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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.
Operator: Good day, and welcome to the Accuray Third Quarter Fiscal Year 2026 Financial Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Stephen Monroe, Vice President of Financial Planning and Analysis. Please go ahead. Stephen Monroe: Thank you, and good afternoon, everyone. Welcome to Accuray Incorporated's conference call to review financial results for the third quarter of fiscal 2026, which ended 03/31/2026. During our call this afternoon, management will review recent corporate developments. Joining us on today's call are Stephen LaNeve, Accuray Incorporated's President and Chief Executive Officer, and Ali Pervaiz, Accuray Incorporated's Chief Financial Officer. Before we begin, I would like to remind you that our call today includes forward-looking statements. Actual results may differ materially from those contemplated or implied by these forward-looking statements. Factors that could cause these results to differ materially are outlined in the press release we issued just after the market closed this afternoon, as well as in our filings with the Securities and Exchange Commission. We base the forward-looking statements on this call on the information available to us as of today's date. We assume no obligation to update any forward-looking statements as a result of new information or future events except to the extent required by applicable securities laws. Accordingly, you should not put undue reliance on any forward-looking statements. A few housekeeping items for today's call. All references to a specific quarter in the prepared remarks are to our fiscal year quarters. For example, statements regarding our third quarter refer to our fiscal third quarter ended March 31. Additionally, there will be a supplemental slide deck to accompany this call which you can access by going directly to Accuray Incorporated's Investor Relations page at investors.accuray.com. As you review our prepared remarks and guidance today, please note that our outlook represents our current estimates and reflects the operating environment as we understand it today, including, among other things, current tariff impacts and geopolitical conditions. As always, the situation remains dynamic and we will continue to update investors as visibility improves. With that, let me turn the call over to Accuray Incorporated's Chief Executive Officer, Stephen LaNeve. Stephen LaNeve: Thank you, Stephen. Good afternoon and thank you for joining us. Since joining Accuray Incorporated last October, I have spent time with teams across the company and in our key markets. What stands out is the strength of our technology, the commitment of our people, the conviction health care providers and patients have in our solutions, and the scale of the opportunity ahead of us. Turning to the quarter, total revenue was approximately $105 million, up 3% sequentially but down 7% year-over-year. In the third quarter, we had product shipments planned to certain customers in the Middle East, North Africa, and Pakistan that have been delayed indefinitely due to increased geopolitical disruption in the Middle East, which is also impacting our service revenue in those regions. We do not know how long this regional dynamic might continue. Additionally, our business in China continues to face headwinds that we discussed during our last earnings call which pertain to geopolitical tensions and ongoing tariff uncertainty. These are markets that remain strategically important to Accuray Incorporated over the long term, but the current environment has added volatility and uncertainty that is largely outside of our control and difficult to predict. That said, restating our strategy, we are prioritizing investment in innovation, product reliability, service solutions, workflow efficiency, and partnerships that expand our reach and strengthen our platform. Additionally, we are relentlessly focused on executing on our transformation program initiatives that did not take effect until the middle or end of the third quarter, which, coupled with the geopolitical factors I have mentioned, have masked their impact to date. While we remain confident in our ability to execute against our transformation plan, the current geopolitical environment, including the conflict involving Iran and its ripple effects across the Middle East, as well as my earlier comments about our business in China, has created significant unpredictability for both the product and the service sides of our business. Given such uncertainty, we believe the responsible approach is to withdraw our financial guidance at this time. We will provide an update on the business when we report fiscal fourth quarter results. Now turning to our transformation plan and the progress we have made. We launched a comprehensive strategic, operational, organizational transformation plan. This plan was designed to sharpen accountability, tighten cost control, and accelerate execution, while positioning Accuray Incorporated for sustainable, profitable growth over the long term. The foundation of this plan was to establish clear product and service strategies supported by a set of critical enablers we believe are necessary to execute at a higher level. The first of those enablers was rightsizing our cost structure while improving efficiency through better processes and the use of our ERP system and business intelligence tools. This was paired with an organizational realignment that centralized key functions, outsourced non-core activities, and reinforced accountability, speed, and commercial focus across the business by reducing approximately 15% of our workforce. At the same time, we reallocated engineering resources toward higher ROI programs, particularly those that integrate third-party solutions and more directly reflect the voice of the customer. Taken together, these actions were designed to structurally improve operating profitability by approximately $25 million on an annualized basis, with roughly $12 million expected to benefit fiscal 2026. As of the end of the third quarter, we have already achieved approximately $10 million of those improvements, and we are well on track to exceed the $12 million we originally targeted for fiscal year 2026. We continue to believe that at least $25 billion of these improvements should be realized in fiscal year 2027. We remain encouraged by the pace, the quality of execution, and the sustainability of these actions to date, and we will provide an updated view on these annualized improvements on our fourth quarter earnings call. To put some color around what this looks like in practice, let me briefly highlight a few initiatives that are already underway. First, we are expanding and diversifying our service portfolio to better monetize our installed base and enhance customer value. During the quarter, we launched new training and educational solutions, which can be included in service agreements or sold standalone. Additionally, we will launch packages to add software solutions to our service agreements, which we believe strengthens recurring revenue opportunities and improves customer engagement over time. Our strategy is to better leverage our substantial and growing installed base and to drive significant value creation through our service business. Second, we are making meaningful progress toward a more disciplined distributor partnership model. In markets where distributors are essential to our reach, we are implementing clear performance standards, improved transparency, stronger alignment, and better support models to drive consistent, high-quality execution. During the quarter, we advanced this effort with several concrete actions, including the appointment of a Vice President of Distributor Partnerships, a new and strategically important role for Accuray Incorporated focused on elevating distributor performance and accountability globally. Third, we are implementing systems, processes, and controls to help ensure we are fully and appropriately compensated for the work our service teams deliver every day. During the quarter, we have made enhancements to our service systems, which are designed to improve cash conversion and margin quality. Fourth, we continue to optimize pricing across our product and service portfolio to better reflect the clinical and economic value our technology and our service solutions deliver. This work is designed to support competitive wins at appropriate margins and is expected to translate into stronger sales quality and margin expansion over time. Finally, an essential element of the transformation is strong commercial leadership. I am very excited that Paul Maielli has joined Accuray Incorporated as Chief Commercial Officer. Paul brings more than two decades of experience leading and scaling global capital medical device businesses across the Americas, EMEA, and APAC regions. His track record strongly aligns with Accuray Incorporated's priorities in terms of building effective commercial operating models, reactivating the installed base, expanding service and solutions monetization, and accelerating capital equipment sales, specifically in the areas of imaging, navigation, and robotics. In prior roles, his leadership helped drive the reversal of revenue decline trends and helped deliver double-digit annual growth. Paul and his team will play a critical role in strengthening our top line, improving profitability, and supporting sustainable, long-term value creation. With our internal transformation well underway, I would like to now turn to strategic partnerships, which is an area that is playing an increasingly important role in shaping Accuray Incorporated's future. A core principle of our transformation is focus. We are being very deliberate about where we invest our internal resources and where partnering allows us to move faster, scale more efficiently, and deliver greater value to our customers. Over the past several months, we have made meaningful progress aligning with partners that strengthen our execution today and fortify our long-term position as an innovative leader in radiation medicine. One of the most exciting areas of progress is how we are leveraging partnerships with the goal to convert one of Accuray Incorporated's most distinctive capabilities—real-time adaptation to patient and tumor motion during treatment—into a durable clinical evidence engine. Radiation medicine is entering an era where precision is increasingly defined not just by the treatment plan created in advance, but by what happens during treatment itself. Recent high-impact prostate SBRT data have reinforced that delivery-side factors, intrafractional motion management, can meaningfully impact outcomes. Accuray Incorporated's installed base gives us access to one of the largest repositories of real-world motion-tracked treatment data in the industry, spanning hundreds of thousands of treatment fractions across multiple disease sites. By pairing these insights with a multicenter registry sponsored by the Radiosurgery Society, we are working to define the clinical value of real-time correction, inform future product development, and help shape emerging standards of care. Importantly, this effort strengthens our differentiation, supports our product roadmap, and reinforces our focus on clinically meaningful innovation. Our new partnership strategy is built around creating an ecosystem of aligned partners that amplifies our strengths. We are building a constellation of strategic collaborations with many leading organizations, including the University of Wisconsin–Madison, Tata Consulting Services, as well as many others. Each brings distinct capabilities across imaging, software, workflow innovation, clinical research, treatment continuity, and operational execution. Together these partnerships allow us to deliver more comprehensive solutions to radiation medicine teams while improving speed to market and capital efficiency. This partnership-driven model is an important pillar of our transformation and a key component of how we intend to create enduring value for customers and shareholders alike. In addition to the momentum we are seeing across our transformation and partnerships, we are very excited about the upcoming European Society for Radiotherapy and Oncology conference in Stockholm later this month. ESTRO is an important global forum for radiation medicine and a key opportunity to engage directly with our customers. At ESTRO, we plan on highlighting a series of practical, customer-driven product enhancements and new partnerships that reinforce our commitment to clinical excellence, workflow efficiency, and continuous innovation. As I have said before, these are areas where we believe Accuray Incorporated can make the biggest difference for patients and where we can meaningfully differentiate ourselves in the market. In summary, while the external environment remains challenging, the transformative progress we are making across execution, innovation, and partnerships gives us confidence that we are building a stronger, more resilient Accuray Incorporated for the future. With that, I will hand it over to Ali to take you through our financial results and key financial metrics. Ali Pervaiz: Thanks, Stephen, and good afternoon, everyone. I would like to begin by thanking our global cross-functional teams for their continued dedication and hard work as we execute on our transformation plan. Turning to the third quarter results, net revenue for the quarter was $104.8 million, which was down 7% versus the prior year and down 10% on a constant currency basis. On a sequential basis, revenue increased 3%. Product revenue for the third quarter was $49.7 million, down 13% versus the prior year and down 15% on a constant currency basis, representing the majority of the year-over-year decline. Similar to earlier in fiscal 2026, most of this came as a result of ongoing macroeconomic headwinds in China and, more recently, geopolitical tensions in the Middle East. Service revenue for the third quarter was $55.1 million, down 1% from the prior year and down 5% on a constant currency basis. As a result of our global installed base and service network being negatively impacted by Middle East tensions, we had a $1.2 million negative impact to service revenue. The company's contract capture rate, defined as a percentage of active systems covered by a service agreement, continues to be at nearly 90% across our active installed base. As Stephen discussed, optimizing pricing to reflect our true clinical and economic value has been a key piece of our transformation plan. This includes a significant focus on pricing on service contract renewals. While the pricing secured in renewals spans over the next two to three years, we did experience $0.6 million of price favorability within service revenues in the third quarter. Product gross orders for the third quarter were approximately $49 million and represented a book-to-bill ratio of 1.0 in the quarter, with a trailing twelve-month ratio of 1.2. We ended the third quarter with a reported order backlog of approximately $356 million, defined to include only orders younger than thirty months. Our overall gross margin for the quarter was 24.1% compared to 27.9% in the prior year. This decline was primarily due to service margins, which were 26.1% compared to 33.3% in the prior year. Driving this decrease was higher net parts consumption of $3.2 million, which negatively impacted service gross margins by approximately 600 basis points. As we have mentioned in prior quarters, the timing of parts consumption can fluctuate quarterly depending on the volume and extent of service requirements. In the third quarter, our higher-than-anticipated service parts consumption also required higher-than-average logistics and duties costs. Additionally, tariffs adversely impacted service margins by $0.8 million, or 150 basis points. Product gross margins in the third quarter were 21.9% compared to 22.7% in the prior year. The year-over-year incremental cost from higher tariffs was $2.6 million, which adversely impacted product gross margins by approximately 530 basis points. Tariffs have been quite fluid recently, and although IEPA tariffs have been invalidated, we continue to monitor how the tariff landscape evolves over the near term and how that impacts our profitability and cash flow. Operating expenses in the third quarter were $34.4 million compared to $30.6 million in the third quarter of the prior fiscal year. The current-year third quarter includes $6.5 million of nonrecurring expenses, which includes severance costs and other costs directly related to our restructuring and transformation plans. Additionally, the prior-year third quarter benefited from a $3.2 million reversal of unrealized accrued compensation from fiscal 2025. Adjusting for these discrete items, third quarter fiscal 2026 operating expenses decreased $6 million, or 18%, versus prior year, which illustrates that the cost actions taken as part of our transformation have taken hold. As stated above, during the third quarter, we recognized $6.5 million of nonrecurring restructuring expenses. As our transformation plan progresses, we expect restructuring costs to sequentially decrease from these third quarter levels in future quarters, with a significant portion of the restructuring costs recognized by the end of the fiscal year. Operating loss for the quarter was $9.1 million compared to income of $1 million in the prior year. Adjusted EBITDA for the quarter was $3.8 million compared to $6 million in the prior year. We describe the reconciliation between GAAP net income and adjusted EBITDA in our earnings release issued today. Turning to the balance sheet, total cash, cash equivalents, and restricted cash as of quarter end amounted to $44.4 million compared to $47.9 million at the end of last quarter. The restricted cash related to required postings for cash flow hedging and tariffs amounted to $0.4 million in the current quarter as compared to $6.6 million at the end of last quarter. Net accounts receivable were $64.6 million, up $3.6 million from the prior quarter, largely due to higher sequential quarter revenue. Our net inventory balance was $156.6 million, up $5.7 million from the prior quarter. At the end of the third quarter, we had $5 million outstanding on our revolving credit facility. As Stephen noted earlier, we continue to execute our transformation strategy and remain ahead of plan to achieve the $12 million improvements we had originally forecasted. By the end of the third quarter, we had already realized approximately $10 million of these transformation-related improvements, which were largely achieved through workforce and discretionary spend reductions, as well as pricing realization. And with that, I would like to hand the call back to Stephen. Stephen LaNeve: Thank you, Ali. I remain excited about the opportunities ahead for Accuray Incorporated and continue to have strong conviction in the differentiation of our technology and the value it brings to customers and patients. We believe the impact of our strategic focus and the transformation plan we initiated will become increasingly evident over the coming quarters, with 2027 and 2028 financial performance expected to reflect the benefits of the actions we are taking today. As we look ahead, we believe our progress should be measured against a clear set of priorities. Number one, driving top-line growth with our product and service business lines through a focused commercial strategy. Number two, relentlessly executing on our transformation plan to improve gross margins and strengthen EBITDA through tighter cost management. And number three, prioritizing innovation grounded in voice of customer as part of our product and service development programs. We will now open the call for questions. I will turn the call back over to the operator for Q&A. Operator: We will now open the call for questions. The first question comes from Marie Thibault with BTIG. Please go ahead. Marie Thibault: Just wanted to ask about the decision to remove guidance. I know that the Iran war started after your last quarterly earnings call, but your prior commentary had pointed to a close understanding of timelines in these various regions. Why not just revise the guidance to remove some of those specific customers or those revenue installs in those regions? Why remove entirely? Stephen LaNeve: Thank you, Marie. This is Stephen. I appreciate the question, and obviously, we have spent a lot of time thinking through this very carefully. As we noted in our remarks earlier, the shipments to customers in the Middle East, North Africa, and Pakistan particularly have been delayed indefinitely due to these tensions, and that directly impacts both product revenue and all the associated service revenue. Just given the dynamic nature of these disruptions and the difficulty in predicting when these installations will resume, we collectively thought it was more appropriate to withdraw guidance. EMEA is the largest region for Accuray Incorporated, and within EMEA, the Middle East and North Africa are the fastest-growing subregions. Given the interdependencies that exist between other regions around the world, we felt this was the most prudent course of action. Marie Thibault: Okay. And then I know you are ahead of schedule on some of your cost-cutting efforts, but it looks like adjusted EBITDA came in well below what we were expecting and certainly does not really keep you on track for your prior outlook. I understand that has been removed. What is going on there? I think that excluded things like the restructuring charge. So what is going on there? And is there a way to see improving profitability despite some of this macro uncertainty? Ali Pervaiz: Hey, Marie, it is Ali. Thanks for the question. We are really excited about the fact that the transformation is moving along well, and we are ahead, just like you said. In terms of the savings, we have made a lot of progress to date. You heard about the workforce reductions and the reorganization that we have done. We have made a lot of progress in terms of overall cost and spend rationalization, and we will continue to execute on the transformation. The main pillars associated with the transformation relate to continuing to focus on our service business, making meaningful progress in our distributor partnership model, and focusing on optimizing pricing. All of those are going to take some time to come into play, and the timing of those is really hard to anticipate. We think we are still going to see a solid annualized benefit in fiscal year 2027. Marie Thibault: Thank you, Ali. You took my question out of my mouth. I was going to ask about the timing of some of those potential benefits. I will hop back in queue. Thank you. Stephen LaNeve: Thank you. Operator: This concludes our question and answer session. I would like to turn the conference back over to Accuray Incorporated's President and Chief Executive Officer, Stephen LaNeve, for any closing remarks. Stephen LaNeve: Thank you all for joining our call today, and we look forward to speaking with you again in the summer when we report our fiscal 2026 fourth quarter earnings results. This concludes our earnings call. Thank you again. Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Central Garden & Pet Company Fiscal 2026 Second Quarter Earnings Call. My name is Kate, and I will be your conference operator for today. At this time, we will hold a question and answer session and instructions will be given at that time. As a reminder, this conference call is being recorded. I would now like to turn the call over to Friederike Edelmann, Vice President, Investor Relations. Please go ahead. Friederike Edelmann: Good afternoon, everyone, and thank you for joining Central Garden & Pet Company’s second quarter Fiscal 2026 Earnings Call. Joining me today are Nicholas Lahanas, Chief Executive Officer; Bradley G. Smith, Chief Financial Officer; John Edward Hanson, President, Pet Consumer Products; John D. Walker, President, Garden Consumer Products; and, last but not least, Jason Barnes, Executive Vice President, Garden Consumer Products. Nicholas will start by sharing today’s key takeaways, followed by Bradley, who will provide more details of our performance. After their prepared remarks, John, JD, and Jason will join us for the Q&A session. Before they begin, I would like to remind everyone that all forward-looking statements made during this call are subject to risks and uncertainties that could cause our actual results to differ materially from what those forward-looking statements express or imply today. A detailed description of Central Garden & Pet Company’s risk factors can be found in our annual report filed with the SEC. Please note that Central Garden & Pet Company undertakes no obligation to publicly update forward-looking statements to reflect new information, future events, or other developments. You can find our press release and related materials at ir.central.com. Last but not least, unless otherwise specified, all comparisons discussed during this call are made against the same period in the prior year. Should any questions come up after the call or throughout the quarter, do not hesitate to contact me directly at ir@central.com. And with that, let us begin. Nicholas, over to you. Nicholas Lahanas: Thank you, Friederike, and good afternoon, everyone. I will start with highlights from the second quarter and then walk through how we are thinking about the rest of the year. We delivered a record second quarter and a record first half, with clear improvement across the board: higher sales, expanded operating margins, and stronger earnings per share versus last year. That performance reflects resilience across our key categories, the strength of our operating model, and the actions we have taken to sharpen execution. At the same time, we are continuing to simplify the business in ways that also strengthen our teams and execution. We have moved our DoMyOwn business into our Covington fulfillment center, which is improving speed, lowering costs, and increasing flexibility across the network. We are also consolidating the TDBBS manufacturing into our dog and cat platform in New Jersey, to better leverage scale and what we believe are best-in-category capabilities. And subsequent to the quarter, we formed a joint venture with the leading U.S. pet food distributor, Phillips Pet Food & Supplies, where we will retain a 20% ownership stake. This is a strategic step which creates a stronger, more agile nationwide distribution network, reduces complexity, and allows us to focus more directly on growing our Central-branded portfolio. These moves build on the cost and simplicity work we have been driving for several years. That work has fundamentally strengthened the business. Today, we are more efficient, more resilient, and a better-run organization. And that discipline is embedded in how we operate. With that foundation in place, our focus is squarely on growth and disciplined capital allocation. We are investing where we see the highest returns and, with our balance sheet and customer relationships, we are well positioned to execute. We also advanced our innovation pipeline this quarter. We are bringing forward new products—both branded and private label—that deepen retailer partnerships and connect with consumers. In Pet, that includes Nylabone dog chews made with real meat and Farnam’s Enduro Gold Killer Fly Mosquito Control Spray for horses. In Garden, our recently launched The Rebels Sun & Shade extension in grass seed and new private label programs are performing well and delivering above expectations. Turning now to our outlook. We entered the back half of the year with momentum and a clear focus on execution. Our diversified portfolio, operational flexibility, and disciplined approach to cost management and capital allocation position us well to deliver profitable growth as the macro backdrop continues to evolve. The retail environment remains dynamic, with consumers looking for value and performance and continued shifts towards e-commerce and, in some categories, private label. We are responding with targeted investments behind our strongest brands, innovation, and consumer insights while continuing to strengthen our digital capabilities. These are the right investments. They are gaining traction, positioning us to drive both growth and margin expansion. While we are still early in our journey, innovation will become a more meaningful contributor as we continue to scale a more streamlined and efficient operating model. M&A remains a key lever. We are taking a disciplined, value-driven approach focused on high-quality, margin-accretive opportunities that strengthen our portfolio. With our liquidity and flexibility, we are well positioned to act when the right opportunities arise. On the joint venture, as expected, it will reduce reported revenue in the second half by a low-teens percentage but with minimal impact on earnings, given the lower margin profile of that business. Based on our performance and outlook, we are maintaining our guidance for Fiscal 2026 non-GAAP diluted EPS of $2.70 or better. That reflects both what we have delivered and our confidence in the path ahead. As always, this guidance excludes the impact of future acquisitions, divestitures, or restructuring actions. Before I hand it over to Bradley, I just want to recognize our teams across Central Garden & Pet Company. Their execution continues to set the pace for the organization. We built a strong foundation and we are moving forward with focus, discipline, and confidence in our ability to deliver long-term growth and value. And with that, I will turn it over to Bradley. Bradley G. Smith: Thank you, Nicholas. I will take a few minutes to walk through how the second quarter came together and share what we are seeing as we move through the year. Net sales were $906 million, a 9% year-over-year increase driven by growth across both segments and reflecting solid underlying demand, the anticipated shift of shipments from the first quarter into the second, and the benefits of actions we have taken to strengthen the business. Gross profit increased to $300 million from $273 million, with gross margin improving by 30 basis points to 33.1%. The prior year included a one-time inventory charge related to the wind-down of our U.K. operations. Excluding this charge, gross margin was essentially consistent year over year, supported by productivity gains across both segments and a favorable mix in Pet, which helped offset higher manufacturing costs and a lower-margin sales mix in Garden. SG&A expense was $186 million, up 3% versus the prior year. As a percentage of sales, SG&A was 20.5%, down from 21.6%, reflecting the improved sales leverage, prudent cost management, and ongoing simplification of the organization while continuing to reinvest in key growth initiatives. Operating income was $114 million compared with $93 million, and operating margin was 12.6% compared with 11.2%. It is important to step back and look at the first half as a whole, which helps smooth out the noise related to the timing shifts between Q1 and Q2. For the first half, our sales were up 2%. Gross margin increased by 70 basis points and operating income grew 8% versus last year. Both segments contributed to that performance in driving growth in both the top line and bottom line, together delivering record operating income for the company—a clear reflection of the strong execution we are seeing across the business. Below operating income, the picture remains stable and consistent with solid underlying profitability. Second quarter net interest expense of $9 million was consistent with the prior year. Other expense was $351,000 compared with $744,000 of other income in the prior year. Net income totaled $79 million compared with $64 million a year ago. We delivered record second quarter diluted earnings per share of $1.28, exceeding both prior year and our expectations, reflecting strong execution and the underlying strength of the business. Adjusted EBITDA for the quarter was $139 million compared to $123 million. Adjusted EBITDA margin for the quarter was 15.4% compared to 14.8%. Our effective tax rate for the quarter was 23.5%, in line with the prior year. With that context, let me turn to the segments. Starting with Pet. Net sales for the Pet segment came in at $477 million, up 5% year over year, primarily driven by the continued strength in our core consumables portfolio along with the expected shift of outdoor cushion orders from the first quarter into the second. On a first-half basis, sales for Pet were up 1% versus last year. In the quarter, we continued to see healthy demand across our consumables categories, particularly in our higher-margin dog and cat, equine, and professional product lines, where innovation and execution are driving top-line growth. Across the Pet segment, we held share overall, with gains in key categories including rawhide, dog treats, flea and tick, pet bird, and professional areas—aligned with our growth and margin priorities. We were also encouraged by the distribution gains we achieved during the quarter across a range of categories. Operating income for this segment was $78 million in the quarter, compared with $61 million. Operating margin improved to 16.3% from 13.4%, reflecting sales leverage, mix improvement, portfolio optimization, and solid execution across the segment. Adjusted EBITDA for the segment was $89 million compared with $75 million, and adjusted EBITDA margin for the segment was 18.6% compared with 16.6%. Now turning to Garden. Net sales for the Garden segment were $425 million, up 13%. As expected, the second quarter benefited from the timing of initial retailer shipments for the 2026 season and relatively low retailer on-hand inventories entering the quarter. In addition, the quarter benefited from meaningful distribution gains, particularly in grass seed and fertilizer. That said, for the first half, sales were up 4% over last year. Overall, we gained market share in Garden in the second quarter, with strength across several key categories including grass seed, fertilizer, and wild bird. As we enter the garden season, our businesses are well positioned to deliver a solid year, supported by strong preparation and close alignment with our retail partners. We remain encouraged by the continued support of our customers across our garden categories and brands. Operating income for the Garden segment in the second quarter increased to $66 million, up from $59 million in the prior year. Operating margin was 15.4%, remaining relatively consistent with last year’s performance as strong sales volume growth and productivity improvements helped offset the impact of a lower-margin sales mix and higher manufacturing costs. Adjusted EBITDA totaled $76 million compared with $69 million, and adjusted EBITDA margin for the segment was 17.7% compared with 18.2%. Let me close with cash and the balance sheet, which remain a key source of strength and provide flexibility to invest in growth. Cash used by operations was $50 million for the quarter, compared with $47 million a year ago. CapEx for the quarter was $10 million and depreciation and amortization totaled $21 million, both consistent with the prior year. We continue to expect to invest approximately $50 million to $60 million in CapEx this fiscal year, with a focus on maintenance and targeted productivity and growth initiatives across both segments. During the quarter, we repurchased approximately 110,000 shares for $3.4 million, with $128 million remaining under our share repurchase authorizations as of quarter end. At quarter end, cash and cash equivalents and short-term investments totaled $653 million, an increase of $137 million despite the acquisition of Champion U.S.A. in the first quarter, reflecting strong liquidity and cash generation. Total debt was $1.2 billion, unchanged from the prior year. Gross leverage ended the quarter at 2.8 times, compared with 2.9 times in the prior year and below our target range of 3.0 to 3.5 times. Net leverage was approximately 1.3 times, supported by our strong cash position. We had no borrowings outstanding under our credit facility. Our fortress balance sheet gives us flexibility to continue investing in organic growth, pursuing value-creating M&A, and returning capital to shareholders while maintaining a strong financial position. Before opening for questions, I want to echo Nicholas and thank our employees. Their work is driving our performance and positioning the business for continued success. Operator, please open the line for questions. Operator: Thank you. We will now open the call for questions. Nicholas Lahanas: Thank you. Operator: Our first question comes from the line of Bradley Bingham Thomas with KeyBanc Capital Markets Inc. Please go ahead. Bradley Bingham Thomas: Good afternoon. Thanks for taking the questions, and nice quarter here. I wanted to start off with a question for Nicholas and JD, I think to some extent. In this all-important spring selling season, clearly you had a great quarter in terms of sell-in. Can you give us any thoughts on how sell-through is shaping up and how you are thinking about that for the third quarter? And then as a follow-up on guidance at a high level, if we do some back-of-the-envelope math, you have had a strong first half. If you were just to hit that $2.70 number, that would imply that the second half could be lower by about $0.25 from what you did in the second half last year. In broad strokes, how are you thinking about the ability to drive profit or earnings growth in the second half? John D. Walker: Hey, Brad, it is JD. Thanks for the question. I will start and then I will ask Jason to comment as well. From a consumption standpoint, going back to the second quarter, as the weather started to improve, particularly in southern markets, consumption was great. That pattern carried into April and we saw strong consumption throughout the month. When the weather is favorable, consumers are very engaged in our categories and our retailers are very engaged and excited about the categories. We have every reason to believe that if weather cooperates and is favorable, we will continue to see that strength throughout the season. I would say we are cautiously optimistic. Jason, do you have anything to add? Jason Barnes: The only thing I would add is that we see strength across the portfolio. We have a pretty broad assortment of categories we participate in. It was not one or two categories that showed strength in March; it was basically across the entire portfolio, and that has continued into April when the weather has been there for us. Nicholas Lahanas: Also, great work with customers. We have more points of sale compared to prior year, and that has played a role too. John D. Walker: It has. Some of that was timing, some of that was low retailer inventories, and some of that was a lot of new points of distribution year over year. We did a nice job of shipping in. The consumption piece is still going to be tied to weather to a large degree. Where we see the weather, we have seen robust consumption. Nicholas Lahanas: On guidance, sure, I will give it a crack. Your point is well taken—we have started pretty strong, and as JD alluded to, April so far looks pretty good. In terms of guiding, we still need to see the season play out. As everybody knows, we are very weather dependent, and that really means May. May is that critical month—April and May—with May very important to the live goods business. Before we can give the all-clear signal and take guidance up, we really need to see that play out. If you look at our history, we usually do that in early to mid-June once we are comfortable with May. We feel really good about the business. It started very slow in the first quarter, and it played out exactly the way we thought. A lot of those sales slipped into the second quarter, then we had some really nice weather, and that momentum has continued into April. We are cautiously optimistic that the momentum will continue, but we just do not know for sure to the point where we are willing to move on guidance just yet. John D. Walker: I would add that May is critically important. We still have a number of markets that have not come on board yet. A lot of the northern markets are just now starting; I was in Boston last week and it was still winter. As those markets come on, we will feel a lot more confident in making a call. As Nicholas said, we really need to see how May plays out. Nicholas Lahanas: And as you know, we give ourselves a very wide range by saying $2.70 or better. We like the momentum we are seeing and the teams are executing, so we feel really good. We just need to see it play out for a few more weeks. Operator: Our next question comes from the line of Brian McNamara with Canaccord Genuity. Please go ahead. Brian McNamara: Hey, good afternoon, everyone. Thanks for taking the questions, and congrats on the strong results. Three months ago, your comments sounded like Pet was at or near a bottom. The second quarter looks like your first quarter of growth in the segment out of the last five and second out of the last seven. Should we think about the back half—appreciating you guide to revenue—as growth continuing as a reasonable expectation, and what drives that? And then apologies if I missed this: what was the durables versus consumables mix for the quarter, and how did durables do? Cushions probably helped there, obviously. Lastly, on distribution and the JV: what drove the decision, and do you still get the benefits like consumer insights, stronger customer relationships, and access to emerging brands and M&A? Why is there an earnings headwind rather than net neutral for the back half? John Edward Hanson: I can take the first part. We feel really good about where we are. We showed 5% top-line growth, and as we said on the last call, from everything we can see—from household penetration and buy rate to even our live animal sales—we believe the category has stabilized. We still feel that way. We did have help in the 5% this time from some timing on our cushions business that slid from the first quarter to the second, but even if you back that out, we feel pretty good about the organic piece of the growth in the business. It is difficult to have a crystal ball on the balance of the year, but I would say we are cautiously optimistic. Bradley G. Smith: On the durables and consumables mix, given the timing noise, I would look at it on a first-half basis. Durables were 18% of sales for the first half in Pet. John and I continue to believe that is going to go down over time given the rate of performance in our consumables business, but durables were relatively resilient. John Edward Hanson: We feel good about consumables performance in the second quarter—it was up mid-single digits, which is a higher-margin piece of our business and a good mix play in our focus area. Durables were up quite a bit in the second quarter largely because of the cushion shift. Nicholas Lahanas: On the JV decision, we still own 20%, and the way we viewed it was access versus ownership. We still have access to the channel; we just do not own the whole business. There were a lot of factors: listening to investors and analysts regarding margins and the overhang of the lower-margin distribution business; our cost and simplicity program—we had roughly 26,000 SKUs, many ship points, trucks, and employees; we want to streamline and focus our energy on higher-margin products and businesses that really move the needle rather than managing a high level of complexity. The independent channel has been a challenge, and we knew that to give us the best chance of success it made sense to do a JV with another player strong in food, whereas we were more on the supply side. We think the combination makes a lot of sense. Bradley G. Smith: From a financial perspective, the business was making money when we sold it—not a lot, but a little—so we lose that in the back half. When you look at the equity that we record for our 20% of the joint venture in the back half, we are currently projecting some initial losses. They will not yet be in a position to start to unlock synergies, and there is going to be a fair amount of purchase accounting attached to it, which will have a non-cash impact that will flow through earnings. Our estimate on the back half in terms of the financial impact to Central Garden & Pet Company is conservatively $0.03 to $0.05 per share dilutive. As we get into next year and the following year, as synergies begin to be realized, we should start to see some positive results. Operator: Our next question comes from the line of Robert James Labick with CJS Securities. Please go ahead. Analyst: This is Will on for Bob. Congrats on the strong quarter. From raw materials and plastic sourcing, with the war, have raw material prices impacted the Garden segment at all so far? And how is pricing in the garden industry in general—are retailers raising prices? John D. Walker: We have seen some inflation, particularly as it relates to urea. One of the benefits we have is we prebuild a lot of our materials for the year, so we will see some impact late this year, but it will be a manageable, smaller number. For next year, as we start our prebuild for 2027, it will have an impact on our fertilizer cost, and that is something that is widely known and already discussed with our customers. It is fluid right now and we will have to see where this goes. We have not taken pricing for this year—no pricing planned for 2026—and the impact should be manageable. Most likely next year we will be forced to take pricing as a result. I would add on urea that it is a very small piece of the business—from a COGS perspective, about 1%—so our exposure is not like some of our other competition. From a fuel standpoint, it is similar. We are managing through it. A lot of our customers pick up product at our facilities right now, so that too is fluid. We will have to see the duration and depth and whether pricing is needed to cover costs. To date, we have been able to manage through it. Our cost and simplicity initiatives help us offset some of these impacts. On broader industry pricing, retailers coming into this year have not been taking wholesale price increases. For next year, depending on input costs, if manufacturers have to take price, then retailers will have to take pricing. For this year, pricing has been fairly stable. We are seeing a fairly promotional marketplace right now, which we anticipated and planned for. Operator: Your last question comes from the line of Andrea Teixeira from JPMorgan. Please go ahead. Shovana Chowdhury: Hi, this is Shovana Chowdhury on for Andrea. Thanks for taking our question. You commented that consumption stayed robust throughout April. Can you add more color on the health of the consumer—are they more value seeking, and are you seeing any trade down to private label? Also, what is the level of promotions that you are seeing? Nicholas Lahanas: On the Garden side, we are seeing really nice consumption when the weather is good. Across the board, consumers are value seeking. They want performance at a reasonable price. Our grass seed brand, The Rebels, has done really well because it strikes that balance of being affordable and a great product. Those areas are taking off. John Edward Hanson: On the Pet side, we are seeing a bit of a channel shift. Consumers are going into mass and club and e-commerce to get value pricing. The value seeking is there, but branded is performing pretty well—solid overall. It is more of a channel shift than a brand trade-down. John D. Walker: On the Garden side, it is very similar. Retailers count on lawn and garden to drive footsteps into the store at this time of year, so they have been very promotional and very engaged in the category. From a consumer standpoint, when the weather is good, we are seeing robust consumption. They are seeking value, and this was a good year for us to pick up meaningful private label business across many retailers. That business is performing extremely well. It is not just private label—our branded products are also seeing strong consumption across categories, which is encouraging. I am not concerned about the health of the consumer right now; when the weather is favorable, the demand is there and retailers are ready. John Edward Hanson: To John’s point about channel shifts, we continue to see e-commerce grow as a percentage of our business. We are well positioned there and believe we are gaining share online as well. One last comment: we had noted in previous calls that footsteps at retail—particularly in home centers—had tailed off over the last few years. We have seen that stabilize and start to increase again, which is encouraging for us. Operator: Thank you for all the color. We do have one additional question coming from Brian McNamara with Canaccord Genuity. Please go ahead. Brian McNamara: At Global Pet, it sounded like everybody was going after cat—that is a hole in your portfolio for lack of a better term. How would you characterize the current M&A environment relative to three months ago and maybe a year ago? It sounds like activity has been heating up. Nicholas Lahanas: Very much. We are seeing things really pick up in terms of conversations and deal flow. A lot of bankers were telling us a year ago that 2025 was going to be the year, and that ended up being a lot more talk. This year, the conversations are a lot more sincere. We are seeing processes kick off with some really nice assets and have several conversations going on right now. We are very encouraged by the M&A environment picking up. Brian McNamara: Great. That is all I have. Thanks, guys. Nicholas Lahanas: Thank you. Operator: Well, this was our last question. Thanks, everyone, for joining us today. Please reach out to us with any additional questions you may have. Thanks. Nicholas Lahanas: Thank you. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today’s teleconference. You may disconnect your lines and have a wonderful day.
