennedy: Good afternoon. Thanks for taking the question. You provided some good updates on the economy in Puerto Rico. Any comments or observations on some of the markets outside of Puerto Rico that you can talk about, given macro uncertainties? Morgan M. Schuessler: We do not have anything specific to call out. We are still confident in 2026, and even with some of the things that are going on in different markets, we do not see anything that we would specifically call out. Cristopher Kennedy: Understood. And last call you talked about one of the biggest pipelines for the company. Can you talk about how the conversion of the pipeline is progressing? Morgan M. Schuessler: Great question. Flipping to the organic side, we posted some pretty big deals—Banco de Chile, Grupo Aval, Financiera Oh!, among others we have talked about. We still have a very healthy organic pipeline, and we are optimistic this year that we will continue to have wins that we can announce throughout the year. Thanks for taking the questions. Operator: Thank you. That does conclude the question and answer session. I would like to turn the floor to management for any closing comments. Morgan M. Schuessler: I want to thank everybody for joining the call. We look forward to seeing you at conferences and speaking to you individually over the coming quarter. Everybody have a good night. Thank you. Operator: Thank you. That concludes today's conference. Thank you for attending today's presentation. You may now disconnect your lines.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to Blue Bird Corporation’s fiscal 2026 second quarter earnings conference call. I will now hand the conference over to Mark Benfield, Blue Bird Corporation’s head of investor relations. Mark, please go ahead. Mark Benfield: And welcome to Blue Bird Corporation’s fiscal 2026 second quarter earnings conference call. The audio for our call is webcast live on blue-bird.com under the Investor Relations tab. You can access the supporting slides on our website by clicking on the presentations box on the IR landing page. Our comments today include forward-looking statements that are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters we have noted on the following two slides and in our filings with the SEC. Blue Bird Corporation disclaims any obligation to update the information in this call. This afternoon, you will hear from Blue Bird Corporation’s President and CEO, John Wyskiel, and CFO, Razvan Radulescu. Then we will take some questions. Let us get started. John? John Wyskiel: Thanks, Mark, and good afternoon, everyone. Thanks for joining us today. It is an exciting day, and we are going to share our strong fiscal 2026 second quarter financial results and the significant progress we have made with our long-term strategy. Results for Q2 were once again very strong, and the Blue Bird Corporation team delivered outstanding sales and adjusted EBITDA, beating guidance for the fourteenth consecutive quarter. Razvan will take you through the details of our financial results shortly, but let us turn to Slide 6, where I will talk to some of the key takeaways for the quarter. First, Blue Bird Corporation beat guidance on all metrics for the quarter. Again, we continue to manage the volatility associated with the administration’s policy on tariffs well. Backlog for the quarter ended at just under 3,600 units, and operationally, all metrics are pointing in the right direction. The team has been able to execute on a day-to-day basis while simultaneously developing detailed manufacturing plans for the future, which I will talk more about later in this call. In terms of pricing, we remain extremely disciplined. Bus prices remain higher than the previous year and the previous quarter. As I have communicated prior, this process is just how we manage the business. In the alt power segment, our dominance continues. Our EV backlog is over 900 units extending into 2027. We remain exclusive in propane, which has the lowest total cost of operation, and our gas variant continues to be a leader. Again, alt power is the segment we created more than fifteen years ago, and we continue to maintain our lead position. Our manufacturing strategy is coming into focus, and I will talk more to that later in this presentation. It is focused on building our new plant, automating where we can get good financial returns, and ensuring production contingency, all of which builds a safe path for ongoing cost improvement through Industry 3.0 and 4.0 opportunities. And finally, we continue to manage the impact of the administration’s executive orders and tariff volatility. We are fortunate to be well positioned to navigate this situation to a margin-neutral outcome. As I have said on every earnings call, it is our objective to position this business to be a strong, long-term investment. Let us turn to Slide 7 and take a closer look at the financial and key business highlights for the quarter. We sold 2,148 buses in Q2 and recorded revenue of $353 million, slightly below last year. On the EV side, we sold 201 electric vehicles, just under 10% of unit volume, and our long-term outlook for EVs remains optimistic. Adjusted EBITDA for the quarter came in at $51 million, $2 million stronger than last year, and free cash flow came in at an outstanding $40 million. Razvan will talk more about this and our outlook later in this call. Turning to the right side of the page, I will touch on a few points. As discussed earlier, our backlog finished at a solid 3,600 units, so we remain close to the sweet spot. As you know, backlog is a function of orders and production, and if you look at the first half of the year, order intake was up 7% from the same period last year versus the market, which was down almost 4%. Overall, we are feeling good about our performance in the market, and I continue to reiterate the overall market fundamentals are still strong. The fleet is aging. We are coming into a heavy replacement cycle, and there have been industry supply issues the last few years leaving pent-up demand. The horizon ahead continues to look very good for school bus volumes. Year-over-year selling price for buses was up almost $6,400, but, of course, this also includes tariff recovery as part of our margin-neutral tariff strategy. With tariffs excluded, pricing was still up year-over-year, and parts sales totaled $28 million for the quarter. Alt-powered buses represented a strong 41% mix of unit sales for the quarter. Our powertrain strategy is a differentiator in the market and allows us to maintain stronger margins. For the quarter, we had 201 EVs booked and 912 EVs in our order backlog pushing into 2027. Again, we remain optimistic on EVs in the school bus sector. EVs are a perfect fit for school buses when you look at the duty cycle, available charging intervals, range, and the proven health benefits for our children. Rounds two and three of the Clean School Bus Program remain intact with funds flowing to our end customers, and the EPA has invited comments for 2026 funding, solidifying rounds four and five of the program consistent with what we have been communicating. We should understand very soon how and when the EPA will administer these funds. Overall, when you look at state funding and the fleet EV mandates, we believe this market will remain relevant. Finally, I have two very exciting items to report for the quarter. First, the $80 million MES contract with the DOE has been officially reconfirmed for funding, solidifying our manufacturing strategy and new plant. Second, we announced the acquisition of our MicroBird 50/50 JV. Similarly, this transaction is another key component of a profitable growth strategy. So let us turn to Slide 8. MicroBird has a rich history with three main segments: Type A school bus, commercial shuttle bus, and integrated EV powertrains. The acquisition was a safe and accretive play that brings with it two plants, 950 people, and best-in-class quality products. For Blue Bird Corporation, the