Operator: Greetings, and welcome to Zevia PBC First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, as a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jean Fontana, Investor Relations. Thank you, Ms. Fontana. You may begin. Jean Fontana: Thank you, and welcome to Zevia PBC’s First Quarter 2026 Earnings Conference Call. On today's call are Amy E. Taylor, President and Chief Executive Officer, and Girish Satya, Chief Financial Officer and Principal Accounting Officer. By now, everyone should have access to the company's First Quarter 2026 earnings press release and investor presentation made available this afternoon. This information is available on the Investor Relations section of Zevia PBC’s website at investors.zevia.com. Before we begin, please note that all financial information presented on today's call is unaudited. Certain comments made on this call include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. During the call, we will have some non-GAAP financial measures as we describe business performance. The SEC filings, as well as the earnings press release and presentation slides that accompany today's comments, and reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures, are all available on our website at investors.zevia.com. Now I would like to turn the call over to Amy E. Taylor. Amy E. Taylor: Thank you, Jean. Good afternoon, everyone, and thanks for joining our First Quarter 2026 earnings conference call. We are off to a strong start to the year, with record sales growth of 21% and adjusted EBITDA of approximately $1 million, both exceeding our expectations for the quarter. This is clear evidence that our strategy is gaining meaningful traction. Across channels, we are seeing encouraging momentum spanning from consumers discovering Zevia PBC for the first time to longtime Zevia PBC drinkers enjoying our new flavors. Importantly, this performance reflects the deliberate actions we have taken over the past several quarters to rightsize our cost structure and reinvest in marketing, sharpen our innovation pipeline, and drive new distribution. Taken together, these efforts are translating into a strong setup for the remainder of the year. The momentum we are seeing today reinforces our confidence that we are on the path to long-term growth and profitability. Now I would like to walk through our progress across our core pillars, starting with marketing, continuing through product innovation, and rounding out with distribution updates. On the marketing front, we delivered two engaging brand campaigns to start the year, as we bring to life Zevia PBC’s distinction as the radically real people's champion. First, our ZTOX campaign in January invited consumers to detox from artificial soda with a simple swap: choose a zero-artificial, better-for-you alternative. The campaign came to life through experiential marketing, sampling, and digital and influencer activations and helped kick off a strong start to the year. Second, our timely and shareable Real Soda for Real Humans campaign ran in March and April, making it clear that only robots should drink chemical cola and Zevia PBC is the soda for humans. Paid advertising across digital platforms and live TV, including a March Madness game, was the primary driver of reach. High-profile events like South by Southwest, where consumers had to prove they were human to get ZDS swag, further amplified the campaign. Sweepstakes activated on social generated thousands of entrants and engaged new consumers. We believe our mix of advertising and grassroots marketing—and more than ever, our differentiated brand voice—is proving efficient and effective in building awareness, trial, and ultimately demand. In March, we announced Zevia PBC’s biggest marketing news to date: a partnership with Grammy and Billboard Music Award–winning artist, Cardi B. She, like Zevia PBC, is a champion for the radical real. Famous for her humor, honesty, and openness, she has the 25th most-followed Instagram account, with over 200 million social media followers in total spanning across demographics and interests. Cardi B joins us at the perfect time as we roll out our new packaging in-store, our 2026 innovation with spring resets, and our improved taste across most of the portfolio. This will be a step change in reach and awareness for Zevia PBC, supporting our objective to expand the user base. Between Cardi B and other marketing programs during the month of March, Zevia PBC saw its highest-ever organic social media reach and the highest level of social media engagement of any month since the brand's launch. The partnership announcement alone generated 152 million editorial impressions in just the first week. To kick things off, Zevia PBC was a key sponsor of the Little Miss Drama Tour, with a superfan giveaway and a brand presence at each stop. We plan to fully activate this partnership through social media, event activations, sampling, a paid media campaign, and at retail, including potential new product innovation in the future. We look forward to sharing more on our broadest-reaching brand campaign plan yet, debuting in the next couple of months. Turning to product innovation. We are pleased with the overall response to our on-trend fruit flavors as they continue to roll out nationally. While still early, initial reads show that our new items are outperforming median velocities for our broader portfolio. At two top national retailers, for example, these items are driving incrementality of 38% and 53%, respectively. Orange Creamsicle, Fruit Punch, and Peaches and Cream launched with spring resets at the end of the first quarter. These flavors are on shelves now, attracting new consumers and providing variety for our loyal base. Package design is our most efficient communication vehicle and a key driver of trial. Our new, more vibrant designs look delicious and bring to life our points of difference as a clean label, great-tasting soda with zero sugar and zero fake ingredients. Along with our innovation and our enhanced taste profile in stores as of Q2, this refresh has supported space gains as it bolsters retailer confidence in Zevia PBC’s ability to bring in even more new, valuable shoppers, drive repeat purchases, and, finally, deliver incrementality. Looking ahead, we will continue to surprise and delight consumers with seasonal offerings, such as a forthcoming holiday limited-edition pack—more to come on that in the future. Now to our third growth pillar: distribution. We are pleased with our results across channels, especially our same-store distribution gains in existing channels such as grocery and our new activity in the club channel. The club channel is expected to help accelerate household penetration and growth. In the first quarter, we executed a successful national Costco rotation, broadening our reach to new consumers in emerging markets where we see potential for year-round distribution or additional rotations. In our more penetrated permanent markets, we saw strong velocities continue. In the mass channel, we saw an acceleration in velocity with notable outperformance in sales through digital platforms, a key priority for Walmart. Additionally, we are pleased with the expansion into Canadian Walmart stores, and momentum in Walmart chain-wide bodes well for future opportunities with other customers in the mass channel. In grocery, spring resets are underway and Zevia PBC has made strong space gains. Kroger has expanded our in-store distribution, adding incremental flavors and boosting Zevia PBC’s visibility. The brand made similar gains through new item distribution and improved shelf sets at major regional players such as HEB and Publix. These developments help the brand drive market penetration nationally and in underdeveloped regions, such as the South and the East Coast. Finally, Zevia PBC’s e-commerce business continues to grow at an impressive rate, outperforming expectations. The introduction of smaller packs across multiple flavors has helped to drive trial and fits the strategy of major e-commerce operators as they seek to compete with grocery and mass. We also see strong performance from our existing 24-pack and variety pack offerings, with our subscription business super-serving a heavy user. As the only zero-sugar, clean label offering at an accessible price point, Zevia PBC plays a unique role in modern soda. We are positioned to win as young consumers increasingly reject conventional carbonated soft drinks and choose better-for-you options. In closing, we have made tremendous strides in advancing our strategic growth pillars and strengthening Zevia PBC’s financial position. While we see uncertainty in the macro, we are focused on what we can control, and that is capitalizing on the opportunity to leverage Zevia PBC’s distinct market position as a great-tasting, zero-sugar, clean label, and affordable better-for-you option. As we continue to execute across marketing, product, and distribution, we are confident in our ability to deliver sustainable, profitable growth over the long term. With that, I will turn it over to Girish. Thank you. Girish Satya: Afternoon, everyone, and thanks for joining our call today. The reinvestments we have made across product, packaging, and marketing, enabled by our productivity initiative, led to a return to growth in 2025 and fueled first-quarter growth of 21%, our highest growth rate since becoming a public company. In addition to accelerated top-line growth, we drove vast improvement in our adjusted EBITDA. We are proud of what we have accomplished, as we believe that Zevia PBC has tremendous long-term growth opportunity. With that, let us turn to our results and an updated outlook for 2026. For the first quarter, net sales grew 21.2% to $46.1 million. The increase versus the prior year was primarily due to expanded distribution in the club channel and higher volume gains in the mass and e-commerce channels. Gross margin was 48.4%, a 170-basis-point decline from a record high of 50.1% in the first quarter of last year. The decline reflects the impact of higher aluminum costs and, to a lesser degree, the higher mix of club sales. This was partially offset by a higher average selling price related to a shift in promotional timing as well as higher price realization. Selling and marketing expenses were $14.5 million, or 31.5% of net sales in 2026, compared to $15.3 million, or 40.3% of net sales, in 2025. Breaking it down, selling expense was $9.4 million, or 20.4% of net sales in 2026, compared to $9.1 million, or 24.1% of net sales, in the first quarter of 2025. The 370-basis-point improvement was due to better warehousing and efficiency gains from automation. Marketing expense was $5.2 million, or 11.2% of net sales in 2026, compared to $6.2 million, or 16.2% of net sales, in 2025. The lower marketing expense as a percentage of sales was due to a shift in timing of our national campaigns relative to last year. We continue to balance brand and performance marketing with the objective of driving more awareness for Zevia PBC. General and administrative expenses were $9.1 million, or 19.7% of net sales in 2026, compared to $7.0 million, or 18.4% of net sales, in 2025. This includes $2.3 million, or 490 basis points, in litigation expenses in 2026. Adjusted EBITDA was approximately $0.9 million compared to an adjusted EBITDA loss of $3.3 million in the prior-year period. Turning to our balance sheet, we ended the quarter with approximately $26.6 million in cash and cash equivalents and have an undrawn revolving credit line of $20 million. Looking ahead, we will continue to build upon the strong progress we have made across our strategic pillars. Our revised outlook reflects the record performance in the first quarter, balanced with the ongoing uncertainty in the macro environment. In addition, our guidance reflects significant cost pressures associated primarily with higher fuel prices as well as additional increases in aluminum costs. Now turning to our outlook. Based on our first-quarter results and incorporating increasing macro uncertainty, we are raising our full-year net sales guidance to between $170 million and $175 million, reflecting 7% growth at the midpoint of the range. As a reminder, our net sales outlook reflects the planned discontinuation of our tea line, which we expect to impact growth by 1 to 1.5 points. We continue to expect the first and third quarters to deliver the biggest growth of the year due to timing of promotional and marketing investments. Turning to profitability, we now expect full-year adjusted EBITDA in the range of negative $2 million to negative $4 million. This incorporates an incremental $6 million in costs, two-thirds of which are related to the surge in fuel prices and the remainder of which are related to higher fuel-related aluminum costs. This is on top of the $5 million in incremental cost related to aluminum prices that we outlined on our previous earnings call. So combined, an $11 million headwind to profitability. This guidance assumes gross margin will be roughly in line with our Q1 gross margin rate, with slight pressure in the back half. The aforementioned fuel charges outside of aluminum costs will impact selling expense. Worth mentioning, if you back out the $11 million of incremental costs, our adjusted EBITDA outlook would have been $7 million to $9 million for 2026—roughly a mid–single-digit margin rate. While we expect these elevated prices to come down over time, we are also taking proactive steps to offset these higher costs. We have already taken $20 million of costs out of the business over the last two years. While we see additional savings opportunities, they will take time to realize and will not be taken at the expense of growth. Turning to our outlook for the second quarter of 2026, we expect net sales of between $43 million and $45 million. Once again, this guidance reflects the planned discontinuation of our tea offering, the lapping of sell-ins to Walgreens and Albertsons in the second quarter of last year, the impact of planned price increases, as well as a shift in marketing and promotional dollar spend from Q2 to Q3. We expect an adjusted EBITDA loss of between negative $0.5 million and negative $1 million, reflecting a gross margin rate similar to the first quarter. In addition to higher fuel costs, we also expect to incur approximately $1 million in restructuring costs related to relocation of one of our distribution centers. In closing, we are very pleased with the overall momentum of our business, which demonstrates strong execution against our strategic growth pillars. Early reads on our enhanced product portfolio, incorporating new fruity flavors, are resonating with consumers, and we look forward to the rollout of our enhanced classic flavors and new packaging in the second quarter. This, coupled with intentional investments in marketing through which we are amplifying brand awareness and driving trial, positions us well to unlock future growth. As we move past these cost pressures over time, we are confident in our ability to drive healthy profitability for this business. I will now turn it over to the operator to begin Q&A. Operator? Operator: Thank you. We will now open the call for questions. We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your questions from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star. One moment, please, while we poll for questions. The first question comes from the line of Sarang Vora with TAG. Please go ahead. Sarang Vora: Thank you. Great quarter, guys. Congratulations. I wanted to start with the new brand ambassador Cardi B relationship. Can you talk a little bit about how you figured out the brand and the fit, as well as how this changes your market approach as you go into the second half of the year? Does the guidance include a little bit of an increase in marketing as well, with all the plans that you talked about? Just a little bit on marketing and the brand evolution would be helpful. Thank you. Amy E. Taylor: Sure. Thanks, Sarang Vora. So Cardi B came on board as a part of our broader plan for 2026, so therefore within planned budgets. And, as you may have noted in our remarks, we talked about shifting promo dollars at retail out of Q1 this year to focus on the summer. So if you think about our focus at retail, the timing of the rollout of our new packaging, the new flavors in market with spring resets, the improved taste profile across our core—all of that with the tailwinds that Cardi will provide through increased awareness and the engagement that she will bring—it is all timed very nicely. What you should expect from the partnership is an always-on social media approach from both sides. Not only does Cardi have a really strong reach, but she is highly engaged in social, and then her fan base is very engaged with her, so we will find her to be very supportive of product messaging in a really organic and authentic way. We are also going to overlay a campaign spend against the partnership right out of the gate, so you will see an advertising campaign this summer inclusive of traditional and over-the-top streaming television and digital that we are really excited about. That will really help step-change our reach and support our number one priority, which is expanding the base. There is a lot more to the partnership within grassroots and driving trial and at retail, but we are excited immediately out of the gates about the always-on social media nature of this partnership given her engagement, and then the big summer advertising campaign that comes just at the right time for the business. Sarang Vora: That is cool. And just one quick question. I know there are a lot of cost pressures you talked about, especially tariffs and fuel prices and such. Can you talk about the pricing approach to it? Is there a thought to raise prices in the back half of the year to mitigate some of these costs? Is that baked into your guidance as well? Operator: Thank you. Girish Satya: From a pricing perspective, as a reminder, we passed through a price increase in the first quarter. We have been pleased with the uptick in higher price realization. We are focused on ensuring we can balance value to the consumer and the P&L as well. We are unlikely to be passing through incremental pricing in the back half of the year. We do believe that the cost pressures, although immediate in 2026, will subside over time, and we are proactively addressing it via other levers within the business. Operator: Thank you. Next question comes from the line of Analyst with Craig-Hallum Capital Group. Please go ahead. Analyst: Great. Thanks for taking my questions, and congrats on a very strong quarter here and very strong outlook. Factoring in the significant cost pressure that you guys are facing, it is a very impressive outlook and nice job done. My first question is just trying to level-set where we are in the overall rollout of the new packaging and new flavors. Certainly nice progress and some nice callouts in the prepared remarks and in the presentation, but could you give us the overall standing of where you are and how long we should look for the rollout of new packaging and new flavors to continue before we effectively reach full nationwide distribution? Amy E. Taylor: Sure. As we sit here today in May, I would say we are in the second inning. The Q1 result was pregame as it relates to the rollout of new package design. By the end of the second quarter, you should find shelves that are stocked with almost all new packaging. We have some early green shoots—accelerating velocities and some nice results at retail. It is too early to attribute those directly to the new packaging, but qualitatively and anecdotally, both in feedback from consumers and retailers, the new packaging performs very well for us in terms of communicating the Zevia PBC points of distinction and being very clear about our positioning, which is a step change over the packaging of the past, as well as popping well on shelves and doing justice to the variety and deliciousness of all of our flavor options. It is early going, but we will be all the way to bright going into the back half of the year, and that is partially baked into our presumptions of some acceleration of velocity in the back half. Analyst: Great. So did you say that you expected to be largely complete entering the back half of the year? And then, I think, this informs my next question: there were comments on the pace of revenue growth throughout the year. It was especially strong in Q1, of course, and I think you called out Q3. Could you help close the loop on what is driving that acceleration in Q3? Is it just stepping on the gas on this distribution rollout? Or are there any other forces at play—shelf resets, etc.—that we should be aware of? Girish Satya: Several things factor into growth rates being higher in Q1 and Q3. We are shifting not only promotional dollars but also marketing dollars into Q3 to coincide with the peak that Amy alluded to. The packaging will be fully rolled out by the end of Q2, and we are expecting a bit of an acceleration given those factors in Q3, which is why we have been calling out Q1 and Q3 as the higher-growth quarters for the year. Analyst: Awesome. Those are all my questions. Congrats again on the very strong quarter and strong outlook here, including the cost environment. Thank you very much. Girish Satya: Thanks. Operator: Thank you. Next question comes from the line of James Ronald Salera with Stephens Inc. Please go ahead. James Ronald Salera: Hey, good afternoon. Thanks for taking our question. I wanted to start with some discussion around club. You mentioned you just completed the rotation at Costco. Contemplated in your outlook for the rest of the year, is there any incremental club rotations in the back half of the year? Or anything that we should be thinking about in terms of visibility there? And maybe as a second part to that question, can you talk about the incrementality of the rotation in Costco and how many either new households or maybe lapsed users that helped you engage? Amy E. Taylor: It is early to quantify the household penetration impact of the Costco national rotation in Q1, but it certainly was additive to the quarter—incremental and reflected in our growth. The advantage of the national rotation does a couple of things. It strengthens our velocities based on increased presence in-store in the markets in which we have permanent distribution, helps spur discussions about future rotations for the regions in which we have rotational distribution, and opens up conversations about increased permanent distribution and/or future national rotation. Those are all on the table and represent upside to the plan. When we perform well in existing markets, it helps us to move from rotation to permanent. The hope is that we would get another national rotation in the balance of the year. All of that is promising and largely incremental, but it represents upside in the plan. Right now, we are not making a lot of assumptions in the back half of the year around incremental distribution at club beyond where we are today. James Ronald Salera: Great. A follow-up on the DSD network: any updates there and how that is trending? And as we have some of this new packaging that should improve on-shelf visibility, how do you anticipate that impacting the West Coast portion of your business that is supported by the DSD network? Amy E. Taylor: We are really bullish on this summer window with DSD for our ability to drive incremental displays in this critical window. We are focused on getting singles in front of the consumer on display, leveraging the new excitement around Cardi B as part of the reason why, as well as focusing promotional dollars for the summer. DSD will have a role in outperforming display execution versus the rest of market there, and we are happy with their ability to do that so far. In terms of an outlook on DSD, we are focused on execution in our regional-type pilots today, which are in the Northwest and the Southwest, focused on the West Coast where we are a bit more developed. We do not have plans to expand DSD outside of the footprint, but we are bullish on their ability to help us open up new channels—and specifically convenience—over time. Both the category and the brand are still in very early days in convenience, so we will pace ourselves there and focus more on same-store penetration and growth in independent channels in the meantime. Sarang Vora: Appreciate the thoughts. I will hop back in queue. Operator: Thank you. Next question comes from the line of Andrew Strelzik with BMO Capital Markets. Please go ahead. Andrew Strelzik: Hey. Good afternoon. Thanks for taking the questions. First, on the quarter—obviously nice upside to your expectations and your guidance for sales and EBITDA in the first quarter. Could you talk about what played out more favorably than you initially expected? Amy E. Taylor: I can talk about the sales side and then turn it over to Girish. The key point is that our base business was strong in Q1. As mentioned, we shifted promo out of the quarter to focus on the summer, and yet retail sales came back stronger than anticipated. We saw velocity acceleration even as we lap new distribution—across grocery, Whole Foods, and a few other accounts—where we are actually gaining share as well. In other cases, there was contribution to the quarter from new activity via the Costco national rotation and a few other same-store expansions within grocery. We were also pleased to see the price increase more fully realized and realized faster than anticipated. On net sales, those were the major drivers. Girish can round us out. Girish Satya: The other two factors were that the Costco rotation was less dilutive than we had anticipated, and we saw higher price realization, which helps flow through the rest of the P&L. We have continued to ratchet down expenses that are not consumer-facing and drive cost discipline throughout the organization. You see all of that playing out in Q1 results. Andrew Strelzik: Great. Building on that, you beat your Q1 guidance by about $5 million and only raised the revenue outlook for the year by $1 million to $2 million. Are you seeing anything that is making you more cautious about the outlook? Is there anything from your internal plans that is changing, or is it just conservatism? Girish Satya: We are really pleased with the outperformance thus far, and there is nothing in the business itself that makes us more cautious. As a reminder, we have a very broad demographic base, and we are seeing the K-shaped economy that others are, and the value consumer is getting squeezed. Out of an abundance of caution, we did not pass through all of the upside, and we are still early in the year. We have a lot of exciting new initiatives in front of us, which gives us positivity heading into the rest of the year. However, the macro continues to give us a little bit of pause, so we are trying to be prudent in our outlook. Andrew Strelzik: If I can squeeze one more in: on the $6 million of cost, is that ratable through the year across the three remaining quarters? And in the past, you have done a nice job on incremental cost saves to offset that. How long will it take before you start to realize some of those potential offsets? Girish Satya: We have already begun to see the impact of increased fuel expenses, primarily in our freight expenses. We started to see that in the back half of March and more fully in April, and you will see that impact in Q2. It will be ratable throughout the year. To the extent there is a ceasefire and diesel prices come down, it will take 90 to 120 days to see the full offset come back into the P&L. We have taken $20 million of cost out of the business. We see an incremental opportunity for $3 million to $5 million that probably will not begin to flow into the P&L until Q4, but most likely Q1 of next year. We will continue to look for opportunities, but we are not going to do it at the expense of growth. As a reminder, on a trailing twelve-month basis, we are basically breakeven from an adjusted EBITDA standpoint despite the cost pressures. In the long run, this can be a very solidly profitable business, especially as we lap some of these macro cost shocks that are out of our control. Andrew Strelzik: That makes sense. Thank you very much. Operator: Thank you. A reminder to all participants that you may press star and 1 to ask a question. Ladies and gentlemen, we have reached the end of the question-and-answer session. I would now like to turn the floor over to Amy E. Taylor for closing comments. Amy E. Taylor: Thank you. Thanks for joining us, everyone. I will reiterate that we are encouraged about the progress we are making across our strategic growth pillars, and I am really proud of this team, from the leadership on down. 2026 will be a pivotal year for Zevia PBC as we introduce exciting new product innovation, powerful marketing campaigns, and pack design evolutions, all of which support our unique positioning within better-for-you beverage. While, as Girish mentioned, we are navigating macro-related cost pressures and some uncertainty, we believe we have laid the groundwork for long-term future growth and profitability, and Q1 is a reflection of that. We are excited about the future. Thanks very much. Operator: Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, ladies and gentlemen, and welcome to Red Violet, Inc.'s First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this call is being recorded. I would now like to introduce your first host for today's conference, Camilo Ramirez, Senior Vice President, Finance and Investor Relations. Please go ahead. Camilo Ramirez: Good afternoon, and welcome. Thank you for joining us today to discuss our first quarter 2026 financial results. With me today is Derek Dubner, our Chairman and Chief Executive Officer, and Daniel MacLachlan, our Chief Financial Officer. Our call today will begin with comments from Derek and Daniel, followed by a question-and-answer session. I would like to remind you that this call is being webcast live and recorded. A replay of the event will be available following the call on our website. To access the webcast, please visit our Investors page on our website, redviolet.com. Before we begin, I would like to advise listeners that certain information discussed by management during this conference call are forward-looking statements covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with Red Violet, Inc.'s business. Red Violet, Inc. undertakes no obligation to update the information provided on this call. For a discussion of the risks and uncertainties associated with Red Violet, Inc.'s business, I encourage you to review Red Violet, Inc.'s filings with the Securities and Exchange Commission, including the most recent annual report on Form 10-Ks and subsequent 10-Qs. During the call, we may present certain non-GAAP financial information relating to adjusted gross profit, adjusted gross margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share, and free cash flow. Reconciliations of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures are provided in the earnings press release issued earlier today. In addition, certain supplemental metrics that are not necessarily derived from any underlying financial statement amounts may be discussed, and these metrics and their definitions can also be found in the earnings press release issued earlier today. With that, I am pleased to introduce Red Violet, Inc.'s Chairman and Chief Executive Officer, Derek Dubner. Derek Dubner: Good afternoon, everyone, and thank you for joining us. Before I walk through the quarter, I want to recognize our team. The results we are reporting today—record revenue, record margins, record EBITDA, and one of the strongest quarters for new customer onboarding in our company's history—are a direct outcome of disciplined execution. This is a team that consistently delivers, and that consistency is what drives the results you are seeing today. Now to the quarter. Revenue for the first quarter was a record $25.8 million, up 17% year over year. It is important to note that the prior year period included $1.2 million of one-time transactional revenue, so the underlying growth this quarter is stronger than the headline suggests. Adjusted gross profit increased 20% to $22.0 million, resulting in a record adjusted gross margin of 85%. Adjusted EBITDA increased 27% to $10.7 million, with a record margin of 41%. Adjusted net income was $6.6 million, producing record earnings of $0.46 per diluted share. Operating cash flow increased 32% to $6.6 million. This marks yet another quarter of consistent execution with high-teen growth and continued expansion in margins and cash flow. On the customer front, IDI added 400 new billable customers, one of the highest quarterly additions in our history, bringing total customers to 10,422. FOREWARN grew to more than 417,000 users with over 640 realtor associations under contract. These metrics reflect increasing adoption, deeper integration, and the growing reliance our customers place on our platform in their daily operations. At the same time, we continue to see a significant and expanding opportunity set in front of us, particularly as AI continues to unlock new capabilities across analytics, data aggregation, and customer interaction. Given the strength of our model and the level of cash flow we are generating, we are well positioned to invest proactively into that opportunity. Importantly, our opportunity in AI is not just about access to tools. It is about the foundation that we have built that those tools operate on. Our longitudinal identity graph, built and refined over time through real-world usage, is what enables us to generate actionable signals, not just data outputs. AI enhances our ability to analyze the foundational graph, identify patterns, and surface risk and insight with greater speed and precision. Similarly, our ability to aggregate and fuse new data is directly tied to our ability to resolve that data to unique individuals within our identity graph. Aggregating data is one thing, but correctly attributing it to the right individual over time is something entirely different. Whether it is distinguishing between thousands of individuals with the same name, resolving generational differences, or identifying underbanked consumers with limited public data, our platform is architected to unify fragmented data into a persistent, accurate identity—a continuously maintained and correctly attributed view of an individual over time, all powered by our proprietary engine. As we bring in additional data inputs, AI further enhances our ability to validate that data against our graph, then link and extract meaningful insight, reinforcing and extending the advantage we have built over the past. Across customer workflows, AI is also enhancing how our solutions are experienced, improving responsiveness, deepening integration, and increasing the utility of our platform in day-to-day decisioning. Internally, we are seeing accelerating adoption of AI across the organization, from engineering and security to operations and customer support, driving significant gains in productivity and development velocity. Within our technology organization in particular, development velocity has accelerated materially with teams leveraging AI and agentic tools to code, test, and deploy at rates we have not previously experienced. What historically required multiple resources can now often be accomplished by a single engineer operating with AI augmentation, significantly increasing our pace of product development and innovation. What we are observing is a compounding effect. As adoption deepens across the organization, the pace of improvement is accelerating, driving efficiency gains internally while simultaneously strengthening the value we deliver to customers. We are just scratching the surface. The net effect is that AI is acting as a force multiplier, increasing the value of our data, accelerating our pace of innovation, strengthening our position within the markets we serve, and further enhancing our AI-embedded layered architecture, which is fundamentally differentiated from the legacy technology stacks of our competition. Switching topics for a moment, I also want to revisit something we said several years ago, and Daniel will go into it in more detail. At that time, we outlined what this business would look like at a $100 million annual revenue run rate—specifically, adjusted gross margins exceeding 80% and adjusted EBITDA margins in the range of 35% to 40%. We had our skeptics, but that was guided by this team's knowledge and experience building similar businesses over the past three decades. Today, at our current scale, we already are delivering 85% adjusted gross margins and 41% adjusted EBITDA margins. This level of performance reflects the durability of our business and the operating leverage inherent in the model as we grow. We ended the quarter with $43.5 million in cash. We currently have $15.6 million remaining under our stock repurchase program after repurchasing 73,250 shares at an average price of $41.90 per share during the first quarter and through 04/30/2026. We will continue to allocate capital with discipline, balancing share repurchases with continued investment in our platform, data assets, and go-to-market capabilities. This was a strong start to 2026, and a continuation of the consistent, disciplined execution that defines who we are. With that, I will turn it over to Daniel. Daniel MacLachlan: Thanks, Derek. Good afternoon, everyone. We are off to an excellent start in 2026, delivering the highest revenue, adjusted gross profit, and adjusted EBITDA in our history—results that reflect the strength of our platform, the expanding reach of our solutions, and the consistency with which we are executing. I want to take a moment to put these results in context, because I think it speaks to something important about this team and this business model. As Derek mentioned, in March 2022, we laid out a framework on our earnings call of what this business looks like at $100 million in annual revenue. At the time, our run rate was approximately $45 million, our adjusted gross margin was 75%, and our adjusted EBITDA margin was 25%. We told you that at $100 million in annualized revenue, you could expect adjusted gross margin to exceed 80% and adjusted EBITDA margin to be in the range of 35% to 40%. We meant it, and we built toward it. This quarter, we crossed that revenue threshold for the first time—on $25.8 million in quarterly revenue, a $100 million-plus annual run rate—we delivered adjusted gross margin of 85% and adjusted EBITDA margin of 41%. Disciplined execution against a multiyear road map at the margins we said we would deliver is not something every management team can point to. But we can, and we are just getting started. At maturity, this business model is capable of adjusted gross margins in excess of 90% and adjusted EBITDA margins approaching 65%. The 2026 performance is evidence we are on the right path to get there. But we take a long-term view of this business, and we are not managing to a near-term margin target. We are managing toward the full potential of what we have built. Over the past decade, we have constructed a differentiated data and analytics platform—one that ingests, normalizes, and delivers intelligence at scale across a broad and growing set of use cases and end markets. The foundation we have built is what makes our AI actionable. AI is accelerating how we develop and deploy new capabilities, compressing development cycles and broadening the solutions we can bring to market. It is enhancing how our customers interact with our products, improving the speed and precision with which identity intelligence is surfaced and acted upon, and it is reshaping how we think about operational efficiency and scale, enabling us to accelerate productivity across the entire business. We are already seeing these benefits, and we expect their impact to compound. As we continue investing in AI, product development, and go-to-market capabilities, we expect adjusted EBITDA margins in the near term to trend in the mid- to high-30% range. We view that as a reflection of deliberate investment in the long-term growth of the business. The path to 65% adjusted EBITDA margins runs directly through the investments we are making today. Turning now to our first quarter results. For clarity, all the comparisons I will discuss today will be against the first quarter 2025 unless noted otherwise. Total revenue was a record $25.8 million, up 17% over the prior year. As Derek noted earlier, Q1 2025 included $1.2 million in one-time transactional revenue from two significant customer wins. Normalizing for that, our underlying growth rate this quarter would have been greater than 20%. We generated $22.0 million in adjusted gross profit, the highest to date, delivering a record adjusted gross margin of 85%, up two percentage points. Adjusted EBITDA came in at a record $10.7 million, up 27% over the prior year. Adjusted EBITDA margin expanded three percentage points to 41%, a new high. Adjusted net income increased 29% to $6.6 million, resulting in adjusted earnings of $0.46 per diluted share—both new highs. Turning to the details of our P&L, as mentioned, revenue for the first quarter was $25.8 million with solid performance across the business. Within IDI, we saw broad-based growth across our verticals, with particular strength in financial and corporate risk, and investigative. We added 400 billable customers sequentially to end the quarter with 10,422 customers. Financial and corporate risk was our fastest-growing vertical, with background screening leading the way with exceptional growth, continuing to benefit from the targeted product development and go-to-market investments we have made over the past year. Financial services delivered strong growth driven by deeper customer integration and volume expansion. In addition, both corporate risk and insurance contributed meaningful growth, rounding out a solid showing across the vertical. Investigative posted robust double-digit gains across every industry, including law enforcement, private investigators, bail bonds, and process servers. Law enforcement, in particular, continues its impressive trajectory, and we remain focused on deepening our penetration of the public sector. This vertical is expanding as a share of our total revenue, and we see significant runway ahead. Collections delivered steady gains this quarter. The recovery dynamic we have discussed in prior quarters remains intact, and we continue to see volume expansion from our existing customer base as the industry works through elevated delinquency levels. The vertical is maintaining its steady recovery, and we view it as a meaningful tailwind to our growth outlook. Emerging markets delivered healthy underlying expansion this quarter. The $1.2 million in one-time transactional revenue in Q1 2025 we noted earlier concentrated in this vertical, which creates a tough year-over-year comparison. Normalizing for that, the underlying growth rate was robust and in line with the demand momentum we continue to see across these industries. Retail, government, legal, repossession, and marketing all contributed meaningful growth. We remain encouraged by the breadth of activity throughout emerging markets as a significant long-term growth driver for the business. Lastly, IDI's real estate vertical, which excludes FOREWARN, delivered modest growth year over year, but is starting to show signs of stabilization following the prolonged pressure that elevated rates and affordability constraints have placed on housing activity. While the macro environment remains a headwind, we are encouraged by the trajectory and believe we are well positioned as conditions gradually improve. As to FOREWARN, the platform continued its impressive performance, delivering strong double-digit revenue expansion this quarter. We exited the quarter with over 417,000 users, up from 325,000 users a year ago. FOREWARN continues to gain traction with real estate professionals, who rely on it as an essential part of their daily workflow. We now have over 640 realtor associations contracted to use FOREWARN. Overall, contractual revenue accounted for 75% of total revenue in the quarter, up one percentage point from the prior year. Gross revenue retention remained strong at 95%, down one percentage point. Moving back to the P&L, our cost of revenue, exclusive of depreciation and amortization, increased $0.1 million, or 4%, to $3.8 million. Adjusted gross profit increased 20% to a record $22.0 million, resulting in a record adjusted gross margin of 85%, up two percentage points from the prior year. Our sales and marketing expenses increased $0.5 million, or 8%, to $5.9 million for the quarter, driven primarily by higher personnel-related expenses. General and administrative expenses increased $1.7 million, or 28%, to $7.9 million, driven primarily by higher personnel costs and acquisition-related activity. Depreciation and amortization increased $0.2 million, or 10%, to $2.8 million for the quarter. Net income increased $1.0 million, or 28%, to $4.4 million for the quarter. Adjusted net income increased $1.5 million, or 29%, to $6.6 million, the highest to date, resulting in record adjusted earnings of $0.46 per diluted share. Moving on to the balance sheet, cash and cash equivalents were $43.5 million at 03/31/2026, compared to $43.6 million at 12/31/2025. Current assets totaled $57.3 million, compared to $56.5 million at year-end, while current liabilities were $5.1 million, down from $7.9 million. We generated $6.6 million in cash from operating activities in the first quarter compared to $5.0 million in the same period last year. Free cash flow for the quarter was $3.1 million, a 24% increase from $2.5 million a year ago. In the first quarter and through 04/30/2026, we purchased 73,250 shares of company stock at an average price of $41.90 per share under our stock repurchase program. As of 04/30/2026, we had $15.6 million remaining under the repurchase program. In closing, crossing the $100 million revenue run rate threshold this quarter is a milestone worth acknowledging, but it is not a finish line. The same discipline and focus that got us here is what will take us to the next level. We have a clear line of sight to continued margin expansion, a platform that is scaling efficiently, and a team that has constantly and consistently delivered on what it said it would do. We are confident in our ability to build on this momentum, and we look forward to updating you on the progress throughout the year. We will now open the call for questions. Operator: Thank you. We will now open the call for questions. As a reminder, to ask a question, you will need to press 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star-1-1 again. Please stand by while we compile the Q&A roster. Our first question today is from Eric Martinuzzi with Lake Street Capital Markets. Your line is open. Eric Martinuzzi: Hey, congrats on the $100 million run rate. That is a very significant milestone that I know you guys have been working a long time to achieve, so great to see that. Question regarding we are always looking for kind of what is next. And given the achievement of those targets that you laid out back in March 2022, you talked a little bit in your prepared remarks, Daniel, about the at-maturity type model having in excess of 90% gross margins and then approaching 65% on the adjusted EBITDA. Obviously, that is the goal. Is there a timeline you are willing to communicate? Daniel MacLachlan: Thanks, Eric, and I appreciate the question. We are really excited about crossing that revenue threshold. That is a milestone and a good marker for us, but as I said earlier, it is just the beginning; it is not a finish line. When we talk about timelines to get to that maturity, we are not going to put a timeline on that today because we do not issue formal guidance, and pinning a year on a maturity-state outlook would be inconsistent with how we manage the business. What it comes down to is the structure of the business model. We operate a data and analytics platform with a largely fixed cost base. Once the platform is built and the data is in place, the marginal cost of an incremental transaction is very small. That means as revenue scales, an outsized share of every dollar flows to the bottom line. Our cost structure is built to support a meaningfully larger business than where we are today, and we are continuing to invest in that cost structure to enable future growth. So 65% at maturity is not a forecast and is not a target. It is the model output when you take a high fixed-cost, low marginal-cost platform and you let it scale to its natural operating leverage. For timelines, it is really about continuing what we are doing—building a good foundational business—and moving as quickly as we can toward those underlying metrics. Eric Martinuzzi: Okay. And then the other notable achievement here was new customer onboarding. As you went through the different verticals you serve, I did not really pick up on anything that was a substantial change versus your commentary last quarter, and maybe I am incorrect there. But what do you attribute the strength to? Is Q1 typically a time when you do onboard a significant number of new customers? Is there something going on in the macro or with the brand that is allowing you to achieve those numbers? Derek Dubner: Thanks, Eric. Q1 is generally strong. Industries tend to enter the new year with a little bit of wind in their sails. Maybe they are ready to deploy those budgets and get going. But I think what we would say is we have produced near-record onboarding—or at least at the very highs of our 12-month average—for quite a while now. We have always said that those are a great leading indicator of the revenue generation and success of the business in the out months, and that is bearing true, and that is why we use it as exactly that—a leading indicator. It is a confluence of many things ongoing within the organization. I think we are doing a very nice job of marketing ourselves, being present at conferences, engaging with our customers, and delivering what they want in products and solutions. We have always said we are very customer-centric, and we will never change. When we think about the next series of developments—whether it be functionality within an application for a certain industry—we are talking to our customers. We are finding out what they want, what they do not see in the competitive environment, and we execute upon that. I am very proud of the organization. That is why I started out with a thank you to the team. It is really brilliant execution over the last 18 months. We have an extraordinarily strong road map, and because of the AI implementations across the organization, we are seeing acceleration there. It has us very enthusiastic that we are well positioned for the future. Eric Martinuzzi: Got it. Last question for me. You talked about the growth in the quarter—up 17%—but really would have been even stronger when you back out the $1.2 million from the year-ago quarter. My math has the kind of apples-to-apples growth at around 24%. I know you are not in the business of giving guidance, but seasonal trends in the business historically would have Q2 up from Q1. Is there any reason that trend would be different this year? Daniel MacLachlan: Thanks, Eric. Historically, the first quarter has always been a really strong quarter for us. We noted Q1 2025 had a little additional in there in one-time transactional revenue, but going back historically, we have always had a good first quarter out of the gate. We try to replicate and grow that in Q2. Last year, if you look, we were probably down sequentially by about $200,000, but of course we were going against that transactional comp. We are not providing any formal guidance. For us, when we think about the business—and going back to 2024 and 2025—we talked about reaccelerating the growth rate. Obviously, we were able to do that. It is one foot in front of the other and continuing to execute. From a sequential basis, we have a great foundation coming out of the gate at $25.8 million. The expectation is we can leverage that and, over the next couple of quarters, grow from there. For the first quarter, April for the most part is closed, and what we saw in April was an extremely strong month. We are excited about what is happening in the business and looking forward to continuing to perform for the near, medium, and long term. Eric Martinuzzi: Great. Thanks for taking my questions. Operator: Our next question comes from Josh Nichols with B. Riley Securities. Your line is open. Josh Nichols: Yes, thanks for taking my question, and great to see the company taking back some stock this quarter. I wanted to ask two questions. One, about scaling up the go-to-market strategy. Historically you have been a little bit more narrowly focused, but when we think of that broadening out—inside sales, strategic sales, and distribution—what are your plans to grow those channels this year, and how are you investing in that? Daniel MacLachlan: Yeah, thanks, Josh. I will take that. If you look historically, especially in that go-to-market line—we provide some supplemental metrics around our sales and marketing personnel—we have invested there. We have invested on the marketing front, bringing in a highly skilled leader to build out that team. As Derek talked about earlier, we are at the conferences we need to be at, we are at the trade shows we need to be at, and we are continuing to engage with customers. That starts with a solid marketing foundation and builds out from there. On sales go-to-market, we have built out an extremely efficient and productive inside sales team. I think of that as the engine of the organization—highly skilled, verticalized subject matter experts across a broad group of industries and verticals. Tactically, over the last several years, we built out more of our strategic side in a number of areas where we have made investments. We have built out the strategic team. So growth is not only in some of those pockets where we have been investing; it is also across the broad and diverse industries and verticals we serve. We call out five main verticals in which we operate and break down revenue, but when you look at the amount of industries that roll up into that by verticals, it is around 25 or 26 different industries. The great thing about the growth we have seen this quarter—and have seen consistently—is that it is broad-based. It is in a number of areas, and it is not concentrated in one use case or one customer. That gives us a lot of confidence today to talk about how the business has been and how we expect it to perform in the future. Derek Dubner: Yeah, Josh, I know you are aware, but I will state it unequivocally that we are an early-stage company sitting in front of an enormous market opportunity, and we are very fortunate that we are generating very healthy cash flow. With that opportunity in front of us, the summary of our call today is that we are going to invest. The opportunity is that large. Our goal is not to set necessarily a record EBITDA margin tomorrow. We are building a very healthy foundational business with a view of 10 years out. The answer across the board is we expect to grow our team. This team is going to be methodical, deliberate, and directly in line with where the opportunity demands it. That includes go-to-market, your question, but also product, data, and definitely AI-driven capabilities. Over time that will create an inflection point. We will get to where revenue scales meaningfully without a commensurate increase in headcount because of what we are doing today and tomorrow. That is the model. We are not one of those companies that has bloated through the pandemic or is using AI as an excuse to eliminate personnel or a missed quarter or anything else. Net-net today, more employees—but a team that is going to operate at a fundamentally much higher level of productivity. Then that will flatten out, and you will see those margins just drive. Josh Nichols: Thanks. Then, Derek, you touched on it—always good to hear you talk a little bit about your thoughts on technology and the impact and tailwinds that you think that is going to bring to the business. Clearly, it is a rapidly evolving environment. Agentic capabilities with AI are something that has gotten a lot of focus recently. I am curious how you are thinking about investing in that, enhancing the company's agentic capabilities, and what that could do for the business as that scales up over the next few years. Derek Dubner: Yeah, sure, Josh. Thank you for the question. We spent some time on this in the fourth quarter in our earnings and full year, but I am happy to revisit it. AI, we do not perceive that as a threat to our business. It is a tailwind for us. I will restate it again: AI alone cannot replicate our data. We have built this longitudinal identity graph. It is billions of unified records, and it is tested and modeled and refined over years of actual usage. That is the foundation that AI needs to run on. For us, we have this healthy foundation built, and we can layer AI on top of it and better serve our customers in all different ways. In the risk signals we are generating, through an API connection our customers see it when they come into the office in the morning versus the competition’s solutions. Our competition is working on trying to complete migrations to the cloud from other architectures. We are cloud native, AI embedded from day one. We are using AI to compress development cycles and implement more AI across the organization. It is pulsating through the products and what we are doing every day—pair programming, agentic tools. We are very excited because as customers, especially small and medium size, become more adept at using it and getting agents into their workflow, we are completely usage-based and volume-based. That means they will access our products in much faster fashion—less manual activity—and more demand for the identities that we can clear every single day. It is necessary to come back to us. One person’s data on a given day to open a new bank account is only good for that moment in time. The next day, that person’s identity and profile may have changed. They might have been arrested the night before, they might now be divorced, they might have financial stress that occurred—a bankruptcy filing, a very large judgment. The next time the commercial or public sector sees that consumer, they need to clear that identity again and make a critical decision about that individual. We have been building for this for the last 11 years. We have built this identity graph to be extraordinarily high confidence. AI can only be directionally correct. We need to be accurate. Law enforcement is making critical decisions every day using our products, as are financial services and all of our industries. We are really well positioned. We are very excited about the innovation that is going on and the product road map, and very excited about introducing new products and updating you on that. Daniel MacLachlan: Thanks, Josh. Operator: Thank you. I am showing no further questions at this time, so I would like to turn it back to Derek Dubner for final remarks. Derek Dubner: Thank you. As we close, I want to reiterate that our performance this quarter reflects the strength of our strategy, the resilience of our business model, and the continued trust of our clients and partners. We remain focused on disciplined execution, responsible growth, and delivering long-term value to our shareholders. While the macro environment continues to evolve, we are confident in our positioning, our technology, and our team. We appreciate your continued support, and we look forward to updating you on our progress next quarter. Operator: Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.
Operator: Thank you for standing by. My name is Jordan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q1 2026 Vanda Pharmaceuticals Inc. earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. If you would like to ask a question during this time, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Vanda Pharmaceuticals Inc.’s Chief Financial Officer, Kevin Moran. Please go ahead. Kevin Moran: Thank you, Jordan. Good afternoon, and thank you for joining us to discuss Vanda Pharmaceuticals Inc.’s first quarter 2026 performance. Our Q1 2026 results were released this afternoon and are available on the SEC’s EDGAR system and on our website, vandapharma.com. In addition, we are providing live and archived versions of this conference call on our website. Joining me on today’s call is Mihael H. Polymeropoulos, our President, Chief Executive Officer, and Chairman of the Board. Following my introductory remarks, Mihael will update you on our ongoing activities. I will then comment on our financial results before we open the lines for your questions. Before we proceed, I would like to remind everyone that various statements that we make on this call will be forward-looking statements within the meaning of federal securities laws. Our forward-looking statements are based upon current expectations and assumptions that involve risks, changes in circumstances, and uncertainties. These risks are described in the cautionary note regarding forward-looking statements, Risk Factors, and Management’s Discussion and Analysis of Financial Condition and Results of Operations sections of our most recent Annual Report on Form 10-K, as updated by our subsequent Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings with the SEC, which are available on the SEC’s EDGAR system and on our website. We encourage all investors to read these reports and our other filings. The information we provide on this call is provided only as of today, and we undertake no obligation to update or revise publicly any forward-looking statements we may make on this call on account of new information, future events, or otherwise, except as required by law. With that said, I would now like to turn the call over to our CEO, Mihael. Thank you very much. Mihael H. Polymeropoulos: Good afternoon, everyone, and thank you for joining us today for Vanda Pharmaceuticals Inc.’s first quarter 2026 earnings conference call. Vanda delivered strong commercial execution in the first quarter, highlighted by 26% year-over-year growth in Fanapt sales, the groundbreaking U.S. launch of Nirius with its pioneering direct-to-consumer platform at nirius.us, and the FDA approval of Dysanti. We believe that these achievements, combined with meaningful pipeline progress and our raised 2026 revenue guidance, position the company for continued growth and value creation. Financial highlights. Total net product sales reached $51.7 million in Q1 2026, a 3% increase compared to $50 million in Q1 2025. Fanapt net product sales were $29.6 million, up 26% year-over-year. Full-year 2026 revenue guidance was raised to $240 million to $290 million, including $10 million to $30 million from newly launched Nirius. Commercial highlights. Fanapt saw continued strong momentum with total prescriptions (TRx) up 32% and new-to-brand prescriptions (NBRx) up 76% versus 2025. In April 2026, weekly TRx for Fanapt reached an eleven-year high of over 2.6 thousand prescriptions for the week ending 04/24/2026. Nirius is now commercially available nationwide through nirius.us, Vanda’s innovative direct-to-consumer platform. This pioneering patient-centric model enables convenient ordering online with rapid direct delivery, eliminating traditional pharmacy barriers and providing a seamless modern access experience. As the first new prescription therapy approved for the prevention of vomiting induced by motion in adults in more than forty years, Nirius represents a breakthrough in both science and patient access. Some key regulatory and clinical development highlights. Dysanti (milsoperidone) received FDA approval for the treatment of bipolar I disorder and schizophrenia. Dysanti is protected by data exclusivity through 02/20/2031 and multiple patents, the latest of which expires on 05/31/2044. Vanda’s ongoing late-stage clinical studies are progressing rapidly and are expected to generate top-line results in 2026 or early 2027, including the Phase 3 study of Dysanti as a once-daily adjunctive treatment for major depressive disorder with results expected in Q1 2027; the third Phase 3 study of Nirius for the prevention of vomiting in patients receiving GLP-1 receptor agonist therapies with results expected in 2026; and the Phase 3 study of VQW-765 in the treatment of adults with social anxiety disorder with results expected by 2026. The FDA accepted the Biologics License Application for imsidolimab in generalized pustular psoriasis, with a Prescription Drug User Fee Act target action date of 12/12/2026. The results of the pivotal clinical study were published in the 04/28/2026 issue of the New England Journal of Medicine Evidence. In summary, 2026 is developing into a transformational year for Vanda Pharmaceuticals Inc. with an extensive and diversified portfolio of commercialized products that include Fanapt, Hetlioz, Hetlioz LQ, Ponvory, Nirius, Dysanti, and potentially imsidolimab by year-end. Our recent innovative launch of Nirius through the nirius.us platform revolutionizes customer experience through a convenient ordering system at a significantly discounted cash-pay price. Finally, our late-stage pipeline, with several Phase 3 studies, is poised to further diversify our portfolio and strengthen Vanda’s commercial presence for years to come. With that, I will turn now to Kevin to discuss our financial results. Kevin Moran: Thank you, Mihael. I will begin by summarizing our first quarter 2026 financial results. Total revenues for Q1 2026 were $51.7 million, a 3% increase compared to $50 million for Q1 2025, and a 10% decrease compared to $57.2 million for Q4 2025. The increase as compared to Q1 2025 was primarily due to growth in Fanapt revenue as a result of continued commercialization efforts for Fanapt in bipolar disorder, partially offset by decreased Hetlioz revenue as a result of generic competition. The decrease as compared to Q4 2025 was primarily driven by the impact of insurance plan disruptions and deductible resets that are typical in the industry at the beginning of the year. Let me break this down now by product. Fanapt net product sales were $29.6 million for Q1 2026, a 26% increase compared to $23.5 million in Q1 2025, and an 11% decrease compared to $33.2 million in Q4 2025. The increase in net product sales relative to Q1 2025 was attributable to an increase in volume partially offset by a decrease in price, net of deductions. Fanapt total prescriptions, or TRx, for Q1 2026, as reported by IQVIA Xponent, increased by 32% compared to Q1 2025. Fanapt new patient starts, as reflected by new-to-brand prescriptions, or NBRx, for Q1 2026, as reported by IQVIA Xponent, increased by 76% compared to Q1 2025. The decrease in net product sales relative to Q4 2025 was attributable to a decrease in volume and price, net of deductions. Fanapt TRx for Q1 2026 decreased by 1% as compared to Q4 2025. The decrease in volume was primarily driven by the impact of insurance plan disruptions and deductible resets that are typical in the industry at the beginning of the year and that we have observed with Fanapt and the broader atypical antipsychotic market in prior years. Historically, Fanapt inventory at wholesalers has ranged between three and four weeks on hand, as calculated based on trailing demand. As of the end of Q1 2026, Fanapt inventory at wholesalers was slightly above four weeks on hand, generally consistent with the level of inventory weeks on hand as of Q4 2025, but slightly above the historic range. Turning now to Hetlioz. Hetlioz net product sales were $15.9 million for Q1 2026, a 24% decrease compared to $20.9 million in Q1 2025 and a 3% decrease compared to $16.4 million in Q4 2025. The decrease in net product sales relative to Q1 2025 and Q4 2025 was attributable to a decrease in volume as a result of continued generic competition in the U.S., which has contributed to declines in expenses for both comparative periods. Of note, for Q1 2026, Hetlioz continued to be the leading product from a market share perspective despite generic competition for over three years. Hetlioz net product sales can be impacted by changes in inventory stocking at specialty pharmacy customers from period to period. Hetlioz net product sales have fluctuated and may continue to fluctuate from quarter to quarter depending on when specialty pharmacy customers need to purchase again. Hetlioz net product sales may decline in future periods, potentially significantly, related to continued generic competition in the U.S. And finally, turning to Ponvory. Ponvory net product sales were $6.2 million for Q1 2026, a 10% increase compared to $5.6 million for Q1 2025, and an 18% decrease compared to $7.6 million in Q4 2025. The increase in net product sales relative to Q1 2025 was attributable to an increase in volume and price, net of deductions. The decrease in net product sales relative to Q4 2025 was primarily attributable to a decrease in price, net of deductions, partially offset by an increase in volume. The specialty distributor and specialty pharmacy inventory on-hand levels during these periods were in line with normal ranges. Of note, underlying patient demand was essentially flat between Q4 2025 and Q1 2026, even in light of the negative impact of insurance plan disruptions and deductible resets at the beginning of the year. Additionally, as we have previously discussed, an amount of variable consideration related to Ponvory net product sales is subject to dispute, of which approximately $3 million was recognized for the three months ended 12/31/2024. For Q1 2026, Vanda recorded a net loss of $48.6 million compared to a net loss of $29.5 million for Q1 2025. The net loss for Q1 2026 included income tax expense of $100 thousand as compared to an income tax benefit of $7.9 million for Q1 2025. As a reminder, the company recorded a one-time tax charge in 2025 to establish a valuation allowance against all of Vanda’s deferred tax assets. Tax expense is expected to be nominal going forward until such time that a valuation allowance is no longer required. Operating expenses for Q1 2026 were $101.9 million, compared to $91.1 million for Q1 2025. The $10.8 million increase was primarily driven by higher SG&A expenses related to spending on Vanda’s commercial products as a result of the continued commercialization efforts for Fanapt in bipolar disorder and Ponvory in multiple sclerosis, expenses associated with the preparation for Nirius and Dysanti commercial launches, and higher legal expenses. These increases were partially offset by lower R&D expenses on our imsidolimab program, partially offset by an increase in expenses for our Dysanti major depressive disorder program, VQW-765 social anxiety disorder program, and other development programs. Q1 2025 included an upfront payment to Anaptys for the exclusive global license agreement for the development and commercialization of imsidolimab. On the commercial side, during 2024 and 2025, we conducted a host of activities as a result of the commercial launches of Fanapt in bipolar disorder and Ponvory in multiple sclerosis, including an expansion of our sales force and the development of prescriber awareness and comprehensive marketing programs. Additionally, in 2025, we launched our direct-to-consumer campaign, which has driven meaningful gains in brand awareness for the company and our products, Fanapt and Ponvory. Throughout 2025 and Q1 2026, we maintained strategic investments in our commercial infrastructure, including increased brand visibility through targeted sponsorships, with the goal of supporting long-term market leadership and future commercial launches. Vanda’s cash, cash equivalents, and marketable securities (referred to as cash) as of 03/31/2026 were $202.3 million, representing a decrease of $61.5 million compared to 12/31/2025. The decrease in cash was driven by the net loss in Q1 2026, as well as a one-time milestone payment of $10 million made to Eli Lilly in Q1 2026 for the approval of Nirius in the U.S.; seasonal compensation and benefit payments, which generally hit during the first quarter of the year, of approximately $7 million; and payments to third parties for manufacturing of commercial and clinical product of approximately $11 million, which is significantly higher than recent quarters. As a reminder, payments made in advance of production are capitalized as a prepaid expense. Commercial products are capitalized as inventory on our balance sheet after production, while pre-commercial products are generally expensed as research and development costs as incurred. The timing of manufacturing of pre-commercial products may result in future variability of our R&D expense, depending upon the timing of production. When adjusting the decrease in cash for these items, the change in Q1 2026 would have been closer to $40 million. With regard to the launches of Fanapt in bipolar disorder and Ponvory in multiple sclerosis, the launches were initiated in 2024, and we continue to enhance our commercial efforts through 2026, with the impact of these commercial efforts contributing to revenue growth in 2025 and expected to continue to contribute to our revenue growth in 2026 and beyond. We have already seen significant growth in our commercial activities. Several lead indicators suggest a strong market response to our commercial activities related to Fanapt for bipolar disorder, including total prescriptions (TRx) increased by approximately 32% in Q1 2026 as compared to Q1 2025. In April 2026, weekly TRx for Fanapt reached an eleven-year high of over 2.6 thousand prescriptions for the week ending 04/24/2026. New patient starts, as reflected by NBRx, increased by 76% in Q1 2026 as compared to Q1 2025. Of particular note, Fanapt was one of the fastest growing atypical antipsychotics in the market throughout 2025 and into 2026, based on several prescription metrics. Our Fanapt sales force continues to expand. Our Fanapt sales force numbered approximately 160 representatives at year-end 2024 and increased to approximately 300 representatives at year-end 2025. These expansions have allowed us to significantly increase our reach and frequency with prescribers. To that end, the number of face-to-face calls in Q1 2026 was more than 80% higher than the number of face-to-face calls in Q1 2025. In addition to our Fanapt sales force, we have established a specialty sales force to market Ponvory to neurology prescribers around the country and have grown this sales force to approximately 50 representatives. Fanapt performance remains the focus of Vanda’s commercial initiatives and encourages us to continue to invest in this differentiated medicine and the franchise-extending launch of Dysanti. Before turning to our financial guidance, I would like to remind folks that with Fanapt, Hetlioz, Ponvory, and now Nirius already commercially available, and with Dysanti recently approved for bipolar disorder and schizophrenia, and a Biologics License Application for imsidolimab now under review by the FDA, Vanda has five products currently commercially approved and could have six products commercially approved by year-end 2026. Turning now to our financial guidance. Vanda is raising its full-year 2026 total revenue guidance to reflect the potential contribution of newly launched Nirius while maintaining prior ranges for Fanapt and other products. Vanda expects to achieve the following financial objectives in 2026: total revenues from Fanapt, Hetlioz, Ponvory, and Nirius between $240 million and $290 million. The midpoint of this revenue range of $265 million would imply revenue growth in 2026 of approximately 23% as compared to full-year 2025 revenue. This compares to previous guidance of total revenues from Fanapt, Hetlioz, and Ponvory of between $230 million and $260 million. Fanapt net product sales of between $150 million and $170 million. The midpoint of this range would imply Fanapt revenue growth in 2026 of approximately 36% as compared to full-year 2025 Fanapt revenue. This guidance is consistent with the previously communicated revenue guidance. Assuming consistent gross-to-net dynamics between 2025 and 2026, the bottom end of the range assumes high single-digit to low double-digit sequential quarterly TRx growth for Fanapt in the remainder of 2026. The top end of the range assumes mid-teens to high-teens sequential quarterly TRx growth for Fanapt in the remainder of 2026. Other net product sales of between $80 million and $90 million. This range assumes a further decline of the Hetlioz business due to generic competition and modest growth of the Ponvory business, where we are seeking to significantly improve market access to the product. Depending on our success in these efforts, we could see meaningful improvements in patients on therapy, prescriptions filled, and prescriptions written by prescribers. This guidance is also consistent with the previously communicated revenue guidance. Finally, Nirius net product sales of between $10 million and $30 million. This guidance was not previously provided and is being introduced as part of the Q1 earnings update. Vanda is currently making conditional investments to facilitate future revenue growth, both in the form of R&D investments, commercial manufacturing, and potentially outsized commercial investments, which could vary moving forward depending on the success of these commercial strategies. As previously communicated, Vanda is not providing 2026 cash guidance at this time; however, it is likely that Vanda’s 2026 cash burn will be greater than the cash burn in 2025. With that, I will now turn the call back to Mihael. Mihael H. Polymeropoulos: Thank you very much, Kevin. At this point, we will be happy to answer your questions. Operator: As a reminder, if you would like to ask a question during this time, please press star followed by one on your telephone keypad. Your first question comes from the line of Olivia Brayer from Cantor. Your line is live. Olivia Simone Brayer: Hi. Good afternoon. Thank you for the question. Can you run through what the pushes and pulls are that you are using for that $10 million to $30 million guidance range for Nirius? It seems like somewhat of a big range given that it is so early in the launch, so I am curious what the higher end of the range assumes versus the lower end. And then on Dysanti’s launch, what is the progress on getting that to patients at this point? And should we assume that any contribution from Dysanti this year is essentially embedded in your Fanapt guidance, or is it just too early to start attributing revenues there? Mihael H. Polymeropoulos: Maybe, Olivia, I will start off by saying it is very early on the new launch, and you have seen that we are approaching it as a broadly available commercial product with a direct-to-consumer platform, which is in the early days. Of course, we are working through all the dynamics and logistics of that. We will have a better idea on progress by our next call. In terms of the $10 million to $30 million, we are excited about the opportunity. We know we are tapping a market of potentially 70 million people with motion sickness, and a good percentage of them suffering from severe motion sickness that is not properly treated today. The $10 million to $30 million is a relatively wide range, but it is not informed by experience; it is more modeling from the total market opportunity and other treatments for motion sickness. I will turn it to Kevin. Kevin Moran: That is right, Olivia. That is what is driving the range; it is not informed by actual data at this point. It is informed by modeling and what we have seen in some of our qualitative and quantitative research. As we gather more information, we will be able to provide additional context as the year progresses. On the Dysanti side, what we previously communicated is that we were looking to have the product available in the back half of the year, and that is still on track. We are working to bring that product to market. As far as the revenue contribution goes, it is still pre-launch, so a little early. I would not think about it as embedded in the Fanapt revenue item because we expect that we will see demand for Dysanti independent of Fanapt. For any demand that we see for Dysanti that replaces Fanapt demand, we are expecting to see meaningful net price favorability, which would lead to a larger revenue contribution from a Dysanti unit versus a Fanapt unit. Olivia Simone Brayer: Got it. So for Dysanti specifically, is it just a matter of waiting until it is officially commercially available before providing any sort of revenue numbers around that, or is 2026 maybe just a little bit too early to start modeling Dysanti? Kevin Moran: We have not committed to providing revenue guidance on Dysanti at a specific point in time, but the launch is going to be critical to us having better visibility. We will be looking to provide additional updates, and it is not necessarily too early depending on the time at which we launch the product. Olivia Simone Brayer: Okay. Thank you. Helpful. Operator: Thanks, Olivia. Your next question comes from the line of Raghuram Selvaraju from H.C. Wainwright. Your line is live. Raghuram Selvaraju: Thanks so much for taking my questions. First, I was wondering if you could provide us with some additional color regarding the timeline to reporting of top-line data for the tradipitant study assessing its ability to attenuate nausea and vomiting and other GI side effects associated with GLP-1 drugs. Kevin Moran: Thanks, Ram. In the press release today, we said results by the end of 2026, and our timing is consistent with what we communicated most recently in our initial launch of the program. We are actively enrolling patients at this point, so that timing is informed by actual activity. Raghuram Selvaraju: Can you talk a little bit about what your expectations are for that dataset—what you would consider to be a clinically meaningful result—and if you are also going to have additional information regarding the impact of tradipitant use on adherence and efficacy outcomes on the GLP-1s for patients enrolled in the study? Mihael H. Polymeropoulos: Thank you, Ram. First of all, the Phase 3 study is of a very similar design to the Phase 2 study for which we reported positive results in November. That is a week of pretreatment with tradipitant or placebo, and then a single injection of Wegovy at 1 mg and follow-on for another week. We aim to confirm the previous finding of the significant reduction in vomiting episodes. That was highly clinically meaningful. On your question about adherence, with this short study, we will not have that information. It is widely known that decreased GI tolerability, especially around dose escalation to higher doses, is a significant contributor to decreased adherence. Raghuram Selvaraju: Can you comment on the possibility or likelihood of any off-label use of tradipitant, given the fact that it is now an approved drug for motion sickness among those folks taking GLP-1 drugs, who may potentially have obtained them via some consumer health initiative, to assist them in achieving long-term adherence? Mihael H. Polymeropoulos: The keyword here is label. We cannot promote off-label use, especially when in the midst of clinical studies and certainly not before approval in that indication. We do not have insights to share on off-label use. We certainly hope that upon approval there will be significant interest. Raghuram Selvaraju: Last question for me is with respect to the long-acting injectable formulation of iloperidone. Can you provide us with an update on that and how rapidly you expect to be able to advance the product candidate at this juncture? Mihael H. Polymeropoulos: For context, this is the long-acting injectable iloperidone being used in a study to measure relapse prevention in schizophrenia. The study is ongoing in the U.S.; however, it is recruiting slowly. We think that is a phenomenon in the field with these studies and the required design of a placebo-controlled relapse prevention trial. We are concerned that this exact model that has worked extremely well for Fanapt oral and other antipsychotics is becoming less amenable to studying new drugs. We are thinking and potentially discussing with the FDA soon that not only is recruitment slower in the U.S. for this type of placebo-controlled schizophrenia relapse prevention study, but the rate of relapse on placebo has been significantly reduced compared to historical data. It is too early for us to say what the exact placebo relapse rate will be in this study, but we already believe it will be much lower than in our prior oral iloperidone relapse-prevention study. Together, these suggest concerns about timing and progress, but we have several ideas and plan to engage the FDA in a constructive discussion and perhaps modify the development plan. Operator: Your next question comes from the line of Madison Wynne El-Saadi from B. Riley. Your line is live. Madison Wynne El-Saadi: Hi, thanks for taking our questions. Maybe I will ask about the recent New England Journal publication on imsidolimab in GPP. We are looking at a potential Christmas-time approval again. Are you taking steps now to lay the groundwork for a potential year-end commercial launch? Would this likely be something where there is a one-quarter cushion before the launch? And is the expectation that you would receive approval in both the acute and the maintenance settings out of the gate? Mihael H. Polymeropoulos: Thank you very much, Madison. You are correct. We are very excited with the publication in a high-caliber journal, the New England Journal of Medicine Evidence, a testament to peer-review scrutiny around these impressive data. On indication, we believe that the data from the GEMINI-1 and GEMINI-2 studies support both immediate treatment of acute flares with a single injection and maintenance of response in responders with once-every-four-week injections. That is our proposed indication with the FDA. We are also making progress toward regulatory filings in Japan and in Europe, but they are much earlier than the FDA submission. In terms of launch timing, this is a complex product to manufacture, being a monoclonal antibody. We do not expect that we will be commercially launching right after the PDUFA date. There will be some lag time, but we hope we can launch within 2027. Madison Wynne El-Saadi: Understood. On the Fanapt prescription data and the reacceleration in April—Dysanti was approved late February—was there a halo effect, or was that purely the sales force you described? Kevin Moran: Thanks, Madison. Historically, including this year, we have seen the first quarter have seasonality with both Fanapt and the broader atypical class. This first quarter was no exception. In line with our expectations, we saw a flattish first quarter on prescription demand, consistent with last year and years prior. Last year, after the first quarter, we saw an acceleration and sequential quarterly growth in the double-digit range in the