transaction focused on a strategic value proposition for growth, technology, and efficiency. First, the transaction will allow us to consolidate sales and drive critical growth outside of the school bus segment by accessing the Buy America commercial shuttle bus segment, expanding our total addressable market. Second, it brings critical integrated EV technology through EcoTube, expanding our product offering, bringing vertical integration opportunities, and ensuring supply stability. Lastly, this transaction brings efficiencies through critical integration, which has already begun both organizationally and in business processes. Overall, this is an excellent transaction for the company, and it brings a tremendous opportunity for growth, technology, and efficiency. It has certainly been a busy quarter, with strong results and some exciting announcements. I would now like to hand it over to Razvan to walk through our fiscal 2026 second quarter financial results as well as our full-year updated guidance in more detail. Razvan? Razvan Radulescu: Thanks, John, and good afternoon. It is my pleasure to share with you the financial highlights from Blue Bird Corporation’s fiscal 2026 second quarter and year-to-date record results. The quarter end is based on a close date of 03/28/2026, whereas the prior year was based on a close date of 03/29/2025. We will file the 10-Q today, May 6, after market close. Our 10-Q includes additional material and disclosures regarding our financial performance. We encourage you to read the 10-Q and the important disclosures that it contains. The appendix attached to today’s presentation includes reconciliations of differences between GAAP and non-GAAP measures mentioned on this call as well as other important disclaimers. Slide 10 is a summary of the fiscal 2026 second quarter and first-half record financial results. It was a seasonally strong operating quarter for Blue Bird Corporation and a great continuation for the first half of the fiscal year, and we beat our guidance provided in the last earnings call on all metrics. In fact, we delivered the best Q2 profit ever for Blue Bird Corporation with $51 million in adjusted EBITDA. The team pushed hard and continued doing a fantastic job and generated 2,148 unit sales volume, which was just below prior-year level, driven by a lower number of production days in this fiscal quarter due to the way holidays fell in the year. As a result, Q2 consolidated net revenue of $353 million was $6 million lower than prior year. Adjusted EBITDA for the quarter was a Q2 record of $51 million driven by higher margins, partially offset by increased year-over-year health-care costs. Adjusted free cash flow was also a record Q2 of $40 million and $21 million higher than the prior-year second quarter. This result was due to continued strong profitability across all bus and powertrain types. Our liquidity position at the end of this quarter was a record $418 million. The first-half results are equally impressive. While units sold of 4,283 buses were just below prior year by 142 units, revenue grew to $686 million with adjusted EBITDA of $101 million, both record first-half results. Free cash flow was also very strong at $71 million, or $30 million above prior-year level. Moving on to Slide 11. As mentioned before by John, our backlog increased versus Q1 and continues to be solid at approximately 3,600 units, including over 900 EVs—a record 25% EV backlog mix. Some of them are already scheduled to be built and delivered in fiscal 2027 Q1. Breaking down the Q2 $353 million in revenue into our two business segments, the bus net revenue was $325 million, down $8 million versus prior year due to slightly lower volumes. However, our average bus revenue per unit increased by $6,145 to $151,000, or 4.3%. EV sales in Q2 were 201 units, or 64 units lower than last year as planned. Parts revenue for the quarter was up at a strong $28 million. This great performance was in part due to increased demand for our parts as the fleet is aging, as well as supply-chain-driven pricing actions and throughput improvements. Gross margin for the quarter was a seasonal record 20%, or 30 basis points higher than last year, due to pricing actions, manufacturing efficiencies, and quality improvements. Adjusted EBITDA of $51 million, or 14.4%, was higher compared with prior year by $1.6 million and 70 basis points. In fiscal 2026 Q2, adjusted net income was a record Q2 at $32.5 million, $1 million higher than last year. Adjusted diluted earnings per share of $1.00 was up $0.04 versus the prior year. Slide 12 shows the walk from fiscal 2025 Q2 adjusted EBITDA to the fiscal 2026 Q2 result. Starting on the left at $49.2 million, the impact of the bus segment gross profit in total was $1.7 million, split between volume and pricing effects, net of material cost increases, of $4.3 million and year-over-year health-care cost increases and lower overhead absorption of $2 million. The parts segment gross profit was flat, and our fixed cost and other income/expenses were also almost flat. Sum total of all the above-mentioned developments drives our record fiscal 2026 Q2 reported adjusted EBITDA result of $50.8 million, or 14.4%. Moving on to Slide 13, we have extremely positive developments year-over-year also on the balance sheet. We ended the quarter with a record $276 million in cash and reduced our debt by $5 million over the last year. Our liquidity is very strong at a record $418 million at the end of fiscal 2026 Q2, a $144 million increase compared to a year ago. Additionally, we have executed another $5 million tranche of share buybacks during fiscal 2026 Q2, part of our new $100 million program, with $90 million left to go. The operating cash flow was very strong for Q2 at $48 million, driven by great operational execution and margins and with almost flat working capital. On Slide 14, we want to share with you our updated fiscal 2026 forecast prior to the MicroBird acquisition and consolidation. Looking at Q2 actuals, we have beaten again in every metric our guidance this past quarter, and we had a very strong start for the first half of the fiscal year. We continue to forecast a strong second half at 15% to 16% adjusted EBITDA margins. We are increasing our EV outlook to 900 for the fiscal year and our pre-deal forecasted revenue to a range of $1.515 billion to $1.565 billion. Given also our beat in Q2, we are raising our forecast adjusted EBITDA to $230 million, or 15%, with a range of $220 million to $240 million. These numbers are prior to the MicroBird acquisition and second-half consolidation. On Slide 15, we want to share with you our updated fiscal 2026 guidance post close on April 1 of our acquisition of the remaining 50% of the MicroBird joint venture. As you can see on this slide, the first half of the year remains reported as unconsolidated JV. However, in the second half, we are now going to consolidate 100% of the revenue and the remaining 50% of the adjusted EBITDA for MicroBird. Building on the updated forecast for the year from the prior page, in Q3 and Q4, we are guiding to increase consolidated total revenue to $500 million and $560 million, respectively, driving the total year to $1.725 billion to $1.775 billion in revenue. For adjusted EBITDA, the Q3 midpoint is increased by $5 million and Q4 midpoint is increased by $10 million for a total year guidance of $245 million, with a range of $235 million to $255 million. Due to consolidation of 100% of the MicroBird revenue for the second half, and only 50% of the adjusted EBITDA, the adjusted EBITDA margin percentage is being updated to approximately 14% for the year. Moving to Slide 16, in summary, we are forecasting an improvement year-over-year to a new record with revenue up to approximately $1.75 billion, adjusted EBITDA in the range of $235 million to $255 million, or approximately 14%, and adjusted free cash flow of $100 million to $125 million, in line with our typical target of 50% of adjusted EBITDA