second, third, and fourth quarters. That is our expectation this year and is supported by what we see in the April data, which includes our highest TRx number in over eleven years—over 2.6 thousand. The pattern we have seen in prior years and expected to see this year has played out to date. Mihael H. Polymeropoulos: I agree, and also want to emphasize that the commercial infrastructure is mature. We have approximately 300 representatives, well trained and developing their relationships in the field, supported by a significant speaker program and our brand awareness direct-to-consumer marketing. Madison Wynne El-Saadi: Understood. Thank you. Operator: Your next question comes from Les Solisky from Truist. Your line is live. Les Solisky: Great. Thank you for taking my questions. First, on Fanapt, do you have a sense of what portion of the TRx and NBRx are coming from bipolar versus schizophrenia? And with inventory running above normal, should we expect any wholesaler destock in 2Q? And then on Dysanti, can you rank the launch priorities—new patient starts versus switches from Fanapt—and targeting Medicaid-heavy patients? And third, I see the MDD readout was moved to 2027 from year-end 2026. What drove the timing shift? And I have a follow-up. Thank you. Kevin Moran: Thanks, Les. On the split, while we do not analyze the data at an indication level, our expectation is that the primary driver of Fanapt growth is the bipolar label expansion we got in 2024. That has informed our targeting strategy, call points, and call guidance. As for stocking, historically we have seen Fanapt inventory levels at three to four weeks. At the end of Q1 2026, Q4 2025, and as far back as 2024, inventory levels were at or slightly above four weeks on hand. The inventory at the end of the first quarter is consistent with what we have seen recently and what we would expect for a product that is growing. Because it is measured off trailing demand, if demand is growing, the calculation lags. I would not expect a destock; I would expect inventory levels to maintain at this level as long as Fanapt continues to grow. On prioritization of new patients versus switches from Fanapt to Dysanti, we will prioritize both. Dysanti will be detailed as a newly approved atypical antipsychotic, and we will deploy commercial strategies to move appropriate prescriptions from Fanapt to Dysanti. With the Dysanti launch in the back half of this year and the potential Fanapt loss of exclusivity at the end of next year, we have about five quarters where both products will be in the market, enabling a switch strategy while executing a launch strategy as well. Mihael will address the MDD timing. Mihael H. Polymeropoulos: Les, you are correct. We moved the timing of end of study and results for the MDD study to 2027 from 2026. We are still working hard to get results as soon as possible; it could be by year-end. We have better data now on recruitment speed, especially bringing on new sites in Europe. It is a reflection of projections from the actual recruitment data. Les Solisky: Thank you. On commercialization in motion sickness, can you provide some color around patient access to the drug and how net pricing looks outside of the website via the retail pharmacy channel? Lastly, I am curious about your pricing strategy given the competing NK1s out there and how this would translate to the GLP-1 adjunct opportunity. Kevin Moran: Thanks, Les. As we look at the insurance reimbursement landscape, with the product relatively recently approved, that process will play out over coming quarters and years as payers conduct their clinical assessments and periodic reviews. We expect to have more information to share on Nirius access and progress as we move further into the launch. Securing coverage is something we would like to achieve in addition to the cash-pay model, but the cash-pay model is our immediate focus with the innovative platform we have deployed. On pricing strategy, in the competitive NK1 class, per-dose pricing ranges from about $200 up to about $600. Our pricing strategy positions us in the middle to lower end. With an eye toward gastroparesis and, if we are successful on the regulatory front, the GLP-1 market, we believe that pricing will be competitive for those patients as well. Considerations included having the appropriate price for the motion sickness market while anticipating potential gastroparesis and GLP-1 markets. Mihael H. Polymeropoulos: I would add that we chose this commercial model because we believe motion sickness is a prototypical consumer product. As you can see on our website, we provide the product in increments of two capsules, which may be enough to supply someone for their business or personal travel where they may experience motion. We are receiving good comments on being very patient-centric. While in recent years we have seen a cash-pay model at discounted prices emerge for drugs like GLP-1 analogs, this is the first instance we know of where you can directly coordinate with the manufacturer. This is an innovative system we have built at Vanda that works in conjunction with a mail-order pharmacy to get the product to patients expeditiously. We are also working to add value-added services, including a telemedicine platform so that patients can conveniently obtain prescriptions. It is focused on the customer experience, and we want this to be an example for others to follow. You mentioned other NK1 antagonists. Yes, there are other approved drugs in the class; none have been studied or approved in motion sickness or as an adjunct to GLP-1 therapy. The lead product there has been aprepitant by Merck in chemotherapy-induced nausea and vomiting and postoperative nausea and vomiting. There are key label differences that can make Nirius more attractive for our consumer base, including the absence of interaction in the midazolam study, which differentiates Nirius from aprepitant, and aprepitant’s contraindication or warning around contraceptive use. Those and other items on the prescribing information, we believe, can make the product attractive for this approved indication. Les Solisky: Thank you. Just to clarify, would you consider a dual-model approach for the GLP-1 adjunct opportunity, meaning rolling it out with a DTC plan and a traditional insurance channel as well? Mihael H. Polymeropoulos: Our premise is broad access. Any way people want to acquire the product, we want to make it available. At the same time, we recognize the difficulties people are going through with the “middlemen”—pharmacy benefit organizations, plans, pharmacies—and price markups. There is a national discussion around that. The WAC price, the list price of $255 a capsule, is within the range of other NK1 antagonists. However, on cash pay, we are offering it at more than a 65% discount—from $255 to $85 a capsule—making it affordable for folks who travel for business or pleasure or engage in activities that cause motion sickness. We are also making the drug available to pharmacies and ensuring that wholesalers will either stock the drug or make it available upon demand. The premise is access, and access is not just insurance negotiations; it is appreciating independence and convenience by individual patients in accessing this drug. We think this dual model can achieve that. Operator: Your final question comes from the line of Andrew Tsai from Jefferies. Your line is live. Andrew Tsai: Hi. This is Faye on for Andrew. Thanks for the updates and for taking our questions. We have two questions. Number one is about milsoperidone. We want to gauge your views on its likelihood of success in the Phase 3 MDD trial. We know that not all antipsychotics work in MDD, so can you talk about your confidence in why milsoperidone should succeed, and is there any existing Fanapt data to support any of its benefits as an adjunct? Mihael H. Polymeropoulos: Yes, we are quite confident—that is why we are running this study, and we are running it with once-daily Dysanti. We think the study is properly powered to detect a clinically meaningful improvement in symptoms of depression. Generally, atypical antipsychotics are effective as an adjunctive treatment in major depression. The pharmacology includes dual dopamine and serotonin receptor antagonism and a strong, unique-in-class alpha-1 receptor antagonism. Whether that will be necessary to achieve the effect in major depression will remain to be seen, but we remain very confident in Dysanti’s ability to achieve the effect. Andrew Tsai: Thank you. The second question is for Nirius. It launched earlier this month, and you briefly touched on the pricing strategy. Can you talk about the sales cadence for this drug later this year moving into 2027? Mihael H. Polymeropoulos: With us launching mid–second quarter, we would expect revenue to grow as the year progresses, driven by the passage of time and the increase in our promotional activities. Operator: Thank you. There are no further questions. I would now like to turn it over to Vanda Pharmaceuticals Inc. management for closing remarks. Mihael H. Polymeropoulos: Thank you very much, all, for joining this call and for your questions. We look forward to talking to you soon. Operator: That concludes today’s meeting. You may now disconnect.
Operator: Good afternoon, and welcome to Castle Biosciences, Inc. first quarter 2026 conference call. As a reminder, today's call is being recorded. We will begin today's call with opening remarks and introductions, followed by a question-and-answer session. I would like to turn the call over to Camilla Zuckero, vice president, investor relations and corporate affairs. Please go ahead. Camilla Zuckero: Thank you, operator. Good afternoon, everyone. Welcome to Castle Biosciences, Inc. first quarter 2026 results conference call. Joining me today are Castle Biosciences, Inc.'s founder, president, and chief executive officer, Derek J. Maetzold, and chief financial officer, Frank Stokes. Information recorded on this call speaks only as of today, 05/06/2026. Therefore, if you are listening to the replay, or reading the transcript of this call, any time-sensitive information may no longer be accurate. A recording of today's call will be available on the Investor Relations page of the company's website for approximately three weeks following the conclusion of the call. Before we begin, I would like to remind you that some of the statements made today will contain forward-looking statements including statements about expected addressable markets, statements containing projections regarding future events, or our future financial or operational results and performance, including our anticipated 2026 total revenue and the impact of our investments and growth initiatives including our ability to achieve long-term growth and drive stockholder value. Forward-looking statements are based upon current expectations and involve inherent risks and uncertainties. There can be no assurances the results contemplated in these statements will be realized. A number of factors and risks could cause actual results to differ materially from those contained in these forward-looking statements. Please refer to the risk factors in our most recent SEC filings for more information. These forward-looking statements speak only as of today, and we assume no obligation to update or revise these forward-looking statements as circumstances change. In addition, some of the information discussed today includes non-GAAP financial measures such as adjusted revenue, gross margin, and adjusted EBITDA that have not been calculated in accordance with U.S. GAAP. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the tables at the end of our earnings release issued earlier today, which has been posted on the Investor Relations page of the company's website. I will now turn the call over to Derek. Derek J. Maetzold: Thank you, Camilla, and good afternoon, everyone. We delivered strong first quarter results, building on our momentum from 2025. Thanks to the strong execution by the entire Castle Biosciences, Inc. team, we delivered revenue of $83.7 million. Test report volumes for our core revenue drivers grew 36% compared to 2025. Excluding DecisionDx-SCC and ID Genetics revenue, our revenue growth for 2026 is approximately 42% compared to 2025, highlighted by double-digit year-over-year test report volume growth for both DecisionDx-Melanoma and 2026. Our teams remain focused on executing our growth priorities, and our strong performance gives us confidence to raise our 2026 revenue outlook to between $345 million and $355 million, compared to our previously provided guidance of $340 million to $350 million. Now I will walk you through business highlights from the first quarter, and then Frank will provide additional financial highlights before we turn to your questions. Let us start with our core revenue drivers, and what we see as the bulk of our 2026 top line growth story: DecisionDx-Melanoma and TissueCypher. For DecisionDx-Melanoma, we delivered 10,021 test reports in the first quarter, representing 16% year-over-year growth. Further, March 2026 saw an all-time high record month for test reports delivered. We believe DecisionDx-Melanoma remains a durable growth driver and continue to expect mid to high single-digit volume growth for full-year 2026. Driving test adoption and sustaining our competitive advantage through robust clinical evidence remains a key priority. We recently presented new data at the 2026 American Academy of Dermatology Annual Meeting demonstrating that our DecisionDx-Melanoma test can significantly improve risk prediction within the American Joint Committee on Cancer, or AJCC, stages for patients with cutaneous melanoma. These data from 1,868 SEER-linked patients showed that DecisionDx-Melanoma significantly stratifies five-year melanoma-specific survival within AJCC stages and T categories, identifying patients whose mortality risk is substantially higher or lower than staging alone would predict. What this means is that in this study, DecisionDx-Melanoma provided clinically meaningful differences in risk within the same stage, enabling more personalized, risk-aligned management decisions by helping clinicians identify patients who may warrant closer monitoring or early intervention while also recognizing those who may safely be managed less intensively. These results are in addition to our recently published data from the PRO multicenter study evaluating DecisionDx-Melanoma's i31-SLNB test result. Data from this prospective U.S.-based study confirmed again that our test identifies patients with a less than 5% predicted risk consistent with the National Comprehensive Cancer Network guideline thresholds while maintaining favorable outcomes and outperforming traditional staging criteria. Now let us turn to our gastroenterology franchise. During 2026, we delivered 11,745 TissueCypher test reports compared to 7,432 in 2025, which is 58% growth. Consistent with our DecisionDx-Melanoma test, March also represented an all-time record month for TissueCypher. Two studies were recently presented at Digestive Disease Week by researchers at the Mayo Clinic. The findings demonstrated how molecular risk stratification with the TissueCypher test refined risk assessment and directly informed real-world management decisions for patients with Barrett's esophagus, with one study showing changes in surveillance intervals in more than half of patients compared with recommendations guided by traditional histopathology alone, supporting more personalized, risk-aligned patient management. Look to our news release from earlier this month for more information on these studies. For the full year, we expect to add a similar number of tests in 2026 as we did in 2025, indicating year-over-year growth approaching 50%. Let us move on to what we believe are our midterm—2027 and 2028—revenue drivers, which includes our Advanced ADTx test in addition to our core revenue drivers. As a reminder, Advanced ADTx is our first-in-class test designed to guide systemic treatment selection for patients 12 years of age and older with moderate to severe atopic dermatitis, or AD. You may recall that we released this test under a limited program in 2025. Continuing on our limited access during the first quarter, we received approximately 650 orders. Initial responses indicate that clinicians appreciate that Advanced ADTx integrates into their existing AD care pathway, helping them make more informed systemic therapy choices early in the patient treatment journey. Supporting this claim, during the quarter we published data from a prospective multicenter clinical validation study in the Journal of the American Academy of Dermatology, demonstrating that Advanced ADTx can identify patients with moderate to severe atopic dermatitis who are significantly more likely to achieve greater and faster responses when treated with a JAK inhibitor compared to a TH2 biological therapy. The data showed that Advanced ADTx can stratify patients by molecular profile, identifying those more likely to achieve near-clear skin or EASI-90, faster time to response, and meaningful patient-reported benefits when taking a JAK inhibitor, supporting improved outcomes and more biologically informed systemic treatment decisions early in the treatment journey with JAK inhibitor therapy as compared to TH2-targeted biologic therapy. Based on revenue cycle timelines, we expect to be in a position to provide more detail on reimbursement by the end of the third quarter 2026. And with that, I will now turn the call over to Frank. Frank Stokes: Thank you, Derek, and good afternoon, everyone. As Derek noted, our first quarter financial performance marks a strong start to 2026. Revenue was $83.7 million for 1Q26, driven by continued strength in our core revenue drivers. For total revenue for 2026, we are raising our revenue guidance to $345 million to $355 million, up from the previously provided range of $340 million to $350 million. This is growth of high-teens to low-20s in 2026 over 2025, excluding revenue from DecisionDx-SCC and ID Genetics from the 2025 and 2026 totals. Our gross margin during 1Q26 was 72.8% compared to 49.2% in 1Q25. As a reminder, 1Q25 gross margin reflects the one-time adjustment of accelerated amortization expense of approximately $20.1 million. Our adjusted gross margin, which excludes the effects of intangible asset amortization related to our acquisitions and excludes the effects of revenue adjustments in the current period associated with test reports delivered in prior periods, was 75.6% for the quarter compared to 81.2% for the same quarter in 2025. Turning to expenses. Our total operating expenses, including cost of sales, for 1Q26 were $102.1 million compared to $115.9 million for 1Q25. Sales and marketing expenses for the quarter were $41.0 million compared to $36.8 million for the same period in 2025, primarily driven by higher personnel costs and higher sales-related travel expenses. Increases in personnel costs reflect a higher headcount driven by salesforce expansion as well as merit and annual inflationary wage adjustments for existing employees. Higher sales-related travel expenses reflect increased field activity to support growing test report volumes. General and administrative expenses were $23.9 million for the quarter, compared to $21.8 million for the same period in 2025, primarily attributable to higher personnel costs, higher information technology-related costs, and higher travel costs, partially offset by a decrease in professional fees. Increases in personnel costs reflect headcount expansions in our administrative support functions as well as merit and annual inflationary wage adjustments for existing employees. Cost of sales expenses were $20.5 million in 1Q26, compared to $16.4 million in 1Q25, primarily due to higher expenses for lab supplies, higher lab services costs, higher personnel costs, and higher depreciation expense. The increase in expenses for lab supplies and lab services expense was driven by higher test report volumes. Increases in personnel costs reflect a higher headcount due to additions made to support business growth in response to growing test report volumes as well as merit and annual inflationary wage adjustments for existing employees. The higher depreciation expense reflects continued investment in and expansion of our laboratory facilities. R&D expenses were $14.4 million for the quarter, compared to $12.6 million for the same period in 2025, primarily due to higher personnel costs and higher clinical studies costs. The increases in personnel costs reflect a higher headcount to support continued business growth, and increases in clinical studies costs reflect investment in our pipeline products. Total noncash stock-based compensation expense, which is allocated among cost of sales, R&D, and SG&A expense, was $9.0 million for 1Q26, compared to $11.2 million in 1Q25. Interest income was $2.5 million for 1Q26, compared to $3.1 million in 1Q25. Our net loss for the quarter was $14.5 million compared to a net loss of $25.8 million for 1Q25. Diluted loss per share for the first quarter was $0.49 compared to a diluted loss per share of $0.90 for the same period in 2025. Adjusted EBITDA for the first quarter was negative $5.1 million compared to negative $13.0 million for the comparable period in 2025. The year-over-year change primarily reflects a one-time noncash amortization expense recognized in 2025 related to the accelerated amortization of our ID Genetics test. Net cash used in operating activities was $22.1 million for 1Q26, due in part to annual cash bonus payments and certain healthcare benefit payments that do not recur through the remaining three quarters of the year. Net cash used in investing activities was $25.8 million for the first quarter, consisting primarily of purchases of marketable investment securities of $55.1 million and purchases of property and equipment, partially offset by the maturities of marketable investment securities and the sale of equity securities. As of 03/31/2026, we had cash, cash equivalents, and marketable securities of $261.7 million. As we have discussed, we expect M&A to play a role in our growth story, and we intend to continue to evaluate candidates that fit within our strategic opportunities criteria. In closing, I am pleased with our strong first quarter results and increased guidance which reflect the consistent execution and momentum we are building across the entire business. I will now turn the call back over to Derek. Derek J. Maetzold: Thank you, Frank. In summary, I am pleased with our strong start to 2026. We remain confident in our ability to execute our growth strategy and drive long-term value to our stockholders. Finally, I want to thank the entire Castle Biosciences, Inc. team for their dedication to advancing patient care and improving patients' lives. We are proud of our accomplishments and excited about the path ahead, and we look forward to sharing our continued progress in the coming quarters. Thank you for your continued interest in Castle Biosciences, Inc. Now we will be happy to take your questions. Operator? Operator: We will now open the call for questions. In order to allow everyone in the queue an opportunity to address the Castle Biosciences, Inc. management team, please limit your time on the call to one question and only one follow-up. If you have additional questions, please return to the queue. If you would like to ask a question, please type star one on your telephone keypad to raise your hand. Your first question comes from the line of Mason Owen Carrico with Stephens. Your line is open. Please go ahead. Mason Owen Carrico: Hey, guys. Thanks for taking the questions here. I want to start out with TissueCypher volume: 58% growth year over year, obviously that is great growth, but volumes did decline very modestly quarter over quarter. That just has not happened since early 2024, I think. So any unique dynamics to call out in the quarter that may have contributed to that, whether seasonality, anything capacity-related? Just any color there would be great. Derek J. Maetzold: Yes, sure, Mason. Thanks. As you know, we continue to see really strong growth there with 58% year-over-year growth. On the sequential or quarter-to-quarter trend there, I think we finally have hit the penetration level where we are seeing seasonality and sensing that. Based on looking at IQVIA third-party data, historically, the first quarter of the year has fewer GI procedures than the other quarters. But having said that, importantly, March was a record month for TissueCypher, and that trend continued in April. So we would expect to add a similar number of test reports in 2026 as we did in 2025, and that gets us something close to 50% year-over-year growth for the year. So a good performance on the test, and we continue to be pleased with what we are seeing. Mason Owen Carrico: Got it. Thanks, Frank. And could you give us an update on the reimbursement initiatives for your ADTx test or the progress you have made on that front? And then as a follow-up, on the potential for revenue to become material there in 2027 or 2028, where do you expect that revenue to come from? Is it all from appeals, or could there be some other revenue model contributing next year by 2028? Derek J. Maetzold: Hi, Mason. We think based upon the long revenue cycles from an RCM perspective, we could be in a position probably by the end of the third quarter to provide some good evidence-based clarity in terms of what we are seeing, but we can assume for 2027 and 2028 under a traditional reimbursement approach. There are, of course, other avenues as well in terms of interested parties who may be interested in controlling the cost of having patients keep cycling around medications. And, of course, there is always an opportunity to partner with some of the commercial companies who might have an interest in having their share shifted. But for right now, I would say we are relying primarily on traditional governmental or private payer category reimbursement, and we expect probably in the third quarter to give some strong clarity based on evidence. Operator: Your next question comes from the line of Thomas Flaten with Lake Street. Your line is open. Please go ahead. Thomas Flaten: Yeah, good afternoon. I appreciate you taking the questions. I think you guys were relocating to a new Phoenix lab at some point this year. Any update on what impact that might have on gross margins going forward? I do not think we will— Derek J. Maetzold: I do not think we will see much impact on gross margins, Thomas. We have not made that change yet. We are moving into an expanded facility in the Phoenix area, and that is really with an eye toward, as you recall from working with us for a while, staying a couple of years ahead of demand in terms of capacity. As we look at the expanding derm franchise and the growth in those test volumes in particular, we are trying to stay ahead of it. I do not have guidance for you on when we will make that move, but I do not think you will see much impact on gross margin at all as we shift from one facility to the other. Thomas Flaten: Got it. And then on Advanced ADTx, any thoughts on broadening this initial rollout? I think you had 150 accounts targeted as the first group. Will that stay at those 150 for the foreseeable future, at least until you have more visibility into reimbursement? Derek J. Maetzold: We opened up access a bit more late in the first quarter. We will look at our volume, look at our early RCM assumptions, make sure we are on track, and then continue to release it over time. That being said, having 650 orders come in the door in the first quarter is very nice reinforcement of the opportunity that we have here when the field force is 100% focused on melanoma and we have such limited access to our customer base. We are quite pleased with the continued early response of the dermatologic clinicians out there in the field. Operator: Your next question comes from the line of Analyst with Baird. Your line is open. Please go ahead. Analyst: Hi, guys. Thanks for the questions. Maybe first, for the mid to high single-digit melanoma volume growth for the year, off to a really strong start there with mid-teens growth in 1Q. Should that double-digit growth continue in the second quarter with some conservatism baked into the back half? Or how should we think about the phasing there? Derek J. Maetzold: We did reiterate our 2026 mid to high single-digit growth expectations. Q1 was a bit of an easier comp than we expect for the rest of the year. We are pleased with that, and I think that is where we see the business trending. Analyst: Okay. Analyst: And then, have you been getting any feedback from clinicians regarding some of the moving pieces on NCCN guidelines and any feedback you have received on the Future Oncology publication or any other data that you have put out recently? Derek J. Maetzold: We continue to get good feedback on, “I do not quite understand what NCCN sees here.” This is a failed study—failed to meet the 5% cut point—so what is trying to be said? Which is good for us, I think. Unfortunately, from an NCCN standpoint, there is a belief that this is really more political than we even thought. We are hearing that from most of our customers. The recent SIDE study which came out in Future Oncology earlier this year was another strong reinforcement that if you use our test to look at accuracy, once again, we have one more study showing that we comfortably get way below 5% predicted risk in people who actually undergo SLNB. As important in that same publication is that people who used our test to move away from SLNB—meaning you did not know if you were going to be positive or negative—had extremely strong outcomes; it was 97% or 98% recurrence-free survival over the time period of the publication. That is a really safe melanoma patient, if you can use those two words together. That continues to be strong reinforcement that we have data that clinicians can rely upon that is consistent over time, which is excellent. I think that also led to having our greatest month ever in March. Operator: Your next question comes from the line of Analyst with Guggenheim. Your line is open. Please go ahead. Analyst: Hi, guys. This is Thomas on for Suvi. Thanks for taking our questions. Frank, you mentioned M&A. Is that something you are looking at near term? Can you just walk us through the factors you are considering when evaluating targets and your criteria there? Derek J. Maetzold: I think we always keep an open eye to what may be a possibility. We own things as we become aware of them. We do not feel compelled to chase anything. We have a great opportunity with what we own and control today. But we do look at things as they come around or come across us. The “Goldilocks” approach is pretty tough. Things have to look pretty good, but we do think that could be part of the future. Analyst: Great. And then separately, maybe on sales—can you just give an update today on derm and GI? And then how is headcount expansion expected to look for this year, and how does that translate to selling and marketing spend? Derek J. Maetzold: We have said we think we can cover, for the time being in the near term, both of those verticals with fewer than 100 reps, and that is where we are today. Operator: Your next question comes from the line of Matthew Parisi with KeyBanc Capital Markets. Your line is open. Please go ahead. Matthew Parisi: Hi. Sorry, I was on mute. This is Matthew on for Paul Knight at KeyBanc Capital Markets. Congrats on the quarter and thanks for taking my question. You previously mentioned in 2025 that melanoma received FDA Breakthrough designation, and I was wondering if Castle Biosciences, Inc. was still preparing for an FDA submission in 2026 that you had mentioned. Derek J. Maetzold: We are moving forward with a submission along that same timeline, sometime in 2026, yes. Matthew Parisi: Alright, thank you. And then just one other follow-up. Wondering if there has been an update on SCC—I know you had received acceptance of the reconsideration request for both Novitas and MolDx—and if there is any update or an idea on timing. Derek J. Maetzold: No official update from either one of the Medicare contractors, Palmetto or Novitas, since our year-end earnings call a few weeks ago. We still continue to believe that a year-plus review cycle should be plenty of time for reconsideration requests that were accepted in, I guess, July and September accordingly between Novitas and MolDx. We are not at this point in time thinking that there is a later posting of a draft LCD than the second half of this year. That would be surprising. Operator: Your next question comes from the line of Kyle Alexander Mikson with Canaccord. Your line is open. Please go ahead. Kyle Alexander Mikson: Hey, guys. Thanks for the questions. On the 650 orders for the atopic dermatitis test, could you talk about recent trends and how you expect that to accelerate going forward? And when you think about that number getting into the thousands in the near term, how does that affect the cost structure of the company? As we see gross margin decline sequentially and things like that, how should we be thinking about P&L impact? Derek J. Maetzold: So you know about COGS and [inaudible]. Frank Stokes: Yeah, so, Kyle, I think what we see right now is that the primary hurdle for our AD test is just our willingness—candidly—on how available we want to make it. In terms of impacting the overall COGS profile, that is a pretty efficient test. It is a PCR-based test, and so we would not expect a material impact on the blended adjusted COGS even with some growth in volumes from where we were in Q1. Certainly not in the next several quarters anyway. Kyle Alexander Mikson: Okay. On that note, how do you anticipate the cadence of expenses throughout this year? It was a little bit surprising to see the net loss and the lower-than-expected EBITDA in the quarter. As we think about cash flow positivity—that has been a goal for 2026–2027 for a while—how should we look at that metric? Frank Stokes: Yeah, so as you know, we continue to focus growth on three windows—near, medium, and long term. As we support that, we do expect some growth in operating expenses. I think as we get through Q1 here and we lap the more meaningful change in SCC revenue, we will get to a more meaningful comparability period going forward. But I think that we continue to grow into the P&L and leverage the cost structure, and our intent is to generate meaningful returns on those operating expenses, driving value going forward. Operator: Your next question comes from the line of Puneet Souda with Leerink Partners. Your line is open. Please go ahead. Puneet Souda: Yes. Hi, guys. Thanks for the question here. First one, on the guide itself—you beat by $4 million and raised by $5 million, largely banking the beat. I wanted to understand how much of the beat was from SCC. Derek J. Maetzold: Most of that beat was driven by TissueCypher. Puneet Souda: Okay, got it. And then, can you provide a little more color on the TissueCypher ramp throughout the year? I think you called out you had two best months—March and April—but maybe it was sequentially down. I did not exactly catch that. How should we think about the ramp from 1Q to 2Q? It seems it could be larger than what you saw last year. Derek J. Maetzold: As we said, we continue to think we will add a similar number of test reports for 2026 as in 2025. I think we are big enough, or penetrated enough now, that seasonality is finally to the point where we feel it. As I referenced, the number of procedures tends to be lower in Q1. So I think we will see that growth come ratably through the year. I am not aware of things quarter to quarter that should shift that from more of a ratable ramp. Operator: There are no further questions at this time. I will now turn the call back to Derek for closing remarks. Derek J. Maetzold: This concludes our first quarter 2026 earnings call. Thank you again for joining us today and for your continued interest in Castle Biosciences, Inc. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Thank you for standing by, and welcome to H&R Block, Inc.'s Third Quarter Fiscal Year 2026 Earnings Conference Call. Currently, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. To remove yourself from the queue, press star 11 again. I would now like to hand the call over to Jessica Hazel, Vice President, Investor Relations. Please go ahead. Jessica Hazel: Thank you. Good afternoon, and welcome to H&R Block, Inc.'s fiscal 2026 third quarter financial results conference call. Joining me today are Curtis Campbell, our President and Chief Executive Officer, and Tiffany L. Mason, our Chief Financial Officer. Earlier today, we issued a press release and presentation which can be downloaded or viewed live on our website at investors.hrblock.com. Our call is being broadcast and webcast live and a replay of the webcast will be available for 90 days. Before we begin, I would like to remind listeners comments made by management may include forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties, and actual results could differ from those projected in any forward-looking statement due to numerous factors. For a description of these risks and uncertainties, please see H&R Block, Inc.'s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q as updated periodically with our other SEC filings. Please note some metrics we will discuss today are presented on a non-GAAP basis. We have reconciled the comparable GAAP and non-GAAP figures in the appendix of our presentation. Finally, the content of this call contains time-sensitive information accurate only as of today, 05/06/2026. H&R Block, Inc. undertakes no obligation to revise or otherwise update any statements to reflect events or circumstances after the date of this call. I will now turn the call over to Curtis. Curtis Campbell: Good afternoon, and thank you for joining us. This quarter, we delivered strong results ahead of expectations across all key metrics. Those results demonstrate that our strategy is translating and that the quality of our business continues to improve. Based on our year-to-date performance, we are raising our full year outlook. This tax season provided early evidence that our strategy focused on expert-led, technology-enabled experiences is showing up in measurable ways, not just in our financial performance, but also in how clients are choosing us: engaging with our experts, experiencing more technology- and AI-enabled service. Those outcomes reflect capabilities we built steadily over the last year and that we further sharpened this season through strategic experimentation, targeted decisioning, and disciplined execution, all centered on the clients we serve. Our progress this year reinforces that H&R Block, Inc. is uniquely positioned to meet clients where they are, bring their trust to expert judgment, and give them the confidence to navigate the complexity of tax preparation and tax planning. Coming out of the season, it is clear that our focus on assisted is delivering tangible results. A key question surrounding H&R Block, Inc.'s performance has been when we stabilize assisted channel market share. Well, this season we did. After two years of improving share trends, net progress translated into meaningful inflection in tax season ’26, as we maintained assisted share, holding our position in a highly competitive environment. Importantly, our assisted channel market share performance was favorable each week throughout the entire season. That consistency matters. It reflects stronger execution from the start of the season through the peak. We continue to see our value proposition resonate most in client segments with a strong desire for confidence, trust, and judgment. Clients with more complex needs are choosing to engage with H&R Block, Inc. at higher rates, and our omnichannel model is designed to serve those clients with the right combination of human expertise and technology. I will speak more to that in a moment. This season's performance underscores the quality, consistency, and strategic focus of the assistance we provide, supporting a more durable business. Our disciplined execution also translated into better outcomes for clients, including evolved experiences that deliver clear expectations, fewer friction points, and more consistent delivery whether our clients engage with us digitally or in person. Those experience improvements drove stronger conversion, higher retention, and better product attach rates, reinforcing both the quality of the experience we are delivering and that our clients are responding to it. One example of how we improved conversion this season was the introduction of a personalized pre-appointment experience that set clear expectations, reduced unnecessary steps, and guided clients to a more streamlined path into the appointment. By addressing friction early in the journey, clients came into appointments better prepared and more confident, which translated into higher conversion rates. Along with conversion, we also saw meaningful retention improvement this season, with Second Look a clear proof point. Last quarter, I shared our plans to meaningfully automate and scale Second Look while we view it as an important driver of client loyalty over time. I am pleased to share that new clients who received Second Look last tax season returned at a 600+ basis point higher rate compared to new clients who did not receive Second Look, reinforcing its role in building trust, confidence, and a quality experience from the very start of the relationship. We are now using AI-based technology to scale Second Look and embed it more consistently into the new client experience so more clients can benefit. By automating the initial review of prior-year tax transcripts, we can focus tax pros’ time on returns with the greatest opportunity while still delivering timely, actionable insights for more clients. This capability allows us to expand Second Look in ways that were not previously feasible and extend its positive impact even further. I have also emphasized our focus on eliminating and/or automating inefficient work so that our tax pros can focus on what matters most to clients, and that is the relational and trust-building experience that differentiates H&R Block, Inc. As part of that effort, this season we equipped all of our offices with client experience monitors, allowing clients to learn about and explore add-on products in a simple, self-guided way without the need for tax pro intervention. Our tax pros are naturally focused on accuracy, advice, and building trust with clients, so simplifying choices, improving clarity, and digitally engaging clients through the client experience monitors proved very successful. Coming out of the season, we saw a 550 basis point increase in product attach, and clients reported greater comfort with the process. Recent tax law changes also contributed to positive client outcomes this season. Average refund amounts for H&R Block, Inc. clients increased by approximately 11%. We saw approximately 7% growth in clients who received a refund and more than a 25% decline in clients who owe the IRS. Those recent tax changes also created new opportunity to help clients access meaningful benefits. A clear example is five thirty eight Trump accounts where we helped enroll more than 2 million accounts, representing over 90% of eligible clients whose children qualify for the $1 thousand fee contribution. Together, these results underscore the role we play in helping millions of clients navigate complexity, support important financial goals for their families, and strengthen their financial confidence. We are also seeing our strategy translate clearly in the segments that are most critical to the long-term health of the business. That impact is most evident with more complex clients where confidence, trust, and judgment play a central role in the decision to engage. As our execution and customer experience improved, we have seen a greater mix shift towards higher-complexity clients this year, reinforcing that our model resonates most where expertise truly matters. As we have said before, not all market share is created equal, particularly in the DIY channel. Customer lifetime value matters more to the financial health of our business than raw volume. Our focus remains on attracting and retaining clients who are more likely to build long-term relationships with us rather than optimizing for lower lifetime value, transitory filers. This season’s results reflect deliberate progress in this area, improving both durability and economics within our business. The gains we are seeing reinforce our focus. They are proof points that disciplined execution and deliberate choices are translating into higher-quality, more durable growth. This season reinforced that the winning model in an AI-driven future is expert-led, technology-enabled experiences, particularly in a high-stakes, highly regulated environment like tax preparation. As AI adoption increases, accuracy and confidence matter more than ever, and clients continue to value the trust, judgment, and accountability that come from working with a tax expert. Our model is well positioned in this environment, and our approach continues to receive external recognition. CNET not only named H&R Block, Inc. the best online tax product, but also recognized H&R Block, Inc.'s AI-powered tax platform with its Best Use of AI award. That recognition highlights how we pair advanced technology with trusted expertise to deliver better experiences for our clients. And we saw this expert-led, technology-enabled positioning reinforced through client and tax pro behaviors and outcomes this season. Let me touch on a few examples of how this came to life. This year, we rolled out Sidekick, our AI-enabled tax pro assistant. Through our collaboration with OpenAI and grounded in the expertise of H&R Block, Inc.'s Tax Institute, we created a unique AI tool that allows tax pros to query and research complex tax topics. Sidekick received positive feedback and saw strong adoption all season, underscoring the power of embedding AI-assisted support directly into the expert workflow while professional judgment remains critical and amplifies impact for clients. Similarly, within the paid DIY filing experience, AI Tax Assist provided clients with real-time, expert-informed answers, and it is becoming increasingly effective as we incorporate learnings from each season. This tax season, AI Tax Assist supported 4.1 million client messages and responses, representing an 88% increase year over year. We gave you these examples along with the AI-enabled scaling of Second Look I discussed earlier to illustrate how we are applying AI in practice, drawing on the capabilities we develop in-house and with select external partners. They reinforce that our strategy is not about replacing expertise with technology, but about using technology to scale expertise, strengthen trust, and deliver more consistent, higher-quality outcomes for our clients whether they work with our tax pros or choose to self-prepare. I have shared the evidence of our strategy at work this season, reflected in stronger conversion, higher client retention, better client experiences, and improvements in the quality of our business. What I want to focus on next is what I believe will continue to drive results next season and for years to come. At the core is how we operate. We have embedded a disciplined learning mindset into how we run the business, focused on identifying what drives meaningful impact, learning from what happens in the wild, and scaling what works. This is not about one-off initiatives. It is about building repeatable execution that compounds over time. Our approach is intentional and focused on removing friction and elevating outcomes for the clients we serve. Not every experiment will earn the right to scale. Some experiments will fail. But every experiment must generate learnings that sharpen execution and accelerate our velocity. We ran more than 150 experiments this season, which is exponentially higher than in prior years. I have talked about several already, and I will not go through all of them, but I do want to highlight one that illustrates how this discipline translates into real impact. One of those meaningful areas of progress this season has been AI automation. We are accelerating our testing and use of more advanced AI tools across tax preparation with a clear goal: eliminating manual data entry, which is a non–value-added step for both clients and tax pros. These efforts are designed to handle more of the mechanical work behind the scenes—the data collection, data entry, and calculations—while keeping tax pros firmly in the role of review, judgment, and advice. By reducing time spent on manual tasks, we can free up capacity for tax pros to generate deeper insights and enable higher-value client conversations. This combination creates a structural advantage relative to purely digital models, particularly in a category where mistakes carry real consequences and confidence matters. Results from our AI-enabled automation experimentation this season have been strong. Although there is still more to learn, we are encouraged by what we are seeing, with a clear path to further scaling over time and expanding our ability to help and empower financial freedom for millions of Americans. I have covered a significant amount of information today and shared examples of how we are operating with discipline, testing in real-world conditions, learning quickly, and scaling what works. The takeaway is that this is how we compound progress over time and continue to raise the consistency, quality, and durability of our business. What we saw this tax season reinforces that our strategy is delivering results while also making clear that we are just getting started. There is significant opportunity ahead to raise the bar in execution, deepen our impact with more complex clients, and further scale the capabilities driving consistency and quality across the business. Our omnichannel model is designed to extend that execution across client needs and the ways clients choose to engage. I also want to mention I am excited about the leadership team we have in place. They bring a strong combination of deep industry experience and fresh perspectives, and I am confident this team will continue to execute with discipline and momentum as we move forward. As we look ahead, our priorities are clear. We will continue to elevate the client experience, serve more complex clients, expand our small business opportunity, and apply AI and technology to scale trusted expertise and deliver consistent expert-led outcomes at a level independents cannot match. I will now hand the call over to Tiffany. Tiffany L. Mason: Thank you, Curtis, and good afternoon, everyone. In the third quarter, we delivered strong year-over-year growth across our key financial metrics, with revenue up 5%, EBITDA up 6%, and adjusted EPS up 12%, reflecting performance above expectations. Based on our year-to-date results, including a strong tax season, we have raised our full year outlook. In the third quarter, we delivered revenue of $2.4 billion, an increase of 5.3% over the prior year. This increase was primarily driven by higher NAC and volume in U.S. assisted tax prep, growth in international revenue, and an increase in refund transfer volume. As Curtis noted, our assisted channel market share trend improved meaningfully this season, marking the third consecutive year of improvement in our core business. We were able to maintain our market share position this season through better execution in a highly competitive environment. In the DIY channel, not all market share is created equally because of the free and paid dynamic, and we have made a strategic choice to prioritize lifetime value. While our assisted volume growth outpaced DIY, key underlying health metrics improved across the business. We drove improved conversion rates in both channels year over year, supported by lower friction and better client experiences. We delivered higher retention rates among prior clients, and our mix continued to shift toward more complex returns, particularly with $100 thousand+ AGI clients. Adjustments were made without impacting clients’ value perception. Taken together, we believe these results reflect a healthy and improving business. Total operating expenses for the quarter were $1.4 billion, a 4.8% increase over the prior year. This increase was primarily due to higher field wages as a result of higher assisted revenue. As we have experienced the last few years, a significant amount of volume is processed in the final weeks of the season, which puts pressure on labor capacity resulting in overtime. Additionally, as we serve increasingly more complex clients, we have an opportunity to allocate return volume more effectively across our tax pro population. Third quarter EBITDA increased 5.9% over the prior year to $1.1 billion. Our effective tax rate was 16.5% compared to 24.6% last year. During the quarter, we recognized a one-time non-tax benefit related to the resolution of an IRS examination that we have previously discussed. This $84.1 million benefit reduced income tax expense and provided a $0.65 benefit to earnings per share. Net income from continuing operations was $848.8 million, an increase of 17.4%, and earnings per share from continuing operations were $6.61, an increase of 24.2%. Adjusted net income was $773.7 million, an increase of 5.8%, and adjusted earnings per share were $6.02, an increase of 11.9%. The increase was a result of fewer shares outstanding from share repurchases and higher net income. Our disciplined approach to capital allocation continues to create meaningful shareholder value. We generate significant, stable annual cash flow and expect the same for this fiscal year. We use this cash flow to invest in the business, grow the dividend, and return excess capital to shareholders through share repurchases. In the first nine months of the fiscal year, we generated operating cash flow of $586.7 million. During that period, we have returned $560.9 million to shareholders in the form of dividends and share repurchases, with Board approval to repurchase an incremental $100 million of stock in the fourth quarter under our previously disclosed $1.5 billion repurchase program. We have approximately $700 million remaining under that program. Turning to our full year outlook, based on strong year-to-date performance, we are raising our guidance for fiscal 2026. As reflected in today's earnings release, we now expect revenue in the range of $3.91 billion to $3.92 billion, EBITDA in the range of $1.025 billion to $1.035 billion, an effective tax rate of approximately 14%, and adjusted diluted earnings per share in the range of $5.10 to $5.20. Our updated outlook reflects the strength and consistency of our execution every quarter of fiscal 2026. And with the tax season now complete, we have also incorporated full season results, peak period labor costs, and a planned shift in marketing expense that aligns with later-season filing dynamics. We were pleased with our third quarter operational and financial results, yet the more important takeaway is what they reflect about the trajectory of our business. We are creating a more durable, expert-led, technology-enabled model, providing assistance to our clients wherever and however they choose to engage with us. That positions us to generate more cash flow and deliver greater value for shareholders. With that, I will turn it back over to Curtis for closing remarks. Curtis Campbell: Thank you, Tiffany. This quarter reflects continued progress against our strategy and improved execution across the business. As the results show, better client experiences, stronger retention, and a continued shift towards more complex clients are contributing to a more durable business. I want to thank our tax pros, associates, franchisees, and partners for their continued dedication to serving clients with expertise and with care. And importantly, I want to thank our clients for their continued trust and confidence in H&R Block, Inc. At the core of what we do, H&R Block, Inc. is in the business of trust, and we do not take that responsibility lightly. It remains central to everything that we are. We will now open the call for questions. Operator: You may press star 11 to ask a question. Press star 11 again to remove yourself from the queue. Our first question comes from the line of Kartik Mehta of Northcoast Research. Your line is open, Kartik. Kartik Mehta: Hey. Good afternoon. Curtis, I wanted to just look at assisted market share and your perspective on that this tax season. I know the tax results you give are from July 1 through April 30, but if you looked at the tax season from January 1 through the thirtieth, kind of the IRS data that is out now, how would you characterize market share for H&R Block, Inc. this season on the assisted side? Curtis Campbell: I am happy to talk about our results this season. Let me touch on that, Kartik, and thank you for the question. I hope you are doing well. We had a really strong season in assisted this year, and just a reminder, assisted gained share in three of the last five tax seasons. This tax season, tax law changes, as you know, resulted in an increase in the number of taxpayers receiving a refund. If you take a look at the information from the IRS, it also resulted in an increase in the average refund amount by 11% and a decrease in the amount of balance dues by a little over 20%. All those things are strong positives for most taxpayers. Now keep in mind—and most people know this to some extent—higher refunds were enabled by the fact that payroll providers and employers did not adjust the withholding tables by the time the tax changes from the one big beautiful bill came out late last year. Oftentimes as well, tax law changes are believed to drive tailwinds for assisted, especially with their potential negative impacts to taxpayers. In this case, this tax season, taxpayer impacts were super positive. There was very little additional boost or tailwind to the assisted market. As we start to think about next year, employers and payroll providers are working on updating their withholding tables, so there could be an adjustment back to a normal. We might see refund amounts decrease and balance dues increase. Tiffany L. Mason: I would just punctuate too, we were really pleased with the team’s performance this tax season and really pleased with the fact that after two years of making progressive improvement in our assisted channel market share, we were able to hold flat market share relative to industry growth. So really pleased with the team’s performance. Kartik Mehta: And then just, Curtis, on your Tax Pro product, I know you tried something a little bit different there. How do you think of the success of that business and maybe what kind of conversion rate you were able to have because of the program? Curtis Campbell: Yeah. And, Kartik, when you say our tax pro product, what specifically are you talking about? Kartik Mehta: Well, I apologize. Tax Pro Review is the DIY product that allows a tax preparer to review the tax return. Curtis Campbell: For sure. So we saw nice progress there. That has been an offering for us for many years now. We continue to lever that up. We saw really good results from a conversion perspective for those paid filers that utilize Tax Pro Review, as well as other promos that we ran this year. I will take it all the way back to one of the talking points in my prepared remarks. I talked a lot about assisted. It is really important for us from a strategic standpoint to lean into assisted and those filers that are looking for that from us from a trust, confidence, and judgment perspective. We saw really strong performance in TPR, as well as other promos. We will continue to learn just like we do every year. Kartik Mehta: Perfect. Thank you. Really appreciate it. Curtis Campbell: Thanks, Kartik. Operator: Our next question comes from the line of Scott Schneeberger of Oppenheimer & Co. Your line is open, Scott. Scott Schneeberger: Thanks very much. Good afternoon, all. Just following up on Kartik’s question. I think there is a little confusion. Maybe, Tiffany, could you discuss this year and the last two years of the market share progression in assisted of H&R Block, Inc. versus itself? I think it is a different dynamic versus the industry, but versus itself is what I think you are outlining. Could you quantify it each of the last three years so we can gauge the progression? Tiffany L. Mason: Yeah, Scott, I can. We saw improved market share performance in each of the last three seasons. We were down in market share in the assisted channel in tax season ’24. We made improvement in tax season ’25. I am not going to give you basis points because that is proprietary information, but we were down in each of the last two years, but the trajectory was improving, and we are flat relative to the industry in tax season ’26. So we made sizable progress from last tax season to this tax season. I want to make sure that as you are looking at data, I can help reconcile some of this confusion because if you are looking at our operating statistics table, which is in the slide deck that we posted on our Investor Relations website just before the call, that data runs from July 1 until April 30. So that reflects full year-to-date performance. Obviously, the information that you are looking at from the IRS is publicly reported data that is one week in arrears. So that data is as of April 24, and it only reflects the tax season. So those are two different points in time with two different starting points. And then the third thing I will say is our data also on the operating statistics table includes all filing data, not just e-file, which is what the IRS reports, but it would also include things like paper filings and entity filings, for example. But what I will tell you is when we share our market share statistics, we do it on the same basis that the IRS reports. So we are talking about e-file data, like-for-like versus the IRS, and that data suggests that our market share is flat for the season, which we are really proud of. Scott Schneeberger: Thanks, Tiffany. And just a clarification: when you do the comparison, are you measuring from summer last year? Any commentary on extensions and what impact that had in the back half of last year, assuming that is the time frame that you are capturing in this measure? Tiffany L. Mason: The operating statistics table that you are looking at is from last summer through the tax season, but when we give our market share commentary in our prepared remarks, it is just like the IRS reports. So from January 1 through the end of the tax season, our market share is flat in the assisted channel. That is great news. To your point about extension data for this tax season, extensions are up, so we should continue to have good performance through this coming extension season. Scott Schneeberger: Looking forward. Okay, gotcha. And I understand. Were you using the most recent IRS we see public or the prior week that captures the last week before the deadline? Tiffany L. Mason: Our commentary was based on the same information you can see in the public data, which is as of April 24. That is the last time the IRS reported publicly. Scott Schneeberger: Gotcha. Okay. Thanks. That is really helpful. And then on the buybacks, the strategy with the buybacks—obviously there is a very opportune share price at H&R Block, Inc., probably behind the decision. Often, you have not done it in this time period. Some commentary on that and how that might impact your normally elevated repurchase activity in the fiscal first half of your new fiscal year? Tiffany L. Mason: Scott, thanks for the question. We are really pleased that the Board approved an incremental $100 million share repurchase, of course subject to market conditions, for the fourth quarter of this fiscal year. As I said in my prepared remarks, we did $400 million in the first half of the fiscal year, so assuming we can get it done in the fourth quarter, that will bring our full-year fiscal 2026 share repurchase to $500 million. A fantastic result. We will be able to take advantage of what has been some dislocation in the stock price, and that should be a great result for us this fiscal year. It has, right now, no bearing on fiscal 2027. But I also cannot project any expectations. We obviously have not guided fiscal 2027, and anything that we do in fiscal 2027 is still subject to Board approval. So more to come as we get to next quarter and guide for the next fiscal year. Scott Schneeberger: Okay. Fair enough. Thanks, Tiffany. I will turn it over. Tiffany L. Mason: Thank you. Operator: Our next question comes from the line of George Tong of Goldman Sachs. Please go ahead, George. George Tong: Hi. Thanks. Good afternoon. You made the decision to prioritize lifetime value with DIY. It is understandable that online free DIY volumes fell this year, but I also noticed that online paid DIY volumes fell too. Can you talk about the dynamics here and what is behind that? Curtis Campbell: Yes, George, thank you for your question. Let me emphasize first that not all DIY market share is created equal, and our focus is on attracting and retaining more complex clients with higher lifetime value rather than pursuing transactional, low-lifetime-value clients. That applies to certain categories of paid and, of course, the free. If I take a look at the data for this season, our DIY mix between free and paid improved by 140 basis points. We saw really strong year-over-year growth in AGI bands over $100 thousand. It is very positive and a part of our strategy. When I think about DIY, I do want to call out that it is an important entry point within our model. We do not manage the business to optimize for DIY volume in isolation. At the end of the day, our approach is focusing on clients that are looking for the right level of assistance that we can deliver through our omnichannel model. George Tong: Got it. So it sounds like it is a decision to selectively go after customers that can eventually upsell themselves and de-emphasize paying clients that do not have much monetization opportunity. Curtis Campbell: For sure, because we have to look at our customer acquisition cost versus lifetime value. That is a really important equation for the business. In my prepared remarks, I talked a lot about assisted and our strategy. I talked about the evolution of us leveraging AI to automate the transactional aspects of tax preparation to focus on the relational pieces. It is really important for us strategically to focus on clients that align with that. George Tong: Understood. And then as a follow-up, on the assisted side, I noticed that the franchise operations volumes fell this tax season. Can you elaborate on that—if you think that is a structural dynamic that will persist over the medium term, or if that is something that happened this year? Tiffany L. Mason: Yeah, George, thanks for the question. Let us unpack franchise for just a minute. A couple of things to point out. If you are looking at the decline in royalty revenue year over year, we do have the franchise buyback strategy. I would say the decline in royalty revenue is largely a result of our buyback strategy. Year to date, we have done about 150 franchise acquisitions. However, if you set those acquisitions aside and you just look on a like-for-like basis this year versus last year at our franchisee base, the franchise footprint is underperforming our company office footprint by about 2%, and that was entirely driven by volume. If you think about the initiatives in our company offices, both in driving conversion of our WIP and in driving higher retention through some of our strategic initiatives, we are seeing our company offices perform a bit better. I do not think there is necessarily a structural difference, but I do think there are some local market differences as we compete head to head with independents across our geographic base in the U.S. Curtis Campbell: Okay. George Tong: Got it. Very helpful. Thank you. Operator: Thank you. Star 11 on your telephone if you would like to ask a question. Our next question comes from the line of Alexander Paris of Barrington Research. Please go ahead, Alex. Alexander Paris: Thank you, and congrats on the beat and raise in the quarter. Most of my questions have been asked and answered. Just a quick follow-up on the last one. Tiffany, you mentioned you did approximately 150 franchise buybacks this year, year to date. What was the number last year for either the nine months or the full year? Was it 124? My notes show that. Tiffany L. Mason: You got it, Alex. It was 124. You got it right on the dot. And thank you for the congratulations. We appreciate it. Alexander Paris: You got it. And then with regard to the raised guidance, were there any divergences from the underlying assumptions that you had for the season? For example, you talked about industry growth of 1%, and a healthier balance of volume, price, and mix. Did anything come in materially better or worse than you had expected going into the season? Tiffany L. Mason: Alex, I would say a couple of things. None of the underlying assumptions really changed. Industry growth rate is coming in right where we expected. I do want to highlight the pursuit of the healthier balance with price, volume, and mix. If we think about our performance in the assisted channel—and you can see it in that operating statistics table—volume is up 2.1% and NAC is up 3.9%. This is probably the healthiest balance we have seen in some time, so we are really proud of that. NAC, in particular, if you unpack that, we took a low single-digit price increase, we used channel, and the rest of that is mix. Again, really nice balance, and that is playing out the way that we had expected. If I think about the inflection from the tax season (Q3 into Q4), the only things I would point out would be the shift that you can see in marketing. We made an intentional shift to match the timing of our marketing spend with the way that the season was unfolding and the way that we continue to see filers come later and later into the season. So there is a little bit of shift in marketing dollars from Q3 to Q4. That is something to think about as you plan the rest of the year relative to our results. And the other would be the same thing with field labor. As we see peak volumes in April, which hits our Q4, you are going to see those peak labor costs as well. Otherwise, no dramatic difference in what we had planned at the start of the year. Curtis, maybe you want to spend a few minutes talking about strategy. Curtis Campbell: For sure. Alex, thanks for the question. Let me double down a little bit on strategy. I know I talked about this in the prepared remarks. I will talk specifically about AI. It is our belief that H&R Block, Inc. is uniquely positioned to win in an AI-driven tax industry. We can seamlessly blend AI capabilities with our 70 years of human expertise and accountability in a way that we believe independents cannot. We view two components of tax preparation. There is the actual data collection, data entry, and calculation portion—we often call that the mechanical portion, component one. Then you have component two, which is the relational experience where trust, accountability, and judgment live. That is really important and a part of our strategy. We believe as AI automates the mechanical work of tax prep, differentiation is going to shift away from those mechanical pieces towards the relational pieces that matter most to clients—trust, judgment, and accountability. In the high-stakes world of taxes—this is the biggest paycheck of the year for most Americans—when taxpayers get this wrong, bad things happen. Typically, taxpayers do not want to get it wrong, and history shows us that. Over the last 30 years, the percentage of taxpayers seeking assistance has remained fairly constant through the transition from paper to box software to cloud to mobile to machine learning to Gen 1 AI. More than half of taxpayers continue to seek assistance, and it is not for calculations. It is for confidence, guidance, and accountability that comes from working with a tax pro. As we think about an AI-driven future, we believe the premium on trust increases. The winners are going to be those that can seamlessly blend AI speed with consistent human expertise, and that is why you heard me emphasize earlier our expert-led, technology-enabled focus. It is at the core of what we are doing at Block. With our go-forward strategy, we believe H&R Block, Inc. is structurally advantaged in this environment. With 70 years built on trust, judgment, and accountability—and decades of real client scenarios and data—we are using AI to amplify expertise, not replace it. So we think that we are well positioned from a strategic standpoint to continue to win. Thank you for the question, Alex. Alexander Paris: I appreciate the color. And then my last question is regarding the long-term algorithm. As I start to think towards fiscal 2027 and beyond, the long-term growth algorithm has historically been 3% to 6% revenue growth, adjusted EBITDA growing 1.5x that rate, and EPS growing at a double-digit rate. Is that a reasonable proxy at this juncture going forward, or are there any thoughts or changes to that long-term algorithm? Tiffany L. Mason: No changes, Alex. We are committed to the long-term growth algorithm. If anything, as we start to get some proof points on the board around the strategy that Curtis just talked about—some of the things that we talked about in our scripted remarks today—we have even more conviction that that is the right ZIP code for us to be in. Alexander Paris: And the last question relates to a prior question regarding the incremental share repurchases expected in the fourth quarter. Does that have any impact on the dividend? I know the Board reviews the dividend only once annually, and we usually find out about it after the fourth quarter. But does the incremental $100 million have any impact or bearing on a decision whether to maintain, which would be the minimum expectation, or raise the dividend this summer? Tiffany L. Mason: Our capital allocation priorities are unchanged. Priority number one is to invest in the business, number two is grow the dividend, and number three is return excess capital to shareholders through share repurchase. As the Finance Committee of the Board meets this summer in advance of the August earnings call, they will think about our capital allocation in that order. Obviously, more to come, but there should not be any concern with any of the dividend protocol or anything thereafter. Alexander Paris: And for what it is worth, I applaud the decision of the Board to increase share repurchases in the fourth quarter given the dislocation in the stock price, driven largely by the AI boogeyman. It seems like AI is a significant tailwind potentially for you in terms of the efficiency of the tax pros and the client experience. Curtis Campbell: Thank you, Alex. We are going to give you a virtual high five. Thank you. Operator: Thank you. I would now like to turn the conference back to Jessica Hazel for closing remarks. Madam? Jessica Hazel: Thank you, everyone, for joining us today. We look forward to reconnecting with you again soon. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good afternoon, and welcome to Exzeo Group, Inc.'s first quarter 2026 earnings call. My name is Angela, and I will be your conference operator. Before we begin today’s call, I would like to remind everyone that this conference is also being broadcast live via webcast and is available for webcast replay approximately four hours after the call through 05/06/2027 on the investor relations section of Exzeo Group, Inc.’s website at axio.com. I would now like to turn the call over to William Broomall. William, please go ahead. William Broomall: Thank you, and good afternoon. Welcome to Exzeo Group, Inc.’s first quarter 2026 earnings call. To access today’s webcast, please visit the Investor Information section of our corporate website at exeo.com. Before we begin, I would like to remind our listeners that today’s presentation and responses to questions may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “anticipate,” “estimate,” “expect,” “intend,” “plan,” and “project,” and other similar words and expressions are intended to signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions, but rather are subject to various risks and uncertainties. Some of these risks and uncertainties are identified in the company’s filings with the Securities and Exchange Commission. Should any risks or uncertainties develop into actual events, developments could have material adverse effects on the company’s business, financial condition, and results of operation. Exzeo Group, Inc. disclaims all obligations to update any forward-looking statements. I will now turn the call over to Suela Bulku. Suela Bulku: Thank you, William. Good evening, everyone, and thank you for joining us for Exzeo Group, Inc.’s first quarter earnings call. Exzeo Group, Inc. continues to deliver on its core objectives. Managed premium on the platform experienced another quarter of growth to $1.43 billion and exceeded our expectations. We delivered continued bottom-line growth, including strong cash flows and a 49% adjusted EBITDA margin in the quarter. Pretax income in the quarter was over $27 million, an increase from $24 million in the prior-year quarter and above our previous guidance range. Diluted earnings were 22¢ per share. For the first quarter, revenue increased to $56 million from $52 million in the prior-year quarter, driven by the increase of managed premium on the platform. The growth in managed premium reflects continued diversification across the business, with managed premium from non-ACI clients reaching approximately $105 million, a positive step forward. Our adjusted EBITDA margin was over 49% in the quarter, and we believe our margins are repeatable in the future. This quarter reflected continued investment in growth initiatives and personnel, and as our model continues to expand, we expect to make additional investments going forward. A few additional highlights for the quarter: our annual recurring revenue was $216 million in the first quarter, an increase from about $1.199 billion in the prior-year quarter. Free cash flow generation remains strong. For the first quarter, we generated free cash flow of about $25 million with net income of about $20 million; that represents a free cash flow conversion rate of 123%. Turning to the balance sheet, we ended the year with $330 million of investment assets, which includes cash, cash equivalents, and fixed income securities, and we remain debt-free. Shareholders’ equity increased to $275 million, an increase from $254 million at the end of the year. Our shareholders’ equity is now eight times higher than it was a year ago. Excluding the IPO impact, it has more than tripled over the same period, reflecting strong underlying growth in the business. Before turning the call over to Kevin, I want to quickly touch on our guidance expectations. For the second quarter, we expect pretax income to be between $27 million and $30 million. For the full year 2026, we are leaving our guidance unchanged at between $115 million and $125 million. With respect to managed premium, we expect managed premium to remain stable in the second quarter at approximately $1.4 billion, consistent with the anticipated timing of growth across our existing client base. We continue to expect managed premium of $1.55 billion at year-end 2026. In closing, we are very pleased with our strong start to 2026, as Exzeo Group, Inc. delivered another quarter marked by continued execution across premium expansion, revenue growth, solid profitability, and a solid balance sheet. I will now turn the call over to Kevin Mitchell. Kevin Mitchell: Thank you, Suela. Exzeo Group, Inc. has made meaningful progress towards its strategy in early 2026. To remind those new to the Exzeo Group, Inc. story, the composition of managed premium continues to evolve as Exzeo Group, Inc. expands beyond its historical client base. At the end of 2025, all $1.2 billion of managed premium on the Exzeo Group, Inc. platform was generated from HCI-sponsored carriers. That has grown to approximately $1.3 billion as of the first quarter of 2026. Additionally, over the past six months, we have added three new carriers to the platform, and these carriers added $105 million of managed premium as of the first quarter. These new carriers account for over 7% of managed premium, marking an important milestone in diversifying revenue sources and validating the platform’s ability to attract and support external partners. Because of the validation we are seeing in the market, we are investing in our business and infrastructure to ensure we have everything in place to pursue our future growth ambitions. This includes investing in talent and platform capabilities. Through April, the company added about 20 new full-time employees. These new team members will focus on supporting the scaling of operations, onboarding new clients, and expanding product capabilities. This buildout reflects both the increasing demand for the Exzeo Group, Inc. platform and management’s confidence in the company’s growth trajectory. In closing, we continue to build momentum. The existing carriers on our platform are growing, the new carriers added to the platform are having success scaling and now contribute to the total managed premium on our platform, and we are investing in infrastructure to put us in a position to take advantage of the next phase of growth. I will now turn the call over to Pareshbhai Patel. Pareshbhai Patel: Thanks, Kevin. As Suela highlighted in her remarks, we are successfully scaling our platform. With tremendous efficiency. Out of every dollar we are adding to the platform, 50¢ is dropping to pretax income. Because of these attractive economics, Kevin is working to add more managed premium to the platform, and I think we have a fabulous team to execute that strategy. In addition to that, we have an additional strategy that is now developing. It requires a deep understanding of the broader industry and market trends. Let me elaborate. First, we know that the insurance industry, our potential clients, generally are behind in adopting the latest technology. Most of them have IT teams who can implement and maintain software tools and systems. But what they cannot do is develop new tools. Second, the Exzeo Group, Inc. platform was developed entirely in-house from the ground up. We have developers and insurance experts under the same roof, and it shows that we know how to develop, deploy, and maintain systems at scale. This is a key differentiator. Third, insurers are facing a shortage of skilled talent, and that talent gap continues to widen across the industry. Finally, there is AI. The industry recognizes that AI has the potential to significantly improve operational efficiency. While there has been considerable discussion about how carriers can leverage AI, most companies are just adding AI to their toolset as an additional expense. Exzeo Group, Inc. is doing something different. Exzeo Group, Inc. is using AI to build solutions. Let me give you a concrete example. Starting April 1, insurance regulators in Florida implemented new wind mitigation requirements. These updated regulations, which include additional documentation requirements, create a meaningful operational burden for all carriers. Insurers must also find the talent and expertise needed to manage these new requirements. These challenges not only place additional strains on operations, but also introduce incremental costs. While many in the industry view these changes as a challenge, Exzeo Group, Inc. saw them as an opportunity. The Exzeo Group, Inc. team was able to combine its deep expertise in building solutions with internally developed AI tools to design and deploy a solution in less than a month. It is called WinForm Pro. By eliminating manual workflows, WinForm Pro streamlines the process and significantly reduces the operational and frictional burden on carriers. In fact, multiple carriers outside the Exzeo Group, Inc. platform are already testing WinForm Pro, and one carrier has already signed up to use it. What this demonstrates is that by combining AI capabilities with our in-house talent, we can quickly identify challenges and design and deploy solutions in a highly cost-effective manner. We believe we are only beginning to tap into the broader opportunities that this approach can create. In summary, we already have a profitable platform that is a strong generator of cash flow and continues to scale. At the same time, we are identifying and solving new industry challenges that can lead to additional revenue streams in the future. We will now open the call for questions. Operator: Thank you. We will now open the call for questions. Your first question comes from the line of Matthew Carletti with Citizens Capital Markets. Your line is now open. Matthew Carletti: Hey, thank you. Maybe I would start with a two-part question. First, can you update us on the newer clients you have announced the past few quarters—how the onboarding and integration and getting up to speed is going? Then alongside that, how the pipeline is looking, conversations and so forth for customers eight, nine, and beyond? Kevin Mitchell: Sure, Matt. From a new client standpoint, or ones that we have recently onboarded, it is going as planned. As I think Suela and I both mentioned, from a standing start in December to around $105 million of premium on the platform, I think that is a strong uptake when you consider that those two clients—one was signed in September and the other in October. So all is on solid footing there. As far as new clients, the pipeline continues to build. As we mentioned last quarter, we have team members that are focused and, each day and each week, are building on that pipeline. We feel confident that we will continue to execute and bring on new clients in standard fashion. Matthew Carletti: Great. And then if I could just maybe follow up for Pareshbhai. You talked a bit about WinForm Pro. Can you help us with the order of magnitude—what that can mean if it gets traction in terms of revenue, how it is priced, whether based on premiums, things like that? And secondly, are you viewing this as a one-off product, or more as a hook or opportunity to bring potential new customers into the broader Exzeo Group, Inc. ecosystem? Pareshbhai Patel: Yes, Matt. The product, because of the need the industry had, was built very quickly, and it solves a current problem that everybody is facing. As such, the way we have deployed it, it is very inexpensive—about 10% of what it would cost to do manually. What it is doing is opening doors for new carriers to appreciate what Exzeo Group, Inc. is capable of. From that sense, it is a very good way to further spread the Exzeo Group, Inc. brand. In terms of revenue, I do not think this in and of itself, especially because of the prices we are charging, is going to be meaningful in terms of revenue. I do not think