and after accounting for the extraordinary CapEx of $25 million, with our 50% fiscal 2026 portion of the new plant investment funded by a reconfirmed DOE MES grant which is currently proceeding with the permitting phase. Moving on to Slide 17, we wanted to remind you of our medium- and long-term outlook prior to the MicroBird acquisition. Medium-term outlook was at $240 million adjusted EBITDA, which included $25 million for our 50% portion of MicroBird results. Our long-term target was to generate EBITDA of $280 million to $320 million, which included MicroBird with $30 million to $35 million. Moving on to Slide 18. We want to remind you of the growth potential we see for MicroBird, especially in the commercial shuttle bus segment in the U.S. with Buy America certification. We are driving towards $450 million in revenue midterm with $60 million in adjusted EBITDA. The long-term outlook is for $500 million to $550 million in revenue and $75 million to $90 million in adjusted EBITDA. Moving on to Slide 19, you can see our updated medium- and long-term outlook post MicroBird acquisition. What used to be our long-term target of $2 billion in revenue moved to midterm, with approximately $275 million in adjusted EBITDA. The long-term outlook is raised now to $2.5 billion in revenue, $325 million to $375 million-plus in adjusted EBITDA, or 14% to 15% plus. Now this is what we call profitable growth. We continue to be incredibly excited about Blue Bird Corporation’s future and now I will turn it back over to John. John Wyskiel: Thank you, Razvan. Let us move to Slide 21. I want to take this opportunity to remind everyone of our long-term strategy, which consists of four key elements and positions the company for the future. First, as an almost 100-year-old company, business continuity and long-term stability is a core element. This includes investing in and updating our manufacturing facilities and products. A great example is our new assembly plant, which I will talk to further in a couple of minutes. Infrastructure and competitive products are an essential part of our plan. The next element is a theme that has been consistent in the last few years: profitable growth. Of course, the school bus market is projected to grow over the next few years, and our new plant will allow us to capitalize on that. But for Blue Bird Corporation, it also means expanding our total addressable market by entering new adjacencies. The Blue Bird Corporation commercial chassis and the MicroBird Buy America shuttle bus are great examples. Margin expansion is the next element. This area focuses on advancing competitiveness and cost reduction. For Blue Bird Corporation, this means continuing our Industry 3.0 automation initiative, and the new plant will allow for further factory-of-the-future opportunities, including Industry 4.0 initiatives. The last area is putting the balance sheet to work. The MicroBird acquisition was a great example of this. Even after this transaction, Blue Bird Corporation continues to have a pristine balance sheet, strong liquidity, and solid cash flows. This will allow us to continue to be strategically opportunistic. We continue to have the ability to grow through acquisition or exploit vertical integration. Overall, we have a balanced strategy that positions the company for the future and delivers value to our shareholders. Let us turn to Slide 22. Earlier in the presentation, I spoke about the DOE MES grant, and now that it has been reconfirmed, I think it is a good time to provide some more details about our manufacturing strategy and our new plant. First, the new plant will be just under 1 million square feet, with an overall total investment of over $300 million, replacing our current 75-year-old plant. The $80 million MES grant will contribute towards this, and we are scheduled to start production in Q4 calendar year 2028. We thank the DOE for the consideration and confirmation of this project. This increased investment was a result of shifting our manufacturing strategy to build Type C buses in the new plant at a capacity of 9,000 buses per year on one shift. The original scope over a year ago was to build Type D. This shift to Type C is critical, as Type C is 90% of the market, 80% of our sales, and 70% of our people. This allows us to align our investment and improvements with the biggest, most competitive segment of the market. Our successful Type D bus will remain in the current facility. Critically, we have identified a number of automation use cases with strong returns that will be incorporated into the new plant at the start of production. We will also maintain Type C capacity in the current plant to protect volume as a start-up contingency. This will allow us to ramp up production at the new plant while production winds down at the old plant during an overlap period. This new plant will also enable further Industry 3.0 and 4.0 opportunities, providing a roadmap to continue our long-term cost competitiveness. This investment in critical infrastructure is part of the business continuity and long-term stability component of our strategy. We are very excited about the new plant and what it will bring to us in decades to come. Lastly, I want to finish up with the strong outlook we have for the business on Slide 23. As we have shown before, the fundamentals of the school bus segment remain strong, as shown on the left side of the page. We are moving into the replacement cycle for the high-volume period. We know there is pent-up demand remaining from the COVID period, and there are still over 180,000 buses over ten years old. Funding remains stable for this market. All of this contributes to a strong 6% CAGR over the next several years. With the addition of MicroBird, we now get the consolidation benefit of Type A school bus and the growth associated with entering the Buy America commercial shuttle bus market, as shown on the right side of the page. Combined, this move increases our total addressable market by 78%. When you add other contributors for growth, like the commercial strip chassis, the outlook gets even stronger. Profitable growth is a key component of our strategy. I will wrap it up on Slide 24. This great company and iconic brand is almost 100 years old. It has stood the test of time. We delivered outstanding results again in 2026, and we continue to demonstrate credibility by delivering on our targets. We are excited about the MicroBird acquisition and the new plant that we discussed today. Both are key components of our very important long-term strategy. Looking ahead, our strategy, discipline, and demonstrated execution will set this great company up for the future and deliver value to our shareholders. As always, I want to thank our employees, our dealer network, supply partners, and, of course, our investors. All are critical to our success. We remain excited about Blue Bird Corporation, and we have had a great start to 2026. This company is a great American story with such a rich history and exciting future ahead. Thank you. That concludes our formal presentation for today, and I would now like to hand it back to our moderator for the Q&A session. Operator: We will now open the call for questions. We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, 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 Eric Stine with Craig-Hallum. Your line is open. Please go ahead. Eric Stine: Hey, everyone. So maybe just wanted to start with MicroBird, timely since it recently closed. I know that the Plattsburgh plant is a big deal, and a big part of this and why now is the fact that in addition to Type A, you can go after this Buy America fleet market. Just curious, are you already going after that market? Is that an initiative where we need to see a few steps before that plays out, or how should we think about when that starts to contribute? And since you are on those lists, is that a near-term event that ramps? John Wyskiel: I will start. There are three main segments: FTA/FAA, large