Suela is adjusting her financial models because of it. But the big thing is how this was developed, the speed at which it was developed, and how it is being deployed. This is monetizing AI capabilities in a manner that both reduces our expenses to develop by orders of magnitude and enhances value to potential clients. It is a real thing that we were not even thinking of when we had the last earnings call two months ago. To be fair, our developers have been monitoring developments in the AI space for almost three years at this point, pretty much since the week ChatGPT came out, but it is about waiting for the moment when it is ready for prime time. With WinForm Pro, we are demonstrating how AI can be used and utilized and turned into a product and turned into revenue—all in two months. Matthew Carletti: That is great color. Thank you very much. Operator: Your next question comes from the line of Terrell Tillman with Securities. Your line is now open. Terrell Tillman: Hey, good afternoon, Pareshbhai, Kevin, Suela, and William. My first question builds on the last set of questions about AI. It seems like almost daily something dramatic is happening, and we are hearing CEOs say they are spending billions of dollars on this. Beyond the ability to light up new solutions really quickly like WinForm, is AI becoming a call to arms for even traditional insurers or upstarts that is driving incremental sales funnel activity because they need to transform the whole business—underwriting, policy management, etc.? Are you seeing any incremental tailwinds from “AI is the real deal and we need to get going yesterday”? And then I have a couple of follow-ups. Pareshbhai Patel: Terry, yes, all of those possibilities in underwriting, quoting, claims management, etc., have always been part of the conversation—AI could do things. The issue has always been how do you do it? A lot of insurance carriers probably want a packaged solution as opposed to a “code your own” solution. That was my point earlier: just because it is available does not mean everybody can assemble it and turn it into a solution they can use repeatedly. It turns out the Exzeo Group, Inc. technology team can, and they do it in a controlled manner—being able to design, deploy, and maintain things at scale is quite a need that still exists. We are starting to see a unique niche that we can fill. In theory, anybody can fill that niche, but in theory, anybody could have built a copy of Google search—Microsoft even tried with all of its resources, but Bing does not quite cut it. Having the idea and being able to put it into production are two different things. Terrell Tillman: Got it. Maybe just one and a half more questions. Kevin, you were talking about investing in 20 FTEs. I know you hired a key long-term veteran in the industry. Is that team built out now, or does it have enough substance and size, and how are they doing? I know it is early days, but any progress there? And then a model question for Suela. Kevin Mitchell: Yes, Terry, we continue to build the team—hence the 20 folks since January 1. We continue to build around them to drive growth and drive ever-increasing pipeline activity. Pareshbhai Patel: Terry, to put a different context around this, I am sure you have been on lots of earnings calls, and the recurring theme has been: add AI—license stuff—and run up an expense, and cut headcount. We are doing the opposite. We are using AI as a revenue generator and a lead generator. We are already monetizing it. Secondly, Kevin is adding people. To be fair, it is not an apples-to-apples comparison because we started from such a lean, efficient operation. The people Kevin is adding should have a material impact on accelerating our growth rate going forward. That is why I am excited that he is adding people. Terrell Tillman: For sure. I will turn it over after this, but I really wanted to get this in. Managed premium and ARR were strong in the quarter—well ahead of our expectations. I know it takes time for that to move to revenue from operations and revenue. Can you share anything about how that played out in 1Q versus what you thought? Or commentary around timing from that large add of premium in 1Q as we move into 2Q and beyond? Thanks again. Suela Bulku: Thank you for the question, Terry. The timing of when managed premium gets added to our platform obviously matters. What we saw in Q1 is that the new additional premium, especially from the new client, joined the platform mid to late quarter. Also keep in mind that we recognize upfront about 25–30% of the revenue and the remainder is recognized over time. That said, new premium is still not a large enough share of our total managed premium currently on our platform to materially distort quarterly revenue on its own. On a normalized basis, you can think of the ARR conversion into revenue as generally fairly flat and consistent over the quarters. Just a reminder that we do have some seasonality on the margin based on the renewal cycle of the policy and the product mix, and then how we recognize revenue along with expenses. Historically, you will see higher-margin renewals tend to be in the middle of the year, which drives the Q2 peak that we have seen historically. Terrell Tillman: Okay. Thanks. Operator: Thank you. Your next question comes from the line of Dylan Becker with William Blair. Your line is now open. Dylan Becker: Hey, everybody, appreciate it. Maybe, Pareshbhai—double-clicking on the prior points, or for Kevin as well—on the opportunity to dedicate more resources given the opportunity at hand and the ability for AI to superpower that in some context. I know the cadence of getting WinForm into market is notable. How do you think about the balance of compounding the existing platform value proposition to compel more customers to come online, while also scaling that outside of Florida and into new territories and regions—kind of a breadth-and-depth question from a platform functionality perspective? Pareshbhai Patel: Great question. That is why, in our prepared remarks, we tried to talk about plans and growth for the existing platform and adding managed premium in that fashion, while at the same time exploring these new capabilities and door-opening projects we are doing. They will not have impact immediately, but they will create long-term opportunity and differentiation for Exzeo Group, Inc. over other solutions in the marketplace. We have short-term, medium-term, and long-term initiatives. From my perspective, the long-term things are the most exciting as to what they could mean down the road. If you think of WinForm Pro as a universal way of filling out this OIR requirement, it is very specific. But the same architecture and method we developed could be used to create a digital agent for reviewing claims, a digital agent for compliance—which is a big thing with insurance carriers—or a digital agent for generating a rate filing. We can see that at this point, and we know how to use AI to develop those tools and capabilities. The beauty of AI is it does not mean it will only work on the Exzeo Group, Inc. platform—one of these agents could also work on any other software platform that a carrier might have implemented. Think about what that opens up as a door. Again, very early days. We did not want to talk about AI in a material way previously—not because we were not aware or doing anything—but because we wanted to speak when we actually had something. WinForm Pro shows we have something, and it is only a sample of what is to come. Dylan Becker: Very helpful. Excited to keep an ear out for what is to come. Thank you, Pareshbhai. Maybe for Suela on the premium growth dynamic—still very impressive. You said you expect it to be flat next quarter and reiterated the full-year outlook. Could you remind us of the seasonal components? And, given the Florida exposure, any broader update on how underwriting cycles are impacted or how carriers think through those as we enter hurricane season—anything to be aware of from a seasonal perspective? Suela Bulku: That is a very good question. As I mentioned, we expect managed premium to remain stable next quarter, which is consistent with the growth pattern of our client base. Our clients are primarily based in Florida, where growth is usually more back-end weighted, so you tend to see managed premium growth more in the fourth quarter. Pareshbhai Patel: Yes, you have it right in the sense that it is not set by us—it is set by clients. We are just explaining what clients typically do and what their normal cadence is. Dylan Becker: Very helpful. Thank you. Operator: Again, if you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. At this time, this concludes our question and answer session. I would now like to turn the call back over to Pareshbhai Patel, who has a few closing remarks. Pareshbhai Patel: Thank you. I want to thank everyone who joined the call today, and I also want to thank the Exzeo Group, Inc. team for their continued hard work. Before we wrap up, I should provide a quick update on the Rule 10b5-1 purchase plan that is underway for me to buy shares. As of today, I have bought about 72 thousand shares since the plan went into effect a couple of months ago, and it still continues. I look forward to it being filled out, hopefully sometime in the current quarter. With that, we will end the call. Thank you. Operator: At this time, this concludes today’s call. Thank you all for joining. You may now disconnect.
Operator: Welcome to the Mineralys Therapeutics, Inc. First Quarter 2026 conference call. It is now my pleasure to introduce your host, Dan Ferry of Life Science Advisors. Please go ahead, sir. Dan Ferry: Thank you. I would like to welcome everyone joining us today for our first quarter 2026 conference call. This afternoon, after the close of market trading, Mineralys Therapeutics, Inc. issued a press release providing our first quarter 2026 financial results and business updates. A replay of today's call will be available on the Investors section of our website approximately one hour after its completion. After our prepared remarks, we will open up the call for Q&A. Before we begin, I would like to remind everyone that this conference call and webcast will contain forward looking statements about the company. Actual results could differ materially from those stated or implied by these forward looking statements due to risks and uncertainties associated with the company's business. These forward looking statements are qualified by the cautionary statements contained in today's press release and our SEC filings, including our annual report on Form 10-Ks and subsequent filings. Please note that these forward looking statements reflect our opinions only as of today, May 6, 2026. Except as required by law, we specifically disclaim any obligation to update or revise these forward looking statements in light of new information or future events. I would now like to turn the call over to Jon Congleton, Chief Executive Officer of Mineralys Therapeutics, Inc. Jon Congleton: Thank you, Dan. Good afternoon, everyone, and welcome to our first quarter 2026 financial results and corporate update conference call. I am joined today by Adam Levy, our Chief Financial Officer, David Rodman, our Chief Medical Officer, and Eric Warren, our Chief Commercial Officer. I will begin with an overview of the business, clinical programs, and recent milestones, followed by Adam to review our first quarter financial results before we open up the call for your questions. Our NDA acceptance in the first quarter has been the culmination of a massive effort by our team and our mission to provide more healthy days to patients with cardiovascular disease. From an operational perspective, we are focused on preparing lorundrostat for a successful launch in the United States while we continue to evaluate partnering opportunities and consider the next steps in the clinical development of lorundrostat. During the first quarter, the FDA accepted the NDA for lorundrostat for the treatment of adult patients with hypertension in combination with other antihypertensive drugs and assigned a PDUFA target date of December 22, 2026. This represents a significant regulatory milestone for lorundrostat that moves us meaningfully closer to our goal of delivering a potentially best-in-class therapy to patients with uncontrolled or resistant hypertension. The NDA is supported by a comprehensive clinical data package, including positive results from the Launch HTN and Advance HTN pivotal trials, TRANSFORM HTN, our open-label extension trial, and the proof-of-concept trials, TARGET HTN and EXPLORE CKD. Collectively, these five trials demonstrated that lorundrostat delivers clinically meaningful reductions in blood pressure, is well tolerated, and maintains a durable response across diverse patient populations. We believe this data package supports the potential for lorundrostat to be included in prescribing guidelines, the economic value of lorundrostat to the health care system, and lorundrostat as a differentiated novel therapy. Uncontrolled and resistant hypertension continue to represent areas of unmet medical need, affecting over 20 million people in the United States and contributing significantly to cardiorenal complications. Aldosterone dysregulation often plays an important role in resistant hypertension where patients on three or more antihypertensive medications fail to achieve their blood pressure goal. The launch of lorundrostat, if approved, will be initially focused on this population with the highest need. Our ongoing market research highlights the following three key factors. One, prescribers prioritize magnitude and consistency of blood pressure reduction and have stated a consistent willingness to prescribe lorundrostat in the fourth line. Two, payers recognize the high-risk nature of patients whose hypertension is uncontrolled on three or more medications and have expressed a willingness to provide coverage for lorundrostat. Three, patients are seeking meaningful and sustained blood pressure reductions that are tolerable and simple to integrate into their daily lives. They are very receptive to novel agents like lorundrostat that may help them achieve their goal. As we move towards our PDUFA target date, our operational focus will continue to be on preparing lorundrostat for commercial success. Our teams are working on early market access planning and payer engagement to ensure the value proposition of lorundrostat is clearly understood. In parallel, we continue to invest in physician advocacy with our medical communications capabilities, including broader education of the unmet need in uncontrolled or resistant hypertension through peer-reviewed publications, increased participation in scientific meetings, and the continued build out of our field-based medical science liaison team. We are also expanding our sales and marketing capabilities to ready lorundrostat for success. Together, these activities are intended to support awareness of the clinical profile and position lorundrostat for a potential commercial launch. We continue to evaluate partnering opportunities and engage in strategic discussions. The right partner could provide enhanced value and enable us to reach more patients who could benefit from lorundrostat. Our focus on preparing for a strong commercial launch is invaluable to potential business development partners. I will now turn the call over to Adam to review our financial results for the first quarter 2026. Adam Levy: Thank you, Jon. Good afternoon, everyone. Today, I will discuss select portions of our first quarter 2026 financial results. Additional details can be found in our Form 10-Q which will be filed with the SEC today. We ended the quarter with cash, cash equivalents, and investments of $646.1 million as of March 31, 2026, compared to $656.6 million as of December 31, 2025. We believe that our current cash, cash equivalents, and investments will be sufficient to fund our planned clinical trials and regulatory activities as well as support corporate operations into 2028. R&D expenses for the quarter ended March 31, 2026 were $24.4 million compared to $37.9 million for the quarter ended March 31, 2025. The decrease in R&D expenses was primarily driven by a $15.5 million reduction in preclinical and clinical costs following the conclusion of our lorundrostat pivotal program in 2025. This decrease was partially offset by $1.1 million of increased clinical supply manufacturing and regulatory costs and $800 thousand of increased personnel-related expenses resulting from headcount growth and increased compensation. G&A expenses were $21.0 million for the quarter ended March 31, 2026, compared to $6.6 million for the quarter ended March 31, 2025. The increase in G&A expenses was primarily driven by $7.9 million of higher professional fees, $6.1 million of increased personnel-related expenses resulting from headcount growth and increased compensation, and $400 thousand from other general and administrative expenses. Total other income, net, was $6.0 million for the quarter ended March 31, 2026, compared to $2.2 million for the quarter ended March 31, 2025. The increase reflects higher interest earned on investments in our money market funds and U.S. Treasuries due to higher average cash balances invested during the quarter. Net loss was $39.3 million for the quarter ended March 31, 2026, compared to $42.2 million for the quarter ended March 31, 2025. The decrease was primarily attributable to the factors impacting our expenses that I just described. With that, I will ask the operator to open the call for questions. Operator? Operator: Thank you. At this time, we will be conducting a question-and-answer session. It may be necessary to pick up your handset before pressing the star key. One moment please while we poll for questions. Our first question comes from Michael DiFiore with Evercore. Your line is now live. Michael DiFiore: Hey, guys. Thanks so much for taking my question. Two for me. Number one, in the scenario where Mineralys Therapeutics, Inc. launches lorundrostat itself without a partner, will you conduct any more significant R&D activity or business development, or will you preserve funds just to support the launch and focus on the launch? And separately, as you near the day 120 safety update, it may have already passed, I am not sure. Can you comment on whether safety remains consistent with the past and whether there are updated plans to publish data from the OLE? Thank you. Jon Congleton: Yes, Mike. Thanks for the questions. To the first one, in the event that we launched alone, we, from the beginning, have been focused on how we build value with lorundrostat and how we do that by extension for Mineralys Therapeutics, Inc. We have built this organization from the beginning thinking about our clinical development program with an eye towards how we generate the greatest value from a commercial standpoint launching, whether it is on our own, with a partner, or through someone else. And so I think it is fair to say we are going to continue to look at ways that we increase value for lorundrostat and Mineralys Therapeutics, Inc. If you think about the development program to date, we have done that. Launch HTN, obviously, spoke to the real-world audience. Advance HTN stands out on its own because it is a very distinct, complicated population that no one else has studied with an ASI. EXPLORE CKD provides information for prescribers looking at the complexity of resistant hypertension and nephropathy or CKD. So we have always had an eye towards meeting the physicians where they are, what they need with lorundrostat, and building the appropriate data around that. So we will continue to look at opportunities to build value from a clinical development perspective, and we will continue to look at opportunities to expand the value of lorundrostat through business development. To your second question around the 120-day safety mark, we continue to be very confident in the safety profile of lorundrostat. The TRANSFORM HTN trial, our open-label extension, continues to collect that data. We think lorundrostat is well characterized from a durable effect and safety and tolerability profile perspective. And as we have noted in the past, we will be looking to get that long-term data published in due course. Michael DiFiore: Great. Thanks so much. Operator: Thanks, Mike. Our next question comes from Richard Law with Goldman Sachs. Your line is now live. Richard Law: Hey, guys. Good afternoon. A couple of questions from me. Do you get a sense that you need to compete with AZ on preferred or exclusive access with payers based on some of the discussions that you are having? And, also, what is your confidence level on getting access to that 3L setting compared to fourth and fifth line settings? Is your 3L strategy based on broader use, or is it more on the smaller niche population? And then I have a follow-up. Jon Congleton: Yeah, Rich, thanks for the questions. As we have talked about in the past, our clinical development program looked at that third-line-or-later opportunity. Both Advance and Launch looked at that population failing to get to goal on two or more because that is where significant need exists. I think that is where an ASI can add significant value. From a market standpoint, in a launch, we think the focus will be fourth line. It is our feeling that in that fourth-line resistant hypertension setting, payers appreciate the risk that these patients are under and the lack of satisfactory alternatives that are currently available relative to what lorundrostat has shown in our clinical program. Eric, do you want to add some more? Eric Warren: Yeah, hey, Richard. It is all about sequencing. The fourth line is the entry point. But, obviously, there is that need for those comorbid patients that are third-line patients. The opportunity will be to gain that experience, gain that confidence, and then make that transition to the third line using that comorbid condition as a bridge. This has been well vetted with payers in research and advisory boards, and as our team is now out there engaging payers with our account executives. You also asked about whether we are going to try to position ourselves in a different way than baxdrostat. Obviously, there is an opportunity for both ASIs, and having parity access is something that is a focus for us. Richard Law: I see. Got it. And then a follow-up. We heard that AZ has been saying that baxdrostat can potentially achieve something like $10 billion peak if they can succeed in other indications beyond hypertension and CKD that they are developing. And I also remember, Jon, I think you mentioned that when you think about a partner, an ideal partner would be the one who would recognize lorundrostat’s potential. So when I hear that, I think you meant the potential beyond hypertension. In your discussion with potential partners, how many of them recognize the value of lorundrostat outside hypertension? And what are these indications that you believe partners are bullish on or not bullish on based on the unmet need and the drug's mechanism? Thanks. Jon Congleton: Thanks, Rich. As we noted before and in the prepared remarks, there are 20 million patients that are struggling to get to goal on two or more meds right now. We know the clear linkage of uncontrolled or resistant hypertension to poor outcomes, whether they are cardiovascular or renal. I think at this stage we can clearly say that what lorundrostat has demonstrated in reducing blood pressure is a clear surrogate for what we could expect as far as a reduction in cardiovascular risk. So I am not surprised by AstraZeneca's bullish position on baxdrostat. I would say we have shared that view given the fact that, just in the United States alone, there are 20 million patients at risk. We have talked in the past about having a partner that is more global in nature and has a holistic view of this asset. I do not think that view has changed. I cannot really opine on how some of those discussions have looked at different indications. But, clearly, we know that aldosterone is going to be a key target for the next several years into the 2030s as it relates to not only hypertension, but the related comorbidities. Operator: Thanks, Rich. Our next question comes from Seamus Fernandez with Guggenheim Partners. Your line is now live. Seamus Fernandez: So I guess I will address, or ask you to address, the elephant in the room, which is you guys have been talking about potential partnering for quite some time. You have had the data and now you have had the NDA firmly established in terms of the PDUFA date for some time. What is it that you are looking for at this point in a potential partner that perhaps you are seeking but has not quite matched up? Or should we anticipate that you are in active discussions along those lines? I think we are all just trying to metric what is the timing for either selection of a partner or a potential go-it-alone strategy in the U.S. Thanks so much. Jon Congleton: Yeah, Seamus, appreciate the question. And, as we have said in the past, we are interested in finding the right partner. In response to Rich’s question, I talked about the global nature of that. We are routinely evaluating those partnering opportunities. As you can imagine, and I think appreciate, we are not in a position to provide color or specifics around the level of dialogues, the timing, or the structure. But it is something that we are mindful of. We have, as noted, continued to focus on how we build value going forward, and that is why, operationally, we are focused on commercial readiness for this asset. I think it is an important part of those partnering dialogues. But, clearly, looking for a partner to build on that value continues to be something we are focused on. Seamus Fernandez: Great. Maybe if I can just ask one follow-up question. As you look at the opportunities to partner your asset with other mechanisms, specifically, what would you say are the core mechanisms that you are particularly excited about? We have a whole host of new cardiometabolic mechanisms that are advancing and potentially looking to emerge outside of hypertension. Which would you say would be particularly exciting from your perspective to partner with lorundrostat? Thanks. Jon Congleton: Yes, Seamus, it is a great question. I think what is key as an opportunity for Mineralys Therapeutics, Inc. is we have the core foundational molecule, that being lorundrostat as an ASI. Given the nature of aldosterone to be a driver of not only hypertension, which is the beginning point of many other cardiorenal metabolic disorders, but also the role that aldosterone plays in CKD and heart failure and other disorders, it begins with the fact that we have the core foundational molecule. There are other mechanisms. Certainly, the SGLT2s are what our competitors are looking at. I think the fact that dapagliflozin is generic at this point, given the data that we have generated to date within our pivotal studies and specifically EXPLORE CKD, gives us an entrée to put lorundrostat forward in a hypertensive nephropathy or CKD population. But there are other mechanisms that we are looking at from a cardiorenal standpoint. We are not in a position right now to opine on those. But I would come back to the fact that we have the core product that really addresses the key driver of pathology, and that is lorundrostat. Operator: Thanks, guys. Appreciate it. Our next question comes from Jason Gerberry with Bank of America. Your line is now live. Jason Gerberry: Hey, guys. Thanks for taking my question. As you are doing a lot of your prelaunch activities, how are you thinking about the physician segments that you think are going to be the most likely to drive early adoption, especially in that fourth-line setting where it sounds like maybe you will not be focusing on doctors that focus on comorbidities like CKD, but maybe more cardiology-driven hypertension? Can you discuss some of the learnings from the prelaunch activities and how you are thinking about the early adopter? Jon Congleton: Yes, Jason, thanks for the question. I would say that we have been thinking about this going back three to four years when we framed the pivotal program for lorundrostat. Clearly, there is a primary care portion of the audience that is key prescribers in fourth line. They would be part of a launch target. But cardiologists as well. That is why Advance HTN is such a critical, differentiating piece of our data story. These are the patients that a cardiologist is truly seeing. They are maximized with treatment. They have tried various alternatives and still cannot get to goal. That was the test that Advance HTN put lorundrostat through, and lorundrostat came through with flying colors. That is a key and distinct dataset that AstraZeneca, frankly, does not have. The cardiologist will certainly be a part of that target base. Nephrology as well. We know that nephrologists deal with uncontrolled and resistant hypertension with comorbid CKD. As we speak to those nephrologists, the number one goal for them to try to arrest the progression of kidney disease is to get their patients’ blood pressure to goal. We have been thinking about the target population, the prescribers and the use cases they have, and that is why we built out a very distinct and diverse dataset that provides information about how to use and where to use lorundrostat, and the expected benefits they can see in blood pressure control and beyond, such as proteinuria. Jason Gerberry: And as a follow-up, is there any one or two things you will be looking at in the first three to six months of your competitor’s launch that may alter your go-to-market strategy? Jon Congleton: I do not know if I would say it will alter it. Certainly, it will be informative. We have a view of the data package we have. Eric and his team have done a really nice job of identifying where the unmet need is, who the key prescribers are, where that beachhead indication is for fourth line, and what is important to them in prescribing. We will obviously be looking at AstraZeneca's launch, and we anticipate it is going to be significant given the unmet need here and the lack of innovation in the last 20-plus years. But given the data that we have generated, and specifically speaking to the different prescribers that your first question alluded to, we are very confident in our ability to tap into that, assuming approval and launch very quickly after that. Operator: Our next question comes from Annabel Samimy with Stifel. Your line is now live. Annabel Samimy: Hi. Thanks for taking my question. I would love for you to talk about who you think might be driving the process of guideline changes that would position the new ASI class as the next drug to try after third-line agents have failed. You have a tremendous amount of data across the spectrum of patients as well as safety, CKD, and OSA. How important is it to have that wealth of data to drive those conversations, or do you think that it is the first to market that drives the conversations? Just want to understand the mechanics behind that. Jon Congleton: Yeah, Annabel, thanks for the question. I think it is safe to say that we have been interacting with those physicians that are part of the guideline committees, appropriately sharing the information that we have. It is something we contemplated three years ago, and it is why we worked with the Cleveland Clinic and Steve Nissen and Luke Laffin with Advance HTN, because we knew there had been a lack of innovation in this space. This is a heavily genericized space, and the guidelines would be a critical component. Advance HTN becomes the study that addresses all of the questions guideline committees are going to have about whether it is apparent or truly confirmed resistant hypertension. That dataset is going to be an instrumental component of the argument for inclusion in the guidelines. Launch HTN is an important part as well. It speaks to the primary care physicians. EXPLORE CKD and EXPLORE OSA, as you alluded to, provide additional data that is informative and speaks to the unique complexities of the resistant hypertension population. We are in front of the right physicians who are part of those guideline committees, and we have the right data and dataset with lorundrostat to make a compelling argument. Annabel Samimy: If I could just follow on the physician segmentation that you are thinking about. Given the Launch trial and the fact that primary care is a big prescriber of hypertensive agents, do you expect the focus to be cardiologists and nephrologists and hope for trickle-down into primary care, or do you expect to include high-prescribing primary care physicians within that first set of physician targeting? Jon Congleton: I do not know that our view has changed. We are continuing to narrow in on those prescribers that control approximately 50% of that third- and fourth-line, predominantly fourth-line, segment, and within that there are primary care as well as specialists. Eric, you can add some more to that. Eric Warren: Well said, Jon. Cardiologists, nephrologists, but there are primary care physicians that function very well within this fourth-line state. They are actively prescribing. We have looked at the segmentation. We have looked at the deciling, and there will be primary care included in that initial go-to-market strategy. Operator: Great. Thank you. Our next question comes from Mohit Bansal with Wells Fargo. Your line is now live. Mohit Bansal: Great. Thank you very much for taking my question. One question I have is regarding differentiation. Do you expect to see any kind of differentiation when it comes to labeling between lorundrostat and the competitor here, based on your market research? What feedback are you getting from physicians that they see any differentiation between these molecules? Thank you. Jon Congleton: Yeah, Mohit, thanks for the question. On the label, I think there will be a level of uniformity, certainly within the indication. But I will step back to a point that I have been making. There is a distinct difference between the datasets that we generated with lorundrostat and that of baxdrostat. Launch HTN speaks to the real-world audience, but, again, Advance HTN is a very distinct and differentiated dataset that provides information to cardiologists specifically who are dealing with very difficult, confirmed resistant hypertension patients. Then EXPLORE CKD. We know that proteinuria and having a benefit on proteinuria is a key attribute in physicians' minds when they think about an antihypertensive and how they view its utilization. Certainly for nephrologists, having a benefit on proteinuria is a key signal, or surrogate if you will, for slowing renal progression. Launch HTN, Advance HTN, and EXPLORE CKD, as well as our long-term open-label extension TRANSFORM HTN, were all part of our submission in the NDA. Now, what language and what portions of those studies get into the actual label will be part of negotiations with the FDA. But having that data, whether within label for promotion or through medical information, is going to be very instructive and informative for those distinct prescriber populations. Mohit Bansal: And the physician feedback, the second part? Jon Congleton: The physician feedback has been very robust. Eric? Eric Warren: Two things I will highlight, Mohit. Number one, the absolute systolic blood pressure reduction. That is really what shines from a physician perspective. That 19 mmHg that we demonstrated in Launch, but also the diversity and the well-represented trial populations. I will call out the Black/African American population at between 28% and over 50% of our patients depending upon the trial. Physicians really appreciate the inclusivity of our populations. Mohit Bansal: Got it. Very helpful. Thank you. Operator: Our next question comes from Matthew Coleman Caufield with H.C. Wainwright. Your line is now live. Matthew Coleman Caufield: Hi, guys. Thanks for the updates today. You covered a couple of my questions, but I think overall the sense is that baxdrostat's possible approval mid-year helps overall ASI receptivity and awareness. At a high level, do you anticipate there being any headwinds with that approval, or do you see it only as a positive as we get closer to the December PDUFA? Jon Congleton: I think there is significant opportunity within this space. As I noted previously, Matt, the lack of innovation speaks to the high interest from physicians to have a novel agent or novel class of agents. I do think there is an opportunity to see this market grow as AstraZeneca launches six to seven months in advance of potential approval for lorundrostat. I think it is important to highlight that we will have a voice in the market during that six to seven month period. We have had national account executives in front of payers going back to Q1. We have our MSL team in place, going out and building advocacy within those top-tier and regional-tier KOLs. So I think it is really both companies out there progressively talking about the role of aldosterone, the importance of addressing it within the ASI class. That grows this market opportunity. Whether you look at it from a revenue projection that AZ guided to, or the 20 million patients that we target, this is a massive market opportunity. There is significant interest in the novelty of the class of drugs. So I think it is a net positive. Matthew Coleman Caufield: Great. Thank you, guys. Appreciate it. Operator: Our next question comes from Rami Azeez Katkhuda with LifeSci Capital. Your line is now live. Rami Azeez Katkhuda: Hey, guys. Thanks for taking my questions as well. Given that AZ will likely set the initial pricing benchmark for the ASI class with baxdrostat, are there any other market access levers that you can pull to differentiate lorundrostat? And then, secondly, I know there are not many recent cardiovascular launches, but what do you view as the most relevant commercial analog for lorundrostat at this point? Jon Congleton: Yes, Rami, thanks for the questions. Relative to AZ, presuming approval, they will be setting the initial price point. I have been asked whether that is an anchor point. I think it is a guiding point. I have no idea where they are going to price it at this stage. Clearly, they are bullish on the revenue opportunity, but it will be informative for us. Going back to differentiation and the payer discussions, we are seeing that right now. As we have dialogues with payers, the distinction of the dataset—whether it is Advance HTN, which I have commented on previously in a very distinct population that AstraZeneca cannot speak to, or the Black/African American population that Eric alluded to—we know that is a critical high-risk population. We believe we have the dataset that is very informative for payers from an access standpoint. The feedback we have gotten from payers to date is they are open and willing to create access in this fourth-line setting and potentially, in due course, third line. They are also interested in having two assets to evaluate. So it is not as if, from our perspective, baxdrostat will launch and secure all access from a payer standpoint. On commercial analogs, it is a fair question and hard to answer because there has not been a lot of innovation within cardiovascular for quite some time. An interesting analog for me, although it is a GenMed category and not cardiovascular, is migraine with the gepants, the orals. When you come out with something truly novel from a clinical profile standpoint and match that to a market with significant unmet need, you can see significant commercial uptake. That is an informative analog we think about as we prepare the commercialization of lorundrostat. Operator: Thanks. Our next question is from Analyst with TD Cowen. Your line is now live. Analyst: Hi, thanks and good afternoon. A follow-up from Mohit’s question. It was helpful to hear about label differentiation. Can you tell us more about how you will react to baxdrostat pricing, especially when it comes to your pricing strategy? We know how important access is to physicians, but we are curious about the strategy you are thinking there. Could you launch with a lower WAC price? Should we assume rebates would be the primary mechanism to drive access, or something else? More thoughts there would be helpful. Thank you. Jon Congleton: Yeah, thanks. I appreciate the question. I hope you appreciate that it is really early to opine too much on that. We will see where AstraZeneca comes in with pricing. We have guided in the past that thinking about Farxiga and Jardiance WAC, or list price, is probably a good barometer to work from. We will see where they go from a pricing standpoint and evaluate what makes sense for lorundrostat. The key for us at the end of the day is to ensure that patients that physicians believe could benefit from lorundrostat get access to it. There are a lot of different levers we could pull, from contracting to what we do with our patient assistance program, but it is too early to give you the level of color your question would require. Analyst: Okay, great. That makes sense. Maybe then I can ask a different question. As we are looking at this launch as a proxy to lorundrostat, can you talk about how you would think about the cadence of that launch? It is hard without recent hypertension proxies, but do you expect that there would be an initial bolus of patients within the hypertension population, or anything that could help us understand what a good first few quarters might look like? Jon Congleton: Looking at 2024 IQVIA data that shows, in third line or later, there are about 8.8 million patients that are turning over and trying new medications, and that is in the absence of any innovation—that is with existing treatments that have been available for 20-plus years. As an old marketer, to me, that tells me there is a market with a great deal of dissatisfaction. Physicians have not given up. They continue to trial existing medications to help patients get to goal. There is significant pent-up demand and appreciation of the risk these patients are under if they do not get to goal. Fundamentally, that is a proxy. How that translates to baxdrostat’s launch quarter over quarter, I cannot opine on that. I just know, looking at fairly recent data from 2024, there is a lot of movement within this marketplace, and that creates opportunities for novel agents like lorundrostat. Operator: We have reached the end of the question-and-answer session. I would now like to turn the call over to Jon Congleton for closing comments. Jon Congleton: Thank you. In closing, we remain encouraged by the FDA acceptance of our NDA based on a strong clinical data package that I have just spoken about through the question and answers. From an operational perspective, we are focused on executing on our pre-commercial readiness strategy, while in parallel evaluating partnering opportunities and considering the next steps in the clinical development of lorundrostat. We believe Mineralys Therapeutics, Inc. is entering an important next phase in its evolution. This reflects the dedication of our entire team, the physicians and researchers who have supported the lorundrostat program, and, most critically, the patients whose needs continue to guide our daily work. Thank you to everyone for joining us today. We appreciate the continued interest and support, and we look forward to providing further updates in the quarters ahead. With that, we will close the call. Have a nice day, everyone. Operator: This concludes today's conference. You may disconnect your lines at this time. We thank you for your participation.