fleets, and retail. The retail side has already started; we have been working through that with dealers. On the FAA and FTA, which is the biggest segment, we have been working to get on contracts—both cooperative and state contracts. Activity has begun. We have won some contracts, and we are going to start working through that process. That puts us on a list for bids and ultimately for purchase orders to be materialized. So the process is underway. It is a near-term event that will ramp. Keep in mind, not every state is open in terms of contracts, so there is a phase-in period. Some contracts are in year two of five, for example. This will take some time to ramp, but it is coming. Razvan Radulescu: Maybe just to complement that, Eric, if you look at our long-term growth chart for MicroBird on Slide 18, you see the ramp-up between the current forecast, midterm, and long term. The vast majority of that growth comes from the shuttle bus segment, so you can correlate that. Eric Stine: Got it. That is helpful. For my follow-up, on EPA funding—there is a comment period and a lot of discussion, and investors ask about it. How do you see that playing out with the administration? Is it potentially more skewed to propane? Does it stay as is? Any thoughts would be helpful. John Wyskiel: A couple of things. I do not want to speculate because we do not know what will happen. Propane would be a great opportunity, especially since we are the only company that builds propane school buses. That is a possibility. For EV, who knows what they do with funding. Right now, they fund essentially the entire price of the bus. Maybe they reduce that, and if they do, it could be applicable to a larger number of buses, spreading it across more units, which would be advantageous as well. Operator: Our next question comes from the line of Michael Shlisky with D.A. Davidson. Your line is open. Please go ahead. Michael Shlisky: Good afternoon, and thanks for taking my questions. I was curious—you did not change your margin outlook all that much despite 90% of the buses going to this new facility, which I assume would be state-of-the-art with some substantial margin opportunities. Why not raise more? And as part of this process, do you need any CapEx at the old plant to accommodate those larger Type D’s, or is this all one big package of CapEx strictly about the brand-new building? John Wyskiel: I will start, and then Razvan will provide a bit more color. On automation, we have a number of use cases that will go into start-up at the new plant. We view the automation as upside in our longer-term outlook—that “plus side” you see in our targets. A big point, Mike, is the contingency we built in. Competitors have stumbled without start-up contingency in more mechanized or automated factories. We will maintain Type C capacity in the current plant to protect volume during start-up, which helps protect the downside while we pursue the upside. Razvan Radulescu: In terms of CapEx for the old building, it does not require any additional CapEx. It already produces both Type C and Type D today. Once Type C moves to the new plant, Type D will remain in the current facility, and it will also make room for more capacity in terms of strip chassis that we could ramp at that point. The CapEx we are talking about on this call is for the new plant. Michael Shlisky: Understood. A quick broad question about market share—do you believe that Blue Bird Corporation may have gained market share so far this year from what has been delivered and the orders you have taken? Do you think you may gain market share over the next few quarters? John Wyskiel: Our order intake has been positive. The market was down; we were up. From that aspect, it was positive. But I would not read too much further into it. It is only a half-year view, and we do not chase market share—that has always been our philosophy. Razvan Radulescu: Also, we operate now almost at max capacity on one shift, so production is more of a gating factor at this point. Michael Shlisky: Great. I will pass it along. Thank you. Operator: Our next question comes from the line of Christopher Alan Pierce with Needham. Your line is open. Please go ahead. Christopher Alan Pierce: Hey, good afternoon. Following along the lines of that last question—if you look at the alt power mix, it has come down a little bit over the past couple of years. Is that because you are able to deliver what the market wants and alt power is somewhat out of favor near term versus prior years, so you are delivering more diesel buses? Or should we think of it as short-term share fluctuations? John Wyskiel: Probably more short-term share fluctuation. Diesel is also a little bit heavier now in terms of market share, maybe due to new legislation coming in and potential prebuying. That could have an impact. Fortunately, we are strong in diesel too. Looking at our numbers, we are up, which proves we are competitive in that segment. Christopher Alan Pierce: Thanks. On absolute bus backlog—this second quarter versus prior years—you have described elevated backlog as unhealthy in the past. Can you remind us what a healthy backlog should be and what to expect as you come out of that aggressive ordering period? John Wyskiel: We always look at 3,000 to 4,000 units as the sweet spot. Too shallow and it is hard to schedule; too deep and you are vulnerable to inflation, tariffs, etc. The post-COVID period had unusually high backlogs that were problematic. Where we are now is more normalized. COVID may have helped flatten seasonality, which helps quality, production, and people. Mark Benfield: Chris, I will add: for us, one to two quarters of production visibility is really the way to think about that sweet spot in backlog. Christopher Alan Pierce: Great. Lastly, can you touch on Section 232 tariffs and raw materials—hedging, pass-through pricing—how do those pieces fit together? Razvan Radulescu: Thanks, Chris. We have been dealing with a medley of tariffs in the last year-plus, and Section 232 is one of them. We are managing that very well, targeting a margin-neutral outcome, as you can see from our results. We are working with dealers and customers on pricing to address some of those tariffs and, at the same time, working with our suppliers to mitigate or resource to minimize other types of tariffs. Operator: There are no further questions at this time. I will now turn the call back to John Wyskiel for closing remarks. John Wyskiel: Thank you, and thanks to each of you for joining us on the call today. Blue Bird Corporation has delivered a great start to 2026 with strong results, meeting expectations, and raising our guidance despite the challenging environment. With the fundamentals of the industry and the key elements of our strategy, I remain very enthusiastic for Blue Bird Corporation and its future. We look forward to updating you on our progress next quarter. Should you have any follow-up questions, please do not hesitate to contact our head of investor relations, Mark Benfield. Blue Bird Corporation continues to be stronger than ever and has an amazing future ahead as we approach our one-hundred-year anniversary. Thanks again from all of us at Blue Bird Corporation, and have a great evening. Operator: This concludes today’s call. Thank you for attending. You may now disconnect.
Operator: Good afternoon. Thank you for joining us today to discuss LifeMD, Inc.'s results for the first quarter ended 03/31/2026. Joining the call today are Justin Schreiber, Chairman and Chief Executive Officer, and Atul Kavikar, Chief Financial Officer. Following management’s prepared remarks, we will open the call for a question-and-answer session. Before we begin, I would like to remind everyone that during this call, the company will make a number of forward-looking statements which are subject to numerous risks and uncertainties that may cause actual results to differ materially from those projected. These risks and uncertainties are described in the company’s 10-Ks and 10-Q filings and within other filings that LifeMD, Inc. may make with the SEC from time to time. Forward-looking statements made during this call are based on certain information available to the company as of today, 05/06/2026. The company assumes no obligation to update or revise any forward-looking statements after today’s call except as required by law. Also, please note that management will be discussing certain non-GAAP financial measures that the company believes are important in evaluating LifeMD, Inc.’s performance. Details on the relationship between these non-GAAP measures and the most comparable GAAP measures, and a reconciliation thereof, can be found in the press release issued earlier today. Finally, I would like to remind everyone that today’s call is being recorded and will be available for replay in the Investor Relations section of the company’s website. Now I would like to turn the call over to LifeMD, Inc.’s CEO, Justin Schreiber. Please go ahead. Justin Schreiber: Thank you, and good afternoon, everyone. After the market closed today, we issued a press release announcing our first quarter financial results. We have also posted an updated corporate presentation, our Form 10-Q, and our shareholder letter on our Investor Relations website at ir.lifemd.com. I encourage everyone to review those materials. Q1 was a strong start to 2026. We delivered revenue of $50.2 million, ahead of guidance, and added more than 42 thousand net telehealth subscribers, the largest quarterly net addition in our history. We ended the quarter with over 365 thousand subscribers. In weight management, sign-ups increased approximately 120% sequentially from Q4, and we exited the quarter with strong momentum across all of our key growth areas. We are seeing clear early validation of the strategy we laid out on our last call. But what matters most is not just the quarter; it is what this quarter says about the platform we are building. As I outlined in our shareholder letter, I think about LifeMD, Inc. in very simple terms: quality care, quality products, quality revenue. When we deliver high-quality care, patients trust us. When we offer products and services that genuinely improve their lives, they come back. And when patients engage across more of the platform and stay with us longer, the revenue becomes more durable, higher quality, and ultimately more profitable. Today, we have a 50-state affiliated medical group, a fully integrated pharmacy, in-home and national lab capabilities, expanding insurance coverage, deep pharmaceutical collaborations, and a growing set of specialty care programs. Increasingly, we are layering AI across that infrastructure to make it faster, more efficient, and more personalized. LifeMD, Inc. is no longer just a telehealth company focused on a handful of conditions. We are building what we believe can become one of the most important virtual healthcare platforms in the country, a trusted destination where patients can access care, medications, labs, insurance-supported services, and ongoing clinical support through one connected experience. Let me walk you through where we are seeing the most progress. First, weight management. This remains the largest opportunity in our business. More than 100 million Americans are clinically eligible for GLP-1 therapy, and it is estimated that fewer than 15% have tried one. These medications represent one of the most significant breakthroughs in consumer healthcare in decades. Importantly, the market is becoming more dynamic, not less. We are entering the next phase of GLP-1 adoption. The first phase was access to injectables. The second phase is broader access, including oral therapies, lower-cost self-pay options, insurance coverage, and a deep pipeline of next-generation drugs. We are built for this phase. We have already benefited from the introduction of oral GLP-1s. Customer acquisition costs improved 4% to 5% sequentially in Q1 even as volumes effectively doubled, from roughly 300 to 400 new patients per day to 600 to 1 thousand patients per day. We ended the quarter with just under 100 thousand weight management patients. And this opportunity is only getting bigger. There are roughly 40 GLP-1 therapies currently in development, including oral formulations, longer-acting injectables, and multi-pathway treatments. As these therapies come to market, we believe platforms like LifeMD, Inc. that combine affordable access, insurance integration, and real clinical care will be the long-term winners. Second, Women’s Health. This continues to be one of the programs I am most excited about. The need is enormous. Tens of millions of women are entering or living through menopause, and access to thoughtful, evidence-based, coordinated care remains limited. We built this program differently, around longitudinal care, not just prescriptions. That includes comprehensive intake, appropriate lab work, structured clinical protocols, and ongoing management by providers trained specifically in women’s health. The early results have exceeded our expectations. Subscriber count grew more than 7x from the Q4 base, customer acquisition costs remain attractive, and on-therapy retention is tracking north of 80%. We believe that performance is a direct reflection of the quality of the program. Over the coming months, we plan to introduce seven new compounded pharmacy products focused on hormone and bone health, highly complementary to patient needs and well aligned with our in-house pharmacy capabilities. Women’s Health has the potential to become one of the largest and most important programs in our company, not just a growth driver, but a category where we can build deep, trusted patient relationships. Third, RexMD and Men’s Health. RexMD remains one of the most recognized men’s health brands in the country and a critical part of our platform. We now have approximately 215 thousand active patients, with growth across ED, sleep, and hair loss, with sleep currently the fastest-growing category. ED remains the core, and our personalized ED medications combining sildenafil and tadalafil grew more than 40% versus Q4. As more fulfillment shifts in-house, we expect continued margin expansion. But RexMD is evolving beyond ED. We are expanding into personalized pharmacy products across sexual health, dermatology, pain management, and longevity. Just as importantly, RexMD provides a large, engaged patient base that can expand into the broader LifeMD, Inc. ecosystem over time, strengthening retention and lifetime value. Fourth, operating leverage and AI. This is one of the most important components of the LifeMD, Inc. story for 2026. We are deploying AI aggressively but thoughtfully, with quality as the nonnegotiable. AI is not just a cost initiative; it is becoming foundational to how we build software, how providers deliver care, and how we operate the business. Our clinical decision support tools will integrate health records, lab data, biomarker insights, and patient intake information to enable more personalized and efficient care. Over time, we expect AI to increase provider capacity without adding headcount, which is a key lever for scaling efficiently. We are also embedding AI across intake, documentation, patient support, revenue cycle, compliance, and back-office workflows. This is not about replacing providers. It is about enabling them to spend more time practicing medicine and less time on administrative work. We expect the margin impact to become more visible in 2026. And when AI is combined with our 503A compounding pharmacy, it unlocks something powerful: personalized prescribing at scale, enabled by data, clinical infrastructure, pharmacy capabilities, and national reach. Very few platforms have that combination, and LifeMD, Inc. is one of them. Fifth, pharmacy, insurance, and partnerships. Our affiliated pharmacy continues to scale. We now operate a 22.5 thousand square foot facility licensed in all 50 states with both commercial and 503A compounding