Nichol L. Ochsner: Good afternoon, and thank you for joining Zevra Therapeutics, Inc.'s First Quarter 2026 Financial Results and Corporate Update Conference Call. Today's call is being recorded and will be available via the Investor Relations section of the company's website later today. The host for today's call is Nichol L. Ochsner, Zevra Therapeutics, Inc.'s Vice President of Investor Relations and Corporate Communications. Thank you, and welcome to those who are joining us. Today, we will provide an overview of our recent accomplishments, followed by a review of our first quarter 2026 financial results. I encourage you to read our financial results news release, which was distributed this afternoon and is available in the Investors section of our website. Before we begin the call, please note that certain information shared today will include forward-looking statements. Actual results may differ materially from those stated or implied in any forward-looking statements due to risks and uncertainties associated with Zevra Therapeutics, Inc.'s business. Forward-looking statements are not promises or guarantees and are inherently subject to risks, uncertainties, and other important factors that may lead to actual results differing materially from projections made, and should be evaluated together with the Risk Factors section in our most recent quarterly report on Form 10-Q, our annual report on Form 10-K, and our filings with the SEC. I am pleased to welcome Zevra Therapeutics, Inc.'s management team members participating in today's call: Neil F. McFarlane, Zevra Therapeutics, Inc.'s President and Chief Executive Officer; Joshua M. Schafer, our Chief Commercial Officer; and Justin Renz, our Chief Financial Officer. Our Chief Medical Officer, Adrian Quartel, will also be available for today's question and answer session. Now it is my pleasure to hand the call over to Neil. Neil F. McFarlane: Thank you. And welcome to everyone joining our quarterly call this afternoon. We are building a durable rare disease company grounded in disciplined execution, financial strength and a commitment to patients. We continue to advance our strategic plan, delivering strong performance and positioning ourselves for long-term growth. We made substantial progress in establishing MyPlifer as a foundational treatment for Niemann-Pick disease type C, or NPC, in the U.S. by delivering meaningful clinical impact to patients and pursuing multiple pathways to expand patient access globally. We are also advancing our late-stage asset, ciliprole, through a Phase III study for the treatment of vascular Ehlers-Danlos syndrome, or VEDS, and executing several approaches to accelerate its development. To sharpen our focus on high-impact activities and remove operational distractions, we optimized the portfolio by divesting non-core assets with the sale of the FDX portfolio to CommAv Therapeutics for $50 million and concurrently resolved the legal dispute. Our balance sheet is strong, with a cash position of $236.8 million and no outstanding debt, providing financial flexibility to drive growth. In the first quarter, total net revenue was $36.2 million, which is a 78% increase over Q1 2025. We have now reached a total of 170 prescription enrollment forms for MyPlifer from launch through March 31, nine of which were received in the first quarter. Recall, the estimated prevalence of NPC patients in the U.S. is approximately 900, of whom 300 to 350 are currently diagnosed. Thus, we have successfully reached roughly half of this patient population and continue to have traction with newly diagnosed patients. This is a significant early launch achievement and remains consistent with the meaningful opportunity ahead for continued growth. As a reminder, we have established a solid patent position for MyPlifer. It received orphan drug designation in the U.S., enabling marketing exclusivity through 2031. Consistent with our strategy to maximize the potential growth drivers for our business, we are pursuing a patent term extension through the U.S. Patent Office and await their decision, which could provide coverage beyond 2031. Through our Global Expanded Access Program, or EAP, we are able to deliver a much-needed treatment to patients with NPC in certain European countries and select territories outside of Europe, including the U.K. As of the end of the quarter, we have a total of 122 patients enrolled in the EAP across geographies. Our global EAP is comprised of multiple access programs, including compassionate use and named patient reimbursement. Within each, we expect variability in enrollment and reimbursement over the first few years until the patient base has stabilized, consistent with our experience in the French EAP program. In Europe, there are an estimated 1,100 individuals with NPC. Diagnosis rates exceed those in the U.S., largely because the earlier approval of miglustat established physician awareness and enabled patient identification. To support the geographic expansion, with a potential approval of aramcholamol in Europe, we have a marketing authorization application under review by the European Medicines Agency, or EMA. We submitted our responses to the EMA's 120-day list of questions within the 90-day clock stop period and are progressing along the standard review process to make aramafamol available to the European NPC community. As a reminder, we have also received orphan medicinal product designation in Europe for the treatment of NPC. Turning to our late-stage pipeline, our Phase III DISCOVER trial is evaluating saliprolol for the treatment of VEDS, a rare inherited connective tissue disorder caused by COL3A1 gene mutations that weaken the walls of blood vessels and hollow organs, and can cause arterial rupture or dissection, among other complications. Approximately 90% of patients experience an event by the age of 40. There are roughly 7,500 individuals living with VEDS in the U.S. Filippool is a selective adrenoceptor modulator that works by inducing vascular dilation and smooth muscle relaxation, and thereby reducing mechanical stress on tissues of the arterial wall and hollow organs. Currently, there are no approved therapies for VEDS. Our commercialization strategy for saliprolol is focused exclusively in the U.S.; there is a clear opportunity to fill an unmet need. While not approved in Europe for VEDS, saliprolol is the primary off-label treatment in several European countries. This use is supported by the results of several studies, including long-term European cohorts. We have enrolled a total of 62 patients in the DISCOVER trial, with 10 patients enrolled in the first quarter. This is an event-driven study, and we have two confirmed events out of the 28 events required to trigger the interim analysis. We continue to implement activities aimed at driving enrollment, including building a network of genetic testing centers to improve diagnosis, as well as strengthening connections with key specialists who manage these patients. In parallel, following the FDA Type C meeting we had in the first quarter, we are preparing for a follow-up meeting in the second half of the year to explore pathways to accelerate its clinical development. In summary, we have a clear vision to become a leading rare disease therapeutics company, and we are motivated by the momentum and the opportunity that this phase of growth brings. I will now turn the call over to Josh to review our commercial performance in more detail. Josh? Joshua M. Schafer: Thank you, Neil, and good afternoon. Before reviewing the quarterly progress with MyPlisa, I will provide a quick background on NPC. NPC is a rare lysosomal storage disorder caused by mutations in genes that impair intracellular cholesterol and lipid trafficking, leading to the abnormal lipid accumulation in the brain, liver, spleen, and other organs. The onset and course of disease are heterogeneous, ranging from infancy to adulthood, with progressive neurodegeneration that can vary in both speed of onset and clinical presentation. The extensive data generated for MyPlife in NPC has shown long-term meaningful patient outcomes through the most expansive clinical development program in NPC to date. We have more than five years of data across more than 270 NPC patients worldwide through clinical studies, including our pivotal trial, open-label extension study, global EAP, and pediatric sub-study, all demonstrating MyPlifer's efficacy and safety. Notably, MyPlifer in combination with miglustat is the first and only disease-modifying therapy shown to halt disease progression at 12 months in a randomized controlled trial based on the validated NPC Clinical Severity Scale. The onset of benefit is rapid, with improvements noted at the first clinical evaluation time point of 12 weeks, and has durable efficacy with treatment effects sustained for over five years. We are pleased to announce that MyPlayFo was added to the NPC clinical practice guidelines, which were recently published in the Journal of Inherited Metabolic Disease, marking the first update to the guidelines since initial publication in 2018. These guidelines discuss the heterogeneity of the disease and reinforce that the NPC Clinical Severity Scale and genetic testing are the most reliable clinical endpoints in confirmation of diagnosis. The guidelines also point out, consistent with our messaging, that early detection is critical to delay disease progression. MyPlifer's mechanistic and clinical differentiation is resonating with prescribers and patients and is driving adoption. As Neil shared, we have received a total of 170 prescription enrollment forms since launch, with nine enrollment forms coming in Q1. Our commercial strategy is focused on three key priorities: accelerating time to diagnosis and treatment, driving demand, and facilitating access to MyPiper. NPC remains significantly underdiagnosed and often diagnosed late due to heterogeneous symptoms. To enable earlier diagnosis, we have focused on education and engagement within the medical community through a strong presence at medical conferences where we regularly present data, and through our ongoing disease awareness campaign called Learn NPC, Read Between the Signs. Additionally, we have built a custom AI-driven targeting model to find likely NPC patients and have collaborations with providers of genetic testing to accelerate their diagnosis. As a result, we continue to see new enrollments from previously diagnosed as well as newly diagnosed patients. We are also finding patients and seeing demand for MyPath increase outside of the centers of excellence. Our prescriber base is expanding to include community-based prescribers, which we believe reflects the success of our targeting and education efforts. Many of these new prescribers did not know that they had NPC patients in their practice and were previously unfamiliar with the disease and treatment options. We help facilitate medical education efforts through various initiatives such as the recently launched Expert Connect, which connects HCPs unfamiliar with NPC to experts who can address questions regarding disease state and available treatment options. Our patient mix has grown to include adults and children equally. These trends give us confidence in the estimated prevalence of 900 people in the U.S. living with NPC. We remain focused on reaching as many patients as possible and expanding the total addressable market. From a market access standpoint, we have stable coverage of 69% and continue to achieve reimbursement through the medical exception pathway. Payer engagement continues to be focused on emphasizing robust clinical safety and efficacy data and the extensive real-world evidence seen in clinical practice that supports MyPlifer's value. We believe we are differentiating MyPlifer through its clinical benefit, support services, and broad patient access. Independent market research suggests MyPlaza is the preferred NPC therapy most trusted by clinicians and shown to improve balance, swallowing, cognition, and speech, and reduce falls. We receive heartwarming letters from families noting how positively impacted they have been by MyPlayfa and the support of our Amplify Assist patient services program. Together, this feedback reflects the impact of our commercial activities and sets the stage for continued growth. With that, I will turn the call over to Justin to review our financial results. Justin Renz: Thank you, Josh. In addition to the financial details included in today's call, we encourage you to refer to our quarterly report on Form 10-Q for more detailed information, which we intend to file shortly. As Neil mentioned, in Q1 2026 we generated net revenue of $36.2 million, which was an increase in total net revenue of $15.8 million compared to $20.4 million in Q1 2025. This is comprised of $24.6 million from MyPlifer net sales in the United States, $300 thousand from OLPUVA, $10.2 million in net reimbursements from the global EAP for aramcholamol, and $1.1 million in royalty revenue. It is worth noting that we had one less shipment week of MyPLYFA in the U.S. due to the first quarter delivery calendar, and as a result, channel inventory fell below the low end of our targeted range. Turning to recent business transactions, in March, we executed an agreement with CAMAi Therapeutics for the sale of the SDX portfolio for $50 million, monetizing assets that were not central to our core investment thesis. Per our contractual obligations, Aquestive Therapeutics received 10%, or $5 million, of gross proceeds. In the first quarter, we received $40.5 million of the $45 million in net proceeds. We received a final payment of $4.5 million in April. In connection with this transaction, we reviewed our capital allocation strategy and retired our debt early, saving on average approximately $8 million a year in future interest expense. We are now debt free, strategically positioned for growth, supported by a clean balance sheet. These one-time transactions impacted our first quarter financials. Accordingly, we recorded a one-time gain of approximately $43.3 million, partially offset by an approximately $10 million expense associated with the early extinguishment of debt, which is noted in the other income and expense section of our financial statements. Pivoting back to normal operations, during Q1 2026 our operating expenses were $25.2 million, which was an increase of $2.4 million compared to the same quarter a year ago. R&D expense was $4.4 million for Q1 2026, which was an increase of $1.1 million compared to Q1 2025, due primarily to increases in third-party costs and professional fees. SG&A expense was $20.8 million for Q1 2026, which was an increase of $1.2 million compared to Q1 2025, primarily due to an increase in professional fees, partially offset by a decrease in third-party spending. We utilized the vast majority of our usable net operating loss carryforwards, and as a result of the multiple one-time transactions that we recorded in the first quarter, we incurred an estimated tax provision of $6.9 million. Net income for Q1 2026 was $37.9 million, or $0.62 per basic and $0.60 per diluted share, compared to a net loss of $3.1 million, or $0.06 per basic and diluted share, for the same quarter a year ago. Excluding the one-time transactions as well as the related tax provision, for clear comparability across periods the estimated quarterly net income reported would be $11.5 million, or $0.18 per diluted share. As of March 31, 2026, total cash, cash equivalents, and investments were $236.8 million, which was a decrease of $2.1 million compared to December 31, 2025. As mentioned earlier, this decrease is attributable to deleveraging driven by our debt payoff, partially offset by the non-dilutive capital proceeds from the sale of the SDX portfolio and supported by our operating income. Collectively, these factors have further fortified our balance sheet. We remain well positioned with the financial capacity to execute on our strategic priorities independent of the capital markets. And now I will turn the call back to Neil for his closing remarks. Neil? Neil F. McFarlane: Thanks, Justin. Our corporate profile has evolved significantly with the execution against the strategic pillars we introduced a little over a year ago. We are delivering strong commercial execution while thoughtfully monetizing the assets that are not core to our business. We relocated our corporate headquarters to Boston, a hub of biotech innovation, and we strengthened our leadership by attracting seasoned professionals to our executive management team and board of directors, bringing valuable experience and perspective. These efforts, combined with prudent financial stewardship, are positioning us to deliver on our vision. As we advance through 2026, we are anchored by a clinically meaningful commercial product with multiple opportunities for global growth, a late-stage pipeline, and a strong financial position. Our collective team at Zevra Therapeutics, Inc. is energized by the numerous opportunities we have to expand our impact for people living with rare diseases. Operator? Please open the line for questions. Operator: Thank you. And our first question today comes from Kristen Kluska with Cantor Fitzgerald. Your line is now open. Analyst: This is Iain on Kristen's line. Congrats on the quarter updates here, and thank you for taking our questions. First, now that MyPIFA has been added to the NPC clinical practice guidelines, we are just wondering what this means for physician adoption. Are these doctors now formally advised to consider MYCFR when treating these patients? Neil F. McFarlane: Thank you for the question. We are really pleased that, as we have been previously communicating, these guidelines were in process and really came out quite fast after the introduction of new products that were approved in the U.S. It really reinforces the NPC severity scale as the tool that shows disease progression, the genetic testing as a key endpoint and diagnostic tool, and the complexity of the disease. When we think about the heterogeneity of both infantile versions and adult versions of the disease, it is really important to detect early in order to be able to delay progression. But really importantly, the combination therapy being considered for NPC was one of the major takeaways. I will ask Josh to talk a little bit about some of the impacts that we see and, quite frankly, hurdles that are lowered with these guidelines that have been published. Joshua M. Schafer: Yes. Thanks, Neil. Just to add to what Neil said, we are also really pleased that the guidelines addressed the need for early detection and that early treatment helps delay progression. It also went on to talk about the importance of using combination therapy in patients who have been diagnosed with NPC. This is really important because these are the opinions of a select group of key opinion leaders that we are now able to use and communicate and help build confidence and consistency in the way that some HCPs who might not be as familiar with NPC can now use this as a consistent guide for their treatment. Analyst: Thank you for that color. And then second, do you have a sense of the proportion of the patients that are identified through the genetic testing that you are conducting and the AI-driven predictive model that ultimately convert onto the drug? I guess, and just related to that, I was wondering what feedback you hear from the physicians that are managing these patients in terms of how they are reacting to these data-driven identification approaches that you are using? Thank you so much. Neil F. McFarlane: Wonderful question, and thanks for outlining our commercial strategy really clearly for us. Let me ask Josh to touch on some of the key priorities we are executing against and some of the feedback that we are getting. Joshua M. Schafer: Yes. We mentioned in the prepared remarks, we have three key priorities from a commercial perspective. The first is to accelerate the time to diagnosis and treatment, and we are seeing that through our disease awareness campaign, as well as some of the collaborations with the genetic testing companies. Our second priority is to really drive demand, and you are seeing that in the enrollments that we have been able to get over the past quarter and more. And then facilitate access, with 69% of covered lives currently able to access MyPlifer and the others we are able to do through medical exception pathways. So we feel really confident in our line of sight for more patients given what we are seeing today, which is a nice mix of newly diagnosed as well as previously diagnosed patients. Operator: Thank you. And our next question comes from Kambi Ziyazi with BTIG. Your line is now open. Analyst: Hi, team. EAP revenue growth was quite robust. Is France driving that growth or other countries? And how should we think about geographic composition of the EAP as a leading indicator where commercial demand may concentrate post EU approval? Neil F. McFarlane: Thank you for the question. Welcome to the analyst coverage. As we reported, 122 patients enrolled in Q1 2026. This really encompasses multiple access programs we have and multiple territories. In Europe, we have had outstanding, for quite some time, our French EAP experience, which we have previously guided and consistently receive about $10 million net per year now that our patient base has stabilized in that territory. And that was per year. Today, we have new markets that are coming on, and that variability in ordering pattern and the rates of new enrollments, and the reality is that we have both compassionate use as well as named patient reimbursement ability that we continuously guide towards. It is early. We have new distributors. We are really pleased, though, with our new distributors and actually all of our distributors and how fast they are able to be able to get the named patient requests for individual patients and then drive that. We are really [inaudible] with the continued inbound in these markets. And our goal is to really expand access to as many markets as we can while still focusing on our key territories in the U.S. and expanding the diagnosis and treatment, along with our global expansion, i.e., Europe and the EMA as well. Analyst: Any quantitative milestones or leading indicators you are tracking internally around your bespoke AI-driven patient identification and genetic testing efforts and identifying newly diagnosed NPC patients? Neil F. McFarlane: Let me ask Josh to work on some of those strategies that are starting to really give us confidence in the TAM. Joshua M. Schafer: Yes. And we monitor and measure a number of [inaudible] internally, but we are measuring how many patients we find that are newly diagnosed. We are looking at how many new prescribers we are able to bring into the mix as well. And then other interesting dynamics. They may have been on the [inaudible] look to really understand as much as we can about these patients. This program is working extremely well. And [inaudible] who we know are diagnosed with NPC clinicians in accelerating their diagnosis and [inaudible] treatment. Neil F. McFarlane: Heterogeneity of the disease, the patient journey [inaudible] of rare diseases it is, you know, one patient, you know, one patient. We are talking [inaudible] been developed over many, many years and has been really [inaudible] child based. We saw that it was about 50% of the patients that were [inaudible]. Now that means that we have to continue to learn how we can then make the tools and continue to evolve NPC. So this is early in our launch. Sumant Satchidanand Kulkarni: Good afternoon. What does your competitive intelligence tell you about your share versus the competitor [inaudible] in the [inaudible]? And do you know of any cases where payers are allowing [inaudible]? Neil F. McFarlane: Thanks, Sumant. We will take one question at a time here. To double click on this a little, you are correct that [inaudible] because of the complexity of the disease as well as [inaudible]. And we are actually seeing success in getting those patients [inaudible] able to get them covered from a commercial perspective. These guidelines, I think, are going to continue to [inaudible]. We believe that that bodes really well for us, our label disease modification, halting the progression of the disease, and the durable effects that we see. Joshua M. Schafer: A little bit more in practice, clinicians want to be able to treat patients with as many different angles as possible. And so we have seen treatment guidelines. The patients that we are treating now, some of them very likely [inaudible] marketplace. And so we can see coverage is continuing to get that through direct formulary. We are able to get coverage even for combination [inaudible]. Sumant Satchidanand Kulkarni: On seliprolol, we know you plan to meet with the FDA again in the second half of the year to move faster to bring this product to VEDS patients. Neil F. McFarlane: Last call, we had a Type C meeting in Q1, and the conversation is constructive, also informative. We are now, you know, this is the early part of 2026, and quite frankly, it is too early for us [inaudible]. One, to continue to boost enrollment activities and the other [inaudible]. Operator: Our next question comes from Lynn with Guggenheim Securities. Your line is now open. Analyst: Apologies if this has already been asked. I am jumping between a few calls. Do you have any update from the 120-day—day 120—on the updated CHMP opinion? Thanks. Neil F. McFarlane: Within the responses that are there, I will not get into the specifics. I would continue to say is that since we have not actually seen any new questions that we did not see that we were able to then provide. So the substantial [inaudible]. As a reminder, it is the totality of the data is over [inaudible]. We have an open-label extension study that has five years of data, our EAP and [inaudible] path, and we look forward to our next engagement with the European regulators. Operator: Thank you. Analyst: Our next question—thanks for taking the question. Jason Nicholas Butler: And again, speaking to the HCP community here, how heterogeneous are they? Diagnosis is delayed, and then channel inventory was below the lower end of the preferred range at the end of the quarter—any additional context? Neil F. McFarlane: Thank you, Jason. Let me start with the “when you know one patient, you know one patient.” One patient may present with a primary symptom that is epilepsy. Another may present with other challenges. And because of that, as Josh talked about, the predictive modeling, claims data, all the things that we are doing, we are performing how we go at [inaudible] and try to continue to expand. And as I mentioned, we have talked about the prevalence of the non 300 to 350 and the 900—we are somewhere [inaudible] patient population. So let me ask Josh to talk a little bit about some of the characteristics [inaudible] of newly diagnosed patients? Joshua M. Schafer: Yes. Just to bring an example, there was a case of a toddler who had an enlarged spleen, and that is what we are seeing. On the other end of the spectrum, there was an adult who had been misdiagnosed with MS for years, and then underwent genetic testing and confirmed that it was NPC. So it really runs the gamut, but there are some similarities and some patterns that we are able to really identify, and we are continuing to educate physicians. We have a strong presence at medical conferences. We publish a lot of— Neil F. McFarlane: And Jason, let me hand off to Justin to keep him going here this evening on the [inaudible] in the U.S. than typical. End of our targeted range. And so [inaudible] we do expect this to fall back within our targeted range by the end of the second quarter. Operator: Next question will come from Brandon Folkes with H.C. Wainwright. Brandon Richard Folkes: Maybe just two from me. Any color on the time from submitting an enrollment form to getting on product and how that is trending at this stage of the launch? And then secondly, is there a difference in net revenue realized per patient if it goes through a medical exception versus a patient whose insurance falls into the 69% of covered lives currently? Thank you. Neil F. McFarlane: Thanks, Brandon. Let me ask Josh to talk a little bit about the enrollment numbers that we are seeing now. Joshua M. Schafer: Yes. I think your question was really around the time from when an enrollment comes in and then once a patient receives therapy, and it is varied. It is largely dependent on the payer type, whether it is government or whether it is commercial. We are seeing in Q1 we had a number of patients who went through a reauthorization process, which is very typical at the beginning of the year, as patients might either change plans or plans might change their policies. And so that had an impact on the first quarter, and we are working through those reauthorizations. So it is a little difficult to give you what the average or the standard is just because of the reauthorizations that took place in the first quarter. Brandon Richard Folkes: Your second question might have to—this is about, I guess, like, you know, what is the priority to grow the 69% of covered lives given your market? And, think, strong. Revenue per patient that goes through insurance versus— Neil F. McFarlane: And I will ask Josh to opine. But the 69% of covered lives allows for you to be on a formulary. It does not necessarily have a preferred position on the formulary, and it does speed up the process. A lot of our education that has gone to payers so far has really allowed us to be able to educate on the clinical benefits with the medical directors of the plan and achieve what we believe is a really good covered life plan. The important component of the question I think you just asked, which is maybe getting into potential for gross-to-net as well: we do not contract currently today. So it is standard government discounts along with distribution margins and the like. So the net price has not really changed except for the variability in gross-to-net on a quarter-over-quarter basis. Joshua M. Schafer: Yes, and I think you are asking a very salient question around the 69% and our intent to grow that. We absolutely do, and we are making steady progress in that area, largely by talking about the clinical differentiation of MyPlifa. The guidelines certainly will help those discussions as well. But as you point out, it really does not impact overall ability for a patient to receive MyPlypha because every plan has a medical exception pathway. What it does is it reduces a little bit of the time; it reduces some of the burden. We have very robust patient services resources that we provide to help patients and offices navigate this. And so our goal is to make MyQuaifa as accessible to patients as possible, and we do that both through increasing the covered lives but also providing these patient services. Brandon Richard Folkes: Great. Thank you very much. And congrats again on all the success. Analyst: Thank you. Operator: Thank you. This concludes the Q&A portion of today's call. I will now turn the call back to Neil for any additional or closing remarks. Neil F. McFarlane: Thank you for joining our call today. We look forward to keeping you apprised of our future progress. Have a wonderful evening. Analyst: Thank you. Operator: This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Sight Sciences, Inc. first quarter 2026 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising 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, Hannah Jeffrey, Investor Relations. Please go ahead. Hannah Jeffrey: Thank you for participating in today's call. Presenting today are Sight Sciences, Inc. cofounder and chief executive officer, Paul Badawi, and chief financial officer, Jim Rodberg. Also in attendance is Sight Sciences, Inc. chief operating officer, Alison Bauerlein. Earlier today, Sight Sciences, Inc. released financial results for the first quarter ended 03/31/2026 and raised its revenue guidance while maintaining its adjusted operating expense guidance for full year 2026. A copy of the press release is available on our website at investors.sightsciences.com. I would like to remind everyone that comments made by management today and answers to questions will include forward-looking statements, including statements about material business considerations, 2026 outlook, and financial guidance. These statements are based on plans and expectations as of today, which may change over time. In addition, actual results could differ materially from projected results due to a number of risks and uncertainties. For a discussion of factors that may affect the company's future financial results and business, please refer to the earnings release issued prior to this call and the company's most recent SEC filings. We undertake no obligation to publicly update or revise any forward-looking statements, except as required by law. Also on this call, management refers to certain financial measures that were not prepared in accordance with generally accepted accounting principles in the United States, including adjusted operating expenses. We believe these non-GAAP financial measures are important indicators of the company's operating performance because they exclude items that are unrelated to, and may not be indicative of, its core operating results. Please refer to our earnings release for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure, as well as additional information about our reliance on non-GAAP financial measures. I will now turn the call over to Paul. Paul Badawi: Thanks, Hannah. Good afternoon, and thank you for joining us. We delivered a strong start to 2026, with first quarter results that demonstrated a return to double-digit revenue growth, continued strength in gross margin, and disciplined operating expense and cash management. We drove solid execution across both segments, Interventional Glaucoma and Interventional Dry Eye. This included the third quarter in a row of revenue growth in Interventional Glaucoma, and continued positive commercial traction in Interventional Dry Eye where revenue nearly doubled from the fourth quarter, representing early validation of our procedural, in-office, recurring-revenue business model. Based on our performance and outlook, we are raising our full year 2026 revenue guidance while maintaining our adjusted operating expense guidance. We are continuing to build an interventional eye care company focused on two significant anterior segment diseases—glaucoma and dry eye disease—where we believe procedural options can play a larger role in the treatment paradigm. Our two flagship technologies, OMNI and TearCare, are designed to address the root underlying causes of disease and can efficiently integrate into established practice workflows. They each support our focus on earlier, procedure-based care, while helping providers deliver consistent clinical outcomes for patients. We believe there is meaningful customer and patient overlap in our two business units, particularly in high-volume cataract and MIGS practices, where ocular surface disease is common and where physicians are increasingly incorporating procedural options in their treatment algorithm. Glaucoma and dry eye disease are often present in the same patient, and eye care providers often want to address both as part of the patient's treatment plan. We are already seeing this overlap, where we are driving new TearCare adopters from our existing glaucoma customer base. As we continue to drive earlier, procedure-based care across these two significant market opportunities, OMNI and TearCare can fit naturally along the same patient journey, supporting consistent clinical outcomes for patients as well as practice efficiency for providers. Over time, that broader portfolio participation can help deepen account penetration and support our efforts to scale both of these businesses and drive sustainable growth long term. Our strategy is to help advance interventional care earlier in the treatment paradigm of both glaucoma and dry eye disease, and to accelerate these efforts by leveraging the overlap of our two interventional business segments that we call the intersection of intervention. We began to drive momentum from this unique intersection in the first quarter. As we build on this progress, we remain focused on delivering sustainable growth and creating long-term value for our stakeholders. Now turning to our segments, I will begin with Interventional Dry Eye. In our first full quarter following initial market access, we drove expanded traction in our reimbursed dry eye business and increased customer adoption of our TearCare technology. We are increasing our Interventional Dry Eye revenue guidance by $1 million at the midpoint based on our strong results ahead of expectations and our confidence moving forward. We are very pleased by the commercial traction we generated with our dry eye customers in the first quarter, where we delivered revenue of $1.4 million, nearly doubling our fourth quarter revenue. The majority of this revenue was from our disposable SmartLids, and we sold approximately 1,500 in the first quarter, up from approximately 700 in 2025, more than doubling the volume. This includes sales to 96 accounts, made up of a balanced mix of new accounts and reordering accounts. Average SmartLids utilization increased from 9 per active account in the fourth quarter to approximately 16 per active account in the first quarter. Our strong dry eye performance is primarily in the First Coast and Novitas regions, where fee schedules were recently established. We are pleased with the early validation of our reimbursed business model and solid customer engagement with TearCare. In addition, we are driving encouraging cross-selling dynamics, with approximately half of all active accounts coming from our existing glaucoma customer base and with higher utilization in those accounts versus the Interventional Dry Eye-only customers. These early indicators demonstrate the depth and value of our established relationships, and the synergies that exist between our two business segments. Importantly, early utilization trends are improving, with a growing number of accounts reordering and increasing procedure volumes. For accounts that reordered in the first quarter, utilization more than doubled from fourth quarter volumes. In addition, new accounts onboarded in the first quarter are ramping at higher initial levels than those in the prior quarter. Together, these dynamics point to improved customer targeting and enhanced office workflow training, strengthening adoption and early momentum for scaling this business. We are also focused on supporting practices as they incorporate TearCare into their workflow. A growing number of accounts have successfully completed reimbursed procedures and reordered SmartLids, which we view as a positive early indicator of repeat utilization. This adoption reflects the effectiveness of our targeted commercial approach, prioritizing high-volume dry eye practices with significant Medicare patient volumes. These efforts are translating into meaningful traction, with increasing interest from both new and existing accounts, supporting the broader shift towards interventional dry eye care. To build on this foundation, we have continued to expand our commercial team in the first quarter, adding resources in both our sales rep and clinic support functions, to enhance execution and deepen provider engagement. Our focus remains on scaling efficiently within established reimbursed markets while positioning the organization to drive meaningful growth as we move through 2026. In parallel, we are also focused on expanding market access through engagement with additional MACs as well as commercial payers. We are actively engaged in discussions with multiple MACs, including detailed reviews of our clinical and economic data, and submitted TearCare claims reviews. Based on these activities and discussions, we expect additional payers to establish fee schedules this year. We are encouraged by our continued progress and view expanding TearCare market access as an important catalyst to support long-term growth. Building on a foundation of clinically differentiated technology, initial reimbursement in select markets, ongoing reimbursement discussions, and strong commercial traction, we are excited about our opportunity to drive the development of this large and underpenetrated reimbursed interventional dry eye market. Turning to Interventional Glaucoma. Our OMNI technology continues to demonstrate its clinical value within the evolving glaucoma treatment paradigm and its increasing importance as a differentiated technology and durable growth driver in the expanding field of interventional glaucoma. In the first quarter, we delivered strong performance and generated the third consecutive quarter of year-over-year growth. Revenue was $18.3 million, up 7% versus the prior year period. Ordering accounts increased 6% compared to the prior year period, driven primarily by reactivating dormant accounts and adding new accounts. The revenue growth was primarily driven by increased volume and price, partially offset by slightly lower utilization per account. We finished the first quarter with a strong March, with procedure volumes increasing from a slower than typical start in January and February. Additionally, we drove continued strong adoption of OMNI Edge, which helped in reactivating accounts and adding new accounts. OMNI Edge includes a higher-capacity viscoelastic delivery feature, while maintaining the trusted safety, efficacy, and usability of the OMNI technology platform. For 2026, our Interventional Glaucoma strategy is anchored in consistent execution, as we work to expand the combo cataract market and capture additional share as well as further unlock the stand-alone market opportunity. In the combo cataract market, we are focused on adding accounts through training new surgeons, capturing share in existing accounts, expanding adoption and penetration with MIGS-naive surgeons, and increasing combo cataract volumes through interventional glaucoma activations. In stand-alone, we have hired a dedicated market development team and are encouraged by the early progress they are making in activating stand-alone glaucoma interventions. Together with our differentiated technology and experienced commercial organization, we are in a strong position to deliver our growth targets in 2026 in Interventional Glaucoma. Looking closer at the stand-alone opportunity, as the shift toward earlier interventional treatment continues to shape the glaucoma treatment landscape, our effective market development team has