capabilities. The pharmacy is currently processing approximately 20 thousand prescriptions per month, with significant capacity to expand throughout this year as our pharmacy offerings expand. We view pharmacy as one of our most important long-term margin expansion levers, improving economics, patient experience, and speed to market. On the payer side, our insurance and Medicare infrastructure continues to expand. We ended the quarter with approximately 112 million covered lives and expect to reach approximately 230 million by the end of this month. The Medicare GLP-1 Bridge launching July 1 is particularly important, as it expands access to GLP-1 therapies for Medicare patients at an affordable monthly cost. We also continue to see strong momentum with pharmaceutical partners as the industry increasingly shifts toward direct-to-patient models. Our GLP-1 collaborations are a strong proof point of that trend. On the employer side, we are making progress with enterprise relationships and direct GLP-1 coverage for self-insured groups, a meaningful upside opportunity not yet fully reflected in our outlook. Stepping back, we feel very good about where we are. We are serving more patients, expanding into larger and more durable categories, strengthening the platform, and building a business we believe can compound over the long term. We are reaffirming our full-year guidance of $220 million to $230 million in revenue and $12 million to $17 million in adjusted EBITDA. We continue to expect annualized run-rate revenue above $250 million and adjusted EBITDA above $25 million by the fourth quarter. With that, I will turn the call over to our new CFO, Atul Kavikar, to walk through the quarter in more detail. Atul? Atul Kavikar: Thank you, and good afternoon, everyone. I am delighted to be joining my first quarterly call as CFO of LifeMD, Inc., and pleased to be leading its financial operations. It has been a positive first few weeks, and I have been impressed by the team, their commitment to continuous improvement, their entrepreneurial mindset, and their general curiosity. I will be doing everything I can to continue that culture. As for results, the first quarter played out largely as we expected: strong subscriber momentum following a planned step-up in patient acquisition spend, and the early benefits of platform efficiency beginning to show in our gross margin. As a reminder, all year-over-year comparisons are on a continuing operations basis excluding WorkSimply, which was divested on 11/04/2025. Revenue for the first quarter was $50.2 million, exceeding our guidance of $48 million to $49 million, and essentially flat versus the prior-year period of $50.9 million, with nearly all revenue derived from recurring subscriptions. Active subscribers grew approximately 26% year over year to over 365 thousand at quarter end, with over 42 thousand net adds in Q1, the largest quarterly net addition in our history. Gross margin for the quarter expanded approximately 420 basis points to 88%, primarily reflecting improvements in lower shipping and fulfillment costs, including the continued scaling of our in-house pharmacy fulfillment that Justin described previously. Gross profit was $44.2 million, up 3% from the year-ago period despite the flat year-over-year revenue growth. Selling and marketing expenses were $29.8 million, an increase of 34% year over year, reflecting the strategic, front-loaded patient acquisition investment designed to drive subscriber growth in subsequent quarters. Q1 was the peak of our marketing investment for the year. Marketing spend has begun normalizing, and we expect sales and marketing to step down in Q2 and remain at more typical levels throughout the back half. GAAP net loss from continuing operations attributable to common stockholders was $9.6 million, or $0.20 per diluted share, compared to a net loss from continuing operations attributable to common stockholders of $2.4 million, or $0.06 per diluted share, in the prior-year period. Stock-based compensation was $1.4 million, down from $2.5 million in the prior-year period, reflecting our continued focus on aligning our management with long-term goals. Adjusted EBITDA, a non-GAAP measure we define as income or loss attributable to common stockholders before various items as outlined in today’s news release, was a loss of approximately $4.5 million for the first quarter, in line with our previously issued first-quarter guidance range of a loss of $4 million to $5 million. This compares with an adjusted EBITDA of approximately $3.7 million in the prior-year period. We will now turn to the balance sheet. We exited the quarter with $34.5 million in cash, no debt, and a $30 million undrawn revolving credit facility that we put into place at the start of the year. Our balance sheet remains a strategic asset, providing ample flexibility to fund our expanding growth initiatives. Looking forward, we are reaffirming our 2026 full-year guidance: revenue of $220 million to $230 million, representing 13% to 19% year-over-year growth, and adjusted EBITDA of $12 million to $17 million. We expect to return to adjusted EBITDA profitability in the second half of the year as customer acquisition costs decline sequentially and the patient volumes added in Q1 become accretive. This is in addition to multiple initiatives around our business that we expect to impact the second half. These include the expansion of our pharmacy offerings, which will allow us to capture revenue and margin we do not currently benefit from. As was established during our 2025 Q4 call, we continue to expect annualized run-rate revenue exceeding $250 million and annualized run-rate adjusted EBITDA exceeding $25 million by the end of 2026. For Q2, we are expecting the business to continue its transition to branded GLP-1s; as such, we expect to see Q2 revenue between $47 million and $50 million and adjusted EBITDA between negative $2 million and positive $1 million as we continue to realize efficiencies and cost savings in our business. With that, I will turn it back to Justin. Justin Schreiber: Thanks, Atul. As we close our prepared remarks, I want to come back to the larger point. Q1 was always going to be an investment quarter. We leaned into the launch of oral GLP-1s, accelerated patient acquisition, made big progress in Women’s Health, expanded our pharmacy and insurance infrastructure, and advanced the AI tools that we believe will make this platform more scalable over time. What gives me confidence is that the early signals are showing up exactly where we would want to see them: record subscriber additions, strong demand in weight management, rapid early growth in Women’s Health, improving pharmacy economics, and a clear path to operating leverage as the year progresses. As I laid out in our shareholder letter, the model is simple: quality care, quality products, quality revenue. If we deliver high-quality care and build products patients value, they stay longer, use more of the platform, and create more durable revenue. That is the foundation of LifeMD, Inc.’s strategy. The opportunity ahead is tremendous. GLP-1 therapy is entering a new phase with oral medications, broader access, and a deep pipeline of next-generation therapies. Women’s Health is scaling from a small base into what we believe can become one of the most important programs we have ever built. RexMD continues to give us a large, engaged patient base and a trusted men’s health brand. And across the company, AI, pharmacy, and insurance are becoming real levers for better care, stronger retention, and margin expansion. We are not building a point solution. We are building a platform patients can come back to for more of their healthcare needs over time. That is what makes this business more durable, and that is what makes me so excited about the rest of 2026. I want to thank the LifeMD, Inc. team for their continued execution and our shareholders for their support. With that, we will open the call for questions. Operator? Thank you. Operator: We will now open the call for questions. If you would like to withdraw your question, please follow the prompts. The first question comes from David Larsen with BTIG. David Larsen: Hi, congratulations on the good start to the year. Can you talk a little bit about your relationship with Novo and also Lilly? Obviously, you are leaders in the industry with regards to partnering with the brand manufacturers, as opposed to continuing with a sort of aggressive compounded GLP-1 effort. How are you making money with Novo and Lilly? How is the oral pill launch progressing? Any more color there would be helpful. Thank you. Justin Schreiber: Hi, Dave. Thanks for the question. We have commented extensively, both in press releases and on calls like this, about how important both of these relationships are to LifeMD, Inc., and I would emphasize we view them as very long-term collaborations. Relatively speaking, both are still pretty new, and we have been working through strategies that we think are going to drive long-term patient growth and really help patients access these therapies. I cannot go into a lot more detail on either relationship. What I will say is that we have had very productive conversations with both companies about compliant ways that we can help more patients access these therapies. Those discussions are ongoing, and we are extremely optimistic that in the near term—being the next quarter or two—at least one, if not both, of those relationships will continue to evolve in a way that helps our overall unit economics and enables more people to access these therapies. Both companies also have next-generation therapies in the pipeline. We are going to be a platform for products from those companies, and we have already spoken to a number of other large pharma companies that have next-generation GLP-1 therapies. We expect those therapies to be available on the LifeMD, Inc. platform. We also spend a lot of time looking at the unit economics for the branded therapy business. We have some areas where unit economics are softer than we like and some areas where unit economics are incredible. One area where unit economics are really strong is on the insurance side of the business. When people are using their health insurance to subsidize the care component, and even still paying cash for these medications, the unit economics look outstanding, and there is a lot of demand. I hope that answers your question. We are under NDA with both companies, so we are limited in what we can say on an earnings call. David Larsen: Okay, great. It sounds like your relationships with both Novo and Lilly are evolving, and you will reach some sort of understanding that benefits both them and you and, most importantly, the patients and members that are benefiting from the medications. And then can you maybe talk a little bit about the incremental marketing spend in 1Q? Obviously, that put a little bit of pressure on EBITDA in the quarter. What is the nature of that incremental spend? Is it just Google Ads and online ads, or something more than that? Atul Kavikar: Yeah, Dave. The elevated marketing spend in the first quarter was very productive. The various channels and media buys were many of the same that we have used, including Google Ads and other social media channels where people begin their research. The upshot of the elevated spend is that it was a tremendous opportunity to acquire customers at CPAs that, relative to the last several quarters, were very attractive. We were able to add to the active base by almost 13% in the quarter. Almost equally important, we really added to our database—our pool of potential targets that we have the ability to market to going forward. So in many respects, it was a broad-based set of campaigns that we believe will help the company in Q2, Q3, and through the rest of the year. David Larsen: Okay. Congrats on a good quarter. I think you probably have a bunch of people on the line, so I will hop back in the queue. Atul Kavikar: Thanks, Dave. Operator: The next question comes from Ryan Meyers with Lake Street Capital. Ryan Robert Meyers: Hey, thanks for taking my questions. Thinking about the approximately 230 million lives you expect to have covered this month, what are you seeing so far in terms of conversion rates, retention, and customer acquisition synergies from these insurance-supported programs? Justin Schreiber: Thanks, Ryan. High level, we are seeing a considerable improvement in retention rates for insurance patients, which is one of the reasons we are very optimistic. We are also seeing a significant reduction in customer acquisition cost—as much as 50%. We do expect that to go up a little bit as we scale these offerings. In short, we are seeing a significant reduction in CAC, and these patients are paying a much lower platform or membership fee to LifeMD, Inc. than patients who are not using their insurance. We are seeing at least a 10% improvement in retention. Some cohorts are newer, but over the first three to six months it is meaningful. So while we are getting fewer dollars per patient and spending less to acquire them, overall we think the unit economics profile of this patient is superior to a self-pay patient. Atul Kavikar: Let me add one thing. For patients coming through our order flow on the site, they have an opportunity to indicate if they are interested in insurance or not. I anticipated a lot of interest, but I did not expect it would be in the 75% to 80% range, which indicates very strong demand. It points to where the business and the makeup of the patient population is going to go over the next quarters and the next few years. We are really excited about this business. Ryan Robert Meyers: Got it. And then while you did come in ahead of expectations, there was a year-over-year decline in revenue. Can you remind us if there were any dynamics in the first quarter of last year, and how we should think about that and the potential impact during the second quarter of this year and how that relates to the guidance? Atul Kavikar: Yes, absolutely. In 2025 we had heavy use of compounded GLP-1s. We have continued to migrate this business to where we think the future is—around branded drugs—and that is really the delta you are seeing. Today, we have a different set of unit economics. We do not make as much; we have been upfront about that. But we also think those are exceptional patients with meaningfully better retention. We think that is the right direction for the business. It is simply the change in product mix. Operator: The next question comes from Sarah James with Cantor Fitzgerald. Analyst: Hey, everyone. This is Gabby on for Sarah. Could you help us get a little bit more comfortable with the second-quarter to third-quarter EBITDA ramp and expand on what initiatives are kicking in? Maybe the second-quarter EBITDA was just slightly softer than we had modeled, so any additional color would be great. Atul Kavikar: Nice to meet you, Gabby. Let me paint the picture for Q2, Q3, and the full year. We are getting a lot of momentum behind the insurance business. CPAs, as Justin said, were really attractive. We see insurance-supported programs being a more important part of the revenue growth story, and a way to strategically capture better-quality patients. We see that really ramping up in the second half. We have made a lot of technical improvements to the platform. We are significantly expanding coverage—next week we are planning to expand to roughly 147 additional plans—which will be a big part of the story in the second half. Another driver is enhanced economics from our collaborations; those are expected to improve both revenue and EBITDA, and under our accounting that is essentially incremental revenue that drops to both top line and EBITDA. There is also cross-care opportunity. Many patients on GLP-1 drugs may be interested in other products we sell—ED, sleep, etc. For technical reasons that have recently been solved or are about to be solved, we can now open up that cross-sell opportunity. On costs, you will start to see marketing step down. It is a front-loaded first half of marketing spend. For Q2, we are expecting marketing in the $26 million to $27 million range. In the back half, we are penciling in $42 million to $44 million across Q3 and Q4 combined, so from first half to second half it comes down quite a bit. You will also see efficiencies across SG&A and gross margin—shipping costs, provider efficiencies, fulfillment costs—showing up more in the second half. That mix of revenue drivers and expense efficiencies gives us confidence in the EBITDA ramp. Analyst: Great, that was very helpful. One more: the CMS Bridge program was extended through 2027. How does that impact you? Does that give you a more positive outlook on your contribution to that program, or what is the right read-through? Justin Schreiber: We are very excited about Medicare beneficiaries having access to GLP-1 medications. As most people listening know, we put an enormous amount of energy into building a 50-state Medicare program. It is working. It is already on in some states for weight management. We are turning it on for Women’s Health in the next couple of weeks. We are thinking through the right strategy for Medicare beneficiaries using Bridge. We have not built this into our model, but I am excited about it. We are working with outside counsel on the particulars. If it works the way we think it will, it could be a really big opportunity for us in the back half of the year and, more importantly, help a lot of Medicare beneficiaries access these medications affordably. Operator: The next question comes from Steven Valiquette with Mizuho Securities. Steven Valiquette: Thanks, and good afternoon. First, it is early days for the new oral launches, but curious to get your thoughts on the uptake so far. At a national level, investors are comparing the week-by-week launch of one oral against the comparable weeks post the launch of the oral Wegovy earlier this year, and so far the uptake of the other oral, at least nationally, is trailing the initial oral Wegovy uptake. Are you seeing that same trend within your own platform? And if so, what do you think is driving that? Second, one of the manufacturers commented that roughly 55% of their new patient starts are cash-pay customers, which seems positive for you. I might have expected your Q2 revenue guidance to be a little stronger sequentially versus Q1 because of that backdrop. I know you mentioned the evolution of shifting patients off compounded drugs to brands is still taking shape in Q2, but is there something about the falloff on the compounded patients that is more rapid? Hopefully that makes sense. Justin Schreiber: I know this is not the exact answer you are looking for, but we want to be a good collaborator to both companies, and I do not think it is appropriate for us to comment on traction of one therapy versus another on our platform. What I will say is that we have [inaudible] live, and we have a lot of patients choosing both [inaudible] and the Wegovy pill. It does seem like the Wegovy pill has more awareness in the space, and that may be why it is still slightly more popular on our platform, but we do not want to get into specifics. On your second question: demand for oral therapies is very strong—stronger than I expected. The success of these self-pay programs has surprised everyone. I will not speak for Lilly or Novo, but it seems clear the programs are working, and I think payers are probably surprised as well. LifeMD, Inc. was built to help patients access branded medications and to create the types of collaborations we have done with Lilly and Novo. That has opened the door for the rest of the industry, and we have a number of other large pharma companies interested in collaborations, some of which could be very transformational. Interestingly, coverage appears to be slightly declining for some GLP-1 medications because of the success of the self-pay programs, which is a tailwind for a platform like LifeMD, Inc. that facilitates direct-to-patient programs while also supporting insurance on both the pharmacy and care sides. Regarding the modest softness in Q2 revenue, our revenue model has changed as part of the company’s transformation and our focus on quality revenue. We are charging less for some services, such as Women’s Health, which is more of an à la carte model. The insurance population is paying less because we are billing their insurance, and we are still optimizing some RCM processes. We are being patient and focused on building services and products with strong retention and value propositions. That is the reason for a little softness, but we are very confident in the back half. Operator: The next question comes from Steven Craig Dechert with KeyBanc. Steven Craig Dechert: Hey, thanks for the questions. I was hoping you could give some outlook on the cadence of weight management subscribers through the rest of the year. And could you talk more about the opportunity with self-insured employers and what you think the upside could be there? Atul Kavikar: The cadence going forward: the first quarter was very strong, and we will probably see a similar growth pattern through the year. There may be ebbs and flows quarter to quarter, but fundamentally the tailwinds are very strong. We have a very large group of patients we can market to who have engaged with us before, and we feel good about maintaining a pretty consistent level, with an eye toward accelerating it—particularly with the insurance offering. Notwithstanding challenges some managed care plans have around coverage, there still are many that will cover, and the Bridge program is a big opportunity to grow and maybe even accelerate penetration and patient counts in GLP-1s. Justin Schreiber: I dedicated time in the shareholder letter to the revenue streams that will be part of LifeMD, Inc.’s future over the next year. We focused on revenue from pharmaceutical collaborations; we think that will be meaningful, and we have a deep pipeline of significant partnerships—very similar to enterprise revenue—where large partners effectively offer our services to their customer bases or memberships. We are excited about those. We also think the employer channel is pretty big, and we are working on programs for self-insured employers. There is tremendous interest from the pharma and strategic partner channels, and because of that interest we have been deprioritizing employer programs in the near term, but they are certainly in the plans, and we understand the attractiveness of that revenue. Operator: The next question comes from Yi Chen with H.C. Wainwright. Analyst: Hey, this is Katie on for Yi. Looking at the FDA’s proposal to exclude semaglutide and that sort of drug from the bulk list, your shift to branded drugs puts you ahead of that a little bit. How should we think about where you stand and how this could play out whether it goes either way? And as a follow-up, what is your prescriber documentation framework for the individualized medical necessity standard? Have you talked to the FDA about that at all? Justin Schreiber: The changes to the bulk drug list have zero impact on the business—totally irrelevant to us. We do not compound these medications. We have some patients still on a personalized compound from third-party pharmacies. This is not something we spend much time on because of our overwhelming focus on helping patients access branded therapies. As for documentation, all of our provider documentation is best in class. Operator: Does that answer your question? Maybe we lost Katie. We will now conclude the Q&A session and turn the conference back over to Justin for any closing remarks. Justin Schreiber: I just want to say thank you, everybody, for your time and for tuning in for our earnings call. We look forward to talking to you next quarter, and I hope everybody has a good evening. Thanks. Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.