been instrumental in partnering with surgeons and their staff to help them introduce a streamlined and actionable interventional glaucoma patient workflow that is modeled after the well-known and proven cataract patient workflow. This differentiated approach is helping practices identify patients and support increased procedural interventions in those practices adopting this workflow. We believe this new interventional glaucoma patient workflow partnership with our customers represents an important driver of market development and a growing contributor to long-term revenue growth. Before turning the call over to Jim, I want to briefly touch on the latest regarding our patent infringement case against Alcon. In April, the court issued its final judgment, which upheld the jury's finding of willful infringement by Alcon, and confirmed past damages and interest totaling approximately $55 million, as well as ongoing royalties of 10% of Hydrus revenue through patent expiration. This ruling is subject to appeal, and no cash has been received to date. To close, we delivered a strong start to 2026 in both our Interventional Glaucoma and Interventional Dry Eye business segments, and the progress we made in the first quarter reinforces our confidence in the year ahead, including our decision to raise revenue guidance while maintaining our adjusted operating expense guidance. In Interventional Glaucoma, we generated our third consecutive quarter of year-over-year growth and remain focused on expanding our leadership position in the combo cataract segment while continuing to activate stand-alone intervention. In Interventional Dry Eye, we are encouraged by increasing customer adoption and utilization, and we remain focused on scaling efficiently in markets where reimbursement is in place while working to expand market access over time. We are also excited about the increased recognition within the eye care community that there is strong patient overlap between Interventional Glaucoma and Interventional Dry Eye. We are uniquely positioned to leverage this synergy with two leading interventions for these two large and overlapping disease categories as we build something bigger—a leading interventional eye care company. Across the company, we are investing to support growth while maintaining the operating and financial discipline needed to improve cash usage and advance our path toward cash flow breakeven. With that, I will turn the call over to Jim to walk through the financials. Jim Rodberg: Thanks, Paul. Before discussing the first quarter results, I want to underscore that we are executing against our strategic goals from a position of strength, with the operating discipline and cost structure we need to support growth, and we believe this positions us to achieve cash flow breakeven without the need to raise additional equity capital. Unless otherwise noted, my comments reflect results for 2026 and comparisons to the same period in the prior year. In the first quarter, total revenue was $19.7 million, a 13% increase driven by growth in each of our two interventional segments. Interventional Glaucoma revenue was $18.3 million, an increase of 7%, driven by increases in ordering accounts and average selling prices, partially offset by lower utilization per account. Ordering accounts grew 6% from the prior year as well as 1% sequentially from the fourth quarter. Interventional Dry Eye revenue was $1.4 million, up from $400,000 and nearly doubling from 2025. Dry eye results were driven by increases in average selling prices, utilization, and ordering accounts, reflecting strong momentum in our reimbursed Interventional Dry Eye business model. Gross margin was 86%, flat compared to the prior year. Interventional Glaucoma gross margin remained strong at 87%, in line with the prior year period on higher average selling prices and product mix, slightly offset by tariff costs. Interventional Dry Eye gross margin was 72%, up from 71% in the same period in the prior year, primarily due to higher average selling prices and increased SmartLids sold, mostly offset by a one-time inventory overhead adjustment in the prior year. Over time, we expect our dry eye margins to continue to improve as we scale our reimbursed business model and offset absorption and overhead costs. Total operating expenses were $29.4 million, an increase of 2% compared to $29 million, primarily due to a $5.4 million one-time fee earned upon a successful final judgment in the Alcon litigation case described above. Excluding this fee, operating expenses were down 17%, driven primarily by lower personnel-related expenses and stock-based compensation. As a reminder, we conducted a reduction in force in 2025, and this past quarter was the second full quarter of our lower cost structure. Adjusted operating expenses were $21.2 million, down 14% compared to $24.7 million. Net loss was $13 million, or $0.24 per share, compared to a net loss of $14.2 million, or $0.28 per share. We ended the quarter with $85 million of cash and cash equivalents, compared to $92 million at year-end 2025. Cash used was $7 million in the quarter, which was down significantly from $11.6 million in 2025. We ended the quarter with $40 million of debt, excluding unamortized discount and debt issuance costs. Moving to our revenue outlook for full year 2026, we are raising revenue guidance to $83 million to $89 million, which reflects growth of 7% to 15% compared to 2025, versus the prior guidance of $82 million to $88 million. This includes revenue for our Interventional Glaucoma segment of $77 million to $81 million, representing growth of 2% to 7%, and our Interventional Dry Eye segment of $6 million to $8 million, compared to $1.6 million in the prior year. This guidance reflects our philosophy of setting achievable targets and our focus on disciplined execution and the growth we believe we can deliver. Looking closer at the second quarter, we expect total revenue to grow low double digits compared to 2025. We expect Interventional Glaucoma to grow mid-single digits compared to 2025. Interventional Dry Eye revenue is expected to be in the range of $1.5 million to $2 million in the second quarter, and we expect that revenue to continue to scale throughout the year. We are reaffirming our full year 2026 adjusted operating expense guidance of $93 million to $96 million, representing an increase of 6% to 9% compared to 2025. The increased spend compared to the prior year is driven by targeted commercial investments to capture growth opportunities in both Interventional Dry Eye and Interventional Glaucoma, while we continue to manage the business with operating discipline. We are pleased with our return to double-digit revenue growth in the first quarter. Looking ahead, we are excited to continue pioneering the Interventional Glaucoma and Interventional Dry Eye markets, and we are laying a strong foundation for sustainable growth and continued success. Operator, please open the line for questions. Operator: Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please standby while we compile the Q&A roster. Our first question comes from the line of Frank Takkinen of Lake Street Capital Markets. Your line is now open. Analyst: Hey. This is Nelson on for Frank. Thanks for all the color, and congrats on the solid progress. Maybe just to start, I want to start on the SmartLids utilization stepping from 9 to 16 in the quarter per active account, which was a strong read there. For your most mature, fully reimbursed accounts, can you talk about that steady-state utilization and how we should think about that trajectory for the broader installed base moving forward? Alison Bauerlein: Yes, thanks, Nelson. It is a great question. The good news is I do not think we are anywhere close to a steady state yet. All of our accounts are still relatively early in their usage of TearCare across their traditional Medicare fee-for-service population, and I think even our largest accounts are not yet fully activating this across their patient population. Once we also get additional coverage, that will allow our customers to treat more and more patients across their patient pool. I will say, when we look at our customer mix, there are a handful of accounts—probably 10% of the accounts—that are driving a larger portion of the total volume here. Those are accounts that have really figured out the workflow, how to put this into their overall practice, and frankly we are really proud of the progress we had in the first quarter, almost 100 active accounts. These accounts are truly the early adopters of TearCare, the true believers in the future of procedural dry eye intervention, and we really see all of our customers as still very early in their utilization curves, which is a testament to how large this market is and how many patients could benefit from a procedural dry eye intervention. Analyst: Got it. That is very helpful. And then just quickly, you called out adding sales reps and clinical support resources during the quarter. Can you maybe size the Interventional Dry Eye team today and where we should see that going throughout the year? Alison Bauerlein: We are not going to provide a detailed sales force headcount every quarter, but we did incrementally add in the quarter. We reported at year-end 2025 that we had about 10 between our direct sales force as well as clinical specialists. So that team is still very small and growing. We are investing in the team, really focused on those First Coast and Novitas areas where we have Medicare fee schedules established, and we would expect to continue to grow that team throughout the year. Analyst: Understand. Thank you, and congrats. Operator: Thank you. Our next question comes from the line of Adam Maeder of Piper Sandler. Your line is now open. Adam Maeder: Congrats on a good start to the year. Two for me. First, I wanted to start on Interventional Glaucoma and really was hoping you could double-click and contextualize the good result there, the plus 7% year over year. Curious to get your view on underlying market trends, competitive dynamics—I think one competitor may have had a bit of a supply issue—pricing, and then you talked about some inclement weather. Did you recapture those patients in the quarter? Just bring that all together for us, and then I have a follow-up. Paul Badawi: Hi, Adam. We are excited to be back in growth mode in Interventional Glaucoma. The glaucoma community recognizes now that intervening earlier is better long term for patients, so there is a real tailwind in the ophthalmic community—you can feel it. We were just at ASCRS last month, and there is so much talk around earlier intervention, both IG—Interventional Glaucoma—as well as IDE—Interventional Dry Eye. On the glaucoma side, there are millions of glaucoma patients currently on medications who could benefit from an earlier intervention. That market is growing. We are excited to be a leader. We are the leading implant-free microinvasive glaucoma surgical option in the market, and over time, as this category grows, we expect to continue to innovate and lead the category we have created. We have new technology coming out; we are trying to stay ahead of the market with OMNI Ultra later this year. It is our third straight quarter of year-over-year growth, so we are excited about that tailwind and continuing to lead as the implant-free market leader in IG. Jim Rodberg: Adam, this is Jim. On the Q1 dynamics, we closed the quarter very strongly. March tends to be a significant part of the first quarter, and the team executed really well. We leave the first quarter feeling really good about where we are at. We had strength in March, and we expect that strength and momentum to continue into Q2 and the balance of the year. Overall, we are confident about our path forward. Adam Maeder: Fantastic. Very helpful color, and great to hear comments on the market. Switching over to dry eye—congratulations, Ali, on the progress there. I wanted to push a little in terms of market access and better understand expectations for new payer adds, whether on the commercial or MAC side. Can you be more specific on potential timing? And can you hit the updated $6 million to $8 million without any additional payer wins? Thank you. Alison Bauerlein: Thanks for the follow-up. We are very focused on increasing reimbursed access to TearCare with both Medicare and commercial payers. We are having continued good conversations across the payer mix, really focused on the SAHARA data, the health economic data, and also showing claims utilization and interest in the procedure. We are building a category here, and that does take time. We still expect to have additional payer wins in 2026; it is hard to predict exact timing. We fundamentally do not feel any different about our ability to get payer wins over time and to get access to this technology for our patients and our ECP provider partners. We do have some incremental positive movement with commercial payers—there are some paying regularly while they have not established coverage policies, and others are moving towards those activities. In terms of guidance, yes, we feel extremely confident. The guidance only takes into account First Coast and Novitas fee schedules in place for 2026. That market potential alone is very large for us. We are still a very small fraction of the patients with moderate to severe dry eye disease with MGD, even within that traditional Medicare fee-for-service population. We are in very early stages in a large market, and we set guidance appropriately for the areas where we currently have fee schedules established. Operator: Thank you. Our next question comes from the line of Steven Lichtman of William Blair. Your line is now open. Steven Lichtman: Congratulations on the progress. Wondering if you could talk about customer accounts for dry eye in the regions where you are approved with reimbursement. What is your latest view on the denominator—the number of viable centers that you think are target sets for you within the regions you are currently in? Alison Bauerlein: I will shift that question a bit and talk about ECPs—eye care providers—because that is an easier way of thinking about the opportunity. Across the U.S., when we target providers that do a lot of prescription eye drops, perform procedural interventions for dry eye, and have strong patient populations, we have historically talked about roughly 6,500 ECPs as that initial target population. Within First Coast and Novitas, there are about 2,000 ECPs that meet that same criteria. We are still very small. Obviously, active accounts is different from ECP counts, and even with there being a couple of ECPs per active account, we are very much in the early penetration days within First Coast and Novitas. Steven Lichtman: Great. And then just a follow-up on the patent suit. Obviously a decent amount of cash pending here for you. Can you talk about the next steps? I think Alcon has an opportunity to appeal within the next couple of weeks, or there could be a settlement. What are the next steps? And remind us of the interest accrual if it does go to appeal? Jim Rodberg: In April, final judgment was issued and that preserved the jury verdict from 2024 that awarded us updated damages, interest, and royalty of approximately $55 million, as well as ongoing royalties of 10% of future Hydrus sales through the patent expiration. We have not received any cash to date, and we will not book anything until such time as appeals are exhausted and cash changes hands, for example. The final judgment is subject to appeal. Beyond that, we will not comment further on pending litigation, but we feel we are in a very strong position in this case. Steven Lichtman: Okay. Great. Thanks. Operator: Our next question comes from the line of Thomas M. Stephan of Stifel. Your line is now open. Thomas M. Stephan: Thanks for taking the questions. First on dry eye—nice to see the guidance raise and already really strong sequential growth in utilization. Big picture, what have been the top one or two upside surprises or learnings amidst this relaunch? And part two, how do you feel about the playbook you are developing for when different markets and patient populations hopefully unlock, and your ability to deploy that quickly? Alison Bauerlein: We have had a lot of learnings since launch, most of them very positive—both about how large this opportunity is and how many patients are looking for a better treatment—and also the synergies with our Interventional Glaucoma business. That is probably the largest benefit we have seen. Those accounts are a large part of the accounts that have activated in these early stages. They have larger traditional Medicare fee-for-service populations, and they are looking for ways to help their patients who also experience significant dry eye. That is a large part of our initial launch, and we also see those accounts having higher utilization than non-IG-synergistic accounts—really positive momentum and good synergies across the team. In terms of the playbook as we move forward, there is still a lot of workflow activation that needs to occur when an account decides to implement procedural dry eye. We think this involves people being in accounts and helping clinics set up their workflow, identify the patients, and determine how best to put them into a dry eye treatment workflow. As we have additional market access wins, particularly in new geographies, that will involve additional commercial investments as we grow the team and work with accounts we already have in those areas. As we get additional density with more payers coming on in markets where we already have Medicare fee schedules, those are easier to activate because it is adding new payers into the same workflow. Over time, that may also shift the accounts we target. Right now, we are targeting many higher-volume ophthalmology practices with a lot of Medicare patients, which is where we are seeing synergies with IG. Over time, as commercial plans come on—about 70% of dry eye disease patients are covered by commercial and 30% by Medicare/Medicare Advantage—that can shift our account targeting and partnerships. We are happy with the progress in creating a workflow within accounts, and it is being replicated efficiently so they can work TearCare into their procedure flow—whether that is a dedicated TearCare day or multiple TearCare sessions across mornings or afternoons. They tend to stack them to be efficient. We are doing assessments up front to identify patients who may benefit from a procedural dry eye intervention and working that into the workflow. A lot is coming together, and we are in a good spot to continue executing across this new area. Paul Badawi: I want to add a few thoughts to Alison's comments around the intersection. Sight Sciences, Inc. started interventional—we started with OMNI and then developed TearCare. These are two very strong interventions for two of the leading diseases in eye care. While that has been our philosophy, I think what we have seen—and been pleasantly surprised by—is the rate at which our customers, specifically surgeons, have recognized the overlap of these two disease categories and the possibilities of offering these same patients multiple interventions. The alignment between the ophthalmic community and our philosophy of building an interventional eye care company has come faster than we expected. When we meet with our happy OMNI surgeons and work with our dedicated commercial team, it is amazing how many of our glaucoma surgeons talk about how many of their glaucoma patients have dry eye disease and are complaining about their dry eye disease—glaucoma is unfortunately a silent disease. Being able to show up as their interventional partner with an intervention for their glaucoma patient and an intervention for the same patient who also has dry eye disease is a very powerful partnership. We are happy with how fast the community is acknowledging that. Internally we call it IX—the intersection of intervention. It is a proprietary angle we have, and we look forward to driving the benefits and synergies of these interventional platforms to reach more patients with better interventions, offering better care more quickly. Operator: Our next question comes from the line of Joanne Karen Wuensch of Citi. Joanne Karen Wuensch: Good afternoon, and thanks for taking the question. You seem to be making a fair amount of progress on expense management, cash management, and everything else that goes along with it. Can you give us a view on your philosophy of how you balance penetrating the MACs, educating physicians, and ramping them with the other metrics we on the Street watch? Jim Rodberg: Hey, Joanne. Thanks for the question. We are in a really good spot with a healthy balance sheet and a strong path to cash flow breakeven, while at the same time having the ability to invest in these two significant opportunities. As we look at 2026, the most important investments this year are on the dry eye side—both in market access resources and commercial resources to scale up that business in markets where we already have reimbursement—and on the glaucoma side, continuing to invest in the stand-alone opportunity. The balance for us is to make disciplined, high-return investments. We are fortunate to have the flexibility to go faster on some of those investments where there is outsized opportunity for growth. Paul Badawi: The only thing I would add on R&D: we have a history of cost-effectively developing clinically differentiated interventions that can elevate the standard of care. We have done that well with OMNI and TearCare. We are making very selective R&D investments—all within this interventional category—as we build a focused interventional eye care company. We have a very interesting pipeline that we are developing cost effectively, and in due course we look forward to sharing more, hopefully later this year. Joanne Karen Wuensch: Wonderful. Thank you. Operator: Thank you. Our next question comes from the line of David Saxon of Needham & Company. Your line is now open. David Saxon: Good afternoon, Paul, Ali, and Jim. Thanks for taking my questions. A similar question to Adam's but from a slightly different angle. I think you are only in four of the 13 states in First Coast and Novitas. Does the guide assume you get into any more of those states, or is the $6 million to $8 million really just reflective of presence in a fraction of the immediate opportunity? Alison Bauerlein: We have sales across most of the states, and we do have some level of sales support across them, but you are right—we have density within four to five main states that have the majority of the sales resources. We expect to continue to expand resources. Whether we expand within those specific four to five states—there is still opportunity. For example, one rep in Florida would not be sufficient to cover the entire state. We are looking at where we invest those resources. The plan takes into account incremental investments in commercial resources in those areas. We are not going to get into specific territories, but all of that is accounted for in our operating expense guidance. David Saxon: Thanks for that. On the IG side, Paul or Ali, would love an update on the Ultra timing of clearance. Is that embedded in the IG revenue guidance, or would that be upside when that comes out? Paul Badawi: We are in discussions with the FDA on OMNI Ultra. While nothing is definitive with 510(k) clearance pathways, we feel confident that we should have a clearance within the coming months—certainly by the end of the year. We are very excited to launch Ultra, hopefully by the end of the year. It has a number of surgeon-informed features: single incision, single pass 360°, viscoelastic delivery on both advancement and retraction, catheter markings to indicate advancement, and improved handle ergonomics. We think these features will help elevate the category further. We have put out guidance that we are very confident we can deliver regardless of when Ultra arrives. Hopefully it arrives sooner rather than later, and we can do even better. Operator: Thank you. This concludes the question-and-answer session. I would now like to turn it back to Paul Badawi for closing remarks. Paul Badawi: Thank you all for attending today's call. We appreciate your interest in Sight Sciences, Inc., and we look forward to updating you on our progress in the future. Operator: Thank you for your participation in today's conference. This concludes the program. You may now disconnect.
Operator: Hello, everyone. Thank you for joining us, and welcome to Flutter Entertainment plc Q1 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 1 to raise your hand. To withdraw your question, press 1 again. I will now hand the conference over to Paul Tymms, group director of investor relations. Paul, please go ahead. Paul Tymms: Hi, everyone, and welcome to Flutter Entertainment plc's Q1 update call. With me today are Flutter Entertainment plc's CEO, Peter Jackson, and CFO, Rob Coldrake. After this short intro, Peter will open with a summary of our operational progress and then Rob will go through our Q1 financials and our updated guidance for 2026. We will then open the lines for Q&A. All of the information we are providing today, including our 2026 guidance, constitutes forward-looking statements that involve risks, uncertainties, and other factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors are detailed in our earnings press release and our SEC filings. In addition, all forward-looking statements are based on current expectations, and we undertake no obligation to update any forward-looking statement except as required by law. Also, in our remarks or responses to questions we will discuss non-GAAP financial measures. Reconciliations are included in the results materials we have released today, available in the Investors section of our website. I will now hand you over to Peter. Peter Jackson: Thank you, Paul. I am pleased to share our Q1 results and update you on the progress made against the key strategic objectives we outlined in February. But first, I wanted to address the management changes we have announced today. Amy Howe will be leaving the business. I would like to thank Amy for her contributions to Flutter and FanDuel, and recognize the impact she has had on the business since joining in 2021. We wish her every success for the future. Looking forward, the U.S. market and FanDuel’s number one position within it represents one of the most significant growth opportunities in our industry, and it is essential that we have the right structure and leadership in place to fully capitalize on it. Dan Taylor’s track record of driving growth and executing on complex strategies makes him ideally suited for his expanded role. Christian Genetski has proved to be an exceptional leader, instrumental in scaling the FanDuel business and market leadership. These changes will sharpen our focus on the U.S. sportsbook, strengthen the connection between our U.S. and international divisions, and fully leverage the group’s expertise, capital, and strategic ambition. I am confident this gives us the right structure for long-term success and strengthens our ability to deliver sustained long-term growth. Now turning to the results in the quarter. In the U.S., we saw encouraging signs in underlying growth in Q1. Overall AMPs were 1% behind last year, and revenue grew 6%, with headline KPIs improving as the quarter progressed. As outlined in February, overall sportsbook performance was adversely impacted by NFL trends observed in Q4, with persistently high gross revenue margins negatively affecting customer activity, leaving us with a smaller player base as we entered 2026. We outlined our sportsbook and generosity improvement plan to maintain our leadership position in these areas, and we are now executing against them. From a generosity perspective, we are focused on delivering a truly customer-first proposition. Examples include the launch of early win promotions through March Madness—an opportunistic pair to capture the social side of betting, which aided engagement. Mets fans will know what I mean. In April, we began rolling out our sportsbook loyalty program, which has had a very positive response from the initial cohort of customers. To gain access to the program, we also launched BetProtect Plus, an industry-first generosity mechanic allowing customers to insure their bets for the full game for a small fee. Initial response has been excellent, with adoption rates double our expectations and continuing to grow. From a sportsbook perspective, product enhancements in the quarter included expansion of our popular Path to Leg feature to Super Bowl, more personalized and simplified NBA same game parlay building with bettors, and full-screen streaming for key sports. These changes are gaining traction with our customers. Underlying trends across our headline KPIs have been positive, with AMPs, handle, and structural revenue margin all improving through the quarter. Looking ahead, we have a strong pipeline of improvements planned. This includes significant expansion of our new loyalty program through Q2 and Q3, ahead of the full rollout for the NFL 2026–2027 season, and new soccer product features ahead of the World Cup. In iGaming, FanDuel delivered another strong quarter of growth, with AMPs up 10%. Expansion of our direct casino player base, coupled with improved frequency amongst higher-value categories, drove revenue growth of 19% year over year. This was driven by enhanced rewards delivered through our loyalty program, including daily reward boxes and a continued rollout of new exclusive content. In April, we migrated PokerStars customers to the FanDuel platform, unlocking improved products and cross-sell liquidity for poker customers. Turning now to prediction markets. First, we continue to see limited cannibalization impact from prediction market operators on our sportsbook growth. We believe this is a function of the fundamental differences in product propositions between sportsbook and prediction market platforms, customer age profiles, and the concentration of prediction market activity amongst entertainment-first and low-value users. However, we continue to monitor the impacts of prediction market operators in the broader sports betting ecosystem. Second, in terms of the opportunity, we continue to view prediction markets as an attractive incremental customer acquisition opportunity ahead of sports betting regulation in new states. A fast-moving and complex regulatory environment has at times made product delivery timescales challenging. However, we are prioritizing new product rollouts focused on building the operational flexibility required to deliver our ambitions. In March and April, we widened our range of sports markets, and early testing of our generosity capabilities saw encouraging returns with strong app downloads through March Madness. We launched the FanDuel One app in April, dynamically serving customers sportsbook in regulated states or prediction markets in non-sportsbook states. Critically, this now allows us to leverage FanDuel’s strong nationwide brand awareness by giving customers one app that delivers access to an increasingly compelling sports experience. While Q1 revenues were modest, reflecting the early stage of the journey, we are focused on delivering the improvements needed during 2026 to serve customers an exciting sports-led experience by Q4. The 2026–2027 NFL season launch will be a major milestone, with further improvements planned for the FIFA World Cup. We believe our world-class proprietary pricing capabilities can also unlock a significant market-making opportunity. We began market-making services on a major third-party prediction platform in April. Early indicators have been encouraging, and we expect to launch the initial phase of our market-making platform in the coming months. Turning to our International segment. Our performance in Italy has been extremely strong. We are the clear number one operator online, outgrowing the market and our main competitors. This performance is even more remarkable given the drag from our SNAI business, which, while in growth during the quarter, had yet to benefit from the migration onto the SNAI platform, which successfully completed in April, transitioning around 2 million accounts. SNAI’s market-first MyCombo product saw excellent engagement, with multi-leg bets contributing half of pre-match soccer handle and over 30% of bets carrying five or more legs. This drove a significant step-up in parlay penetration and structural margin. In iGaming, SNAI benefited from the continued rollout of exclusive content. I am very excited about the outlook for the rest of the year in Italy, SNAI’s ongoing exceptional performance, and the unlocking of Sisal’s market-leading product following the platform migration. In the UKI, strong double-digit iGaming revenue growth was delivered across Paddy Power, Tombola, and Betfair, driven by new slots content and robust retention. Although Sky Bet’s performance has been behind our expectations as customers adapted to the new user interface post migration, momentum has improved with the highest customer acquisition volumes in five years in January, and underlying sportsbook revenue returning to growth in March. Market competitiveness remained stable ahead of the UK iGaming tax increase of 40% on April 1. We now expect less profitable operators to begin adjusting marketing and general strategies. As the leading UK operator, Flutter Entertainment plc is well placed to deliver material first-order mitigation as previously outlined, and to benefit from second-order market share gains over time. In Brazil, performance remained encouraging, with Betano Latino AMPs over 40% higher year over year. We will soon integrate our proprietary pricing capabilities, unlocking a best-in-class parlay product and promotional improvements ahead of the FIFA World Cup in June. In APAC, we saw modest year-over-year growth in sportsbook AMPs and handle, and racing, excluding greyhounds, was still declining year over year but was ahead of our expectations. We also welcomed advertising restrictions announced in April and believe Sportsbet is well placed to build on its market-leading position. Overall, I am pleased with how we have executed on our priorities across the group, and particularly in the U.S. we have made significant progress embedding improvements discussed in Q4. FanDuel Predicts is building momentum, and I am excited about our market-making opportunity. Internationally, our SNAI and LSX integration is progressing well. We are investing with conviction in Brazil. We now have the right organizational structure in place to deliver against our strategic priorities, giving me confidence in the outlook for the year and our ability to deliver sustainable, long-term shareholder value. Finally, I wanted to note our plans to review our London Stock Exchange listing as we consider streamlining the dual listing. We expect this review to conclude during Q2 with an update on our findings at that time. I will now turn the call over to Rob for the financial results. Rob Coldrake: Thank you, Peter, and good afternoon, everyone. The group delivered 17% revenue growth in Q1 2026 with adjusted EBITDA up 2%. This reflected contributions from our SNAI and Betna Finale acquisitions and a positive year-over-year swing in sports results. Performance included 10% sportsbook revenue growth, with excellent underlying momentum in SNAI, and the U.S. showing encouraging signs of improvement, as Peter outlined. We also delivered continued strong iGaming performance across the U.S., SNAI, and UKI, with total iGaming revenue growth of 28%. Net income of [inaudible] declined $126 million year over year, driven by a $71 million increase in interest expense and a $122 million increase in depreciation and amortization. These were partially offset by an $88 million non-cash year-over-year benefit from the Fox option fair value adjustment. Earnings per share and adjusted earnings per share declined to $1.23 and $1.22, respectively, reflecting the factors mentioned above and a $61 million year-over-year noncontrolling interest benefit as we lapped the prior period. This included an expense reflecting Boyd’s 5% ownership of [inaudible]. Net cash provided by operating activities increased by $142 million, or 76% year over year, primarily driven by a positive year-over-year swing in player funds of $153 million—from an outflow in the prior year related to a Sisal lottery payout to an inflow in the current quarter. This more than offset higher tax and interest payments and a super PAC contribution in the period to support our U.S. advocacy initiatives. Capital expenditure was higher year over year due to lower prior-year phasing in the quarter. As a result, free cash flow, including financing CapEx and excluding player funds, declined by 46%. There is no change to our full-year 2026 capital expenditure guidance. Our disciplined capital allocation policy provides flexibility to respond effectively to evolving market conditions and emerging opportunities. We continue to prioritize organic investment in our core business and strategic investment, including emerging opportunities such as prediction markets, which we continue to view as an optionality-driven investment within a defined cost envelope. Deleveraging is now a priority. Buybacks also remain an important part of our capital allocation policy. At our Q4 earnings in February we communicated our plans to return $250 million to shareholders commencing in H1. This program began in Q1 and remains ongoing. As of May 1, $190 million has been returned to shareholders. Consistent with our flexible approach, we will continue to evaluate the buyback program as we progress through the year. From a leverage perspective, we ended Q1 with leverage of 3.7x. We expect leverage to decrease by the end of 2026, initially increasing through Q2 and Q3 reflecting the profitability profile of the business, before reducing in Q4 and moving us towards our target ratio of 2.0x to 2.5x over the medium term. We also continue to drive efficiencies across the business and have already embedded significant cost savings through our ongoing cost transformation programs. Internationally, we are on track to deliver the full $300 million run rate from our cost efficiency program by the year end, with most major milestones already achieved. We are now actively defining the next phase of cost transformation into 2027 and beyond with a clear emphasis on sustained cost discipline and operating leverage. In the U.S., we are equally focused on cost efficiency, with 2026 savings realized across initiatives including payment provider efficiencies, improved supplier rates, and overall process optimization. This includes the closure of our FanDuel TV racing network and FanDuel Picks product in 2026 in order to optimize costs and ensure investment is directed towards the highest-return areas. Moving to our 2026 outlook. We are pleased with the trading momentum in April. Our full-year guidance is unchanged on an underlying basis, adjusting only for unfavorable Q1 sports results in the U.S. and International, and launch costs in Arkansas not previously included. Guidance also reflects the internal transfer of management of our PokerStars North America business from our International business to the U.S. Revenue is now expected to be $18.3 billion at the midpoint, with adjusted EBITDA of $2.865 billion for the year. Additional detail on guidance is available in today's release. To reiterate Peter's comments, I am encouraged by the positive operational signals we are seeing, which give me conviction in our full-year outlook. Peter and I are now happy to take your questions. I will hand back to the operator to manage the call. Operator: We will now open the call for questions. Please limit yourself to two questions. 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 Jordan Bender with Citizens. Jordan, your line is open. Please go ahead. Jordan Bender: Hi, everyone. Good afternoon, and thanks for the question. I want to start with the management changes over the last couple of months, including today. From our perspective and from some of the questions we are getting, how should we be viewing these changes in real time? Is this an effort to get back to where we were at the start of the NFL season with Christian and Dan, or is this a change in strategy on what you are trying to do, including maybe willingness to spend on generosity? And then the second question, Rob or Peter: your 2Q EBITDA is about $104 million by my math. Can you help us with some of the inputs? You have a lot of moving pieces in the quarter—just how we get to that number? Thank you. Peter Jackson: Hi, Jordan. Good afternoon. I will take the first question; Rob will pick up the Q2 EBITDA one. In terms of the management changes, now is the right time for us to put in place new leadership in the business. I am excited to see what Christian and Dan can do. We are getting onto the front foot as a business. The sportsbook improvement plan is working. We started to see some of those sequential benefits in the quarter. I am excited to see what we can do with the loyalty program as it rolls out through the course of the year. I think we have been trading the business harder. I mentioned the activity we have been doing with the Mets and other things to get on the front foot, which is working. And I am pleased with the progress we are making with BetProtect. There is no change in our strategy or posture of the business. Rob Coldrake: Picking up on your Q2 question, Jordan: there is no change in our expectations for Q2 from where we were previously. If you look at our trading at the moment, we are in line with our expectations and have seen some slightly favorable sports results in recent weeks. I think if you look at consensus, there is potentially some adjustment needed to the phasing—slightly too high in Q2 and too low later in the year. The main things to consider in the year-on-year bridge for Q2 would be that the prior year included about $70 million from sports results. We have some prediction market spend in the forecast for this year in Q2, which we expect to ramp up slightly from Q1. We also have some marketing around the World Cup that will kick off in Q2, in addition to the new states investment that will continue around Missouri and Arkansas. From an underlying perspective, as we saw in Q1, we started the year with a slightly lower player base, and that flows through. But ultimately, no change in Q2 from our previous expectations. Jordan Bender: Thank you very much. Operator: Your next question comes from the line of Barry Jonas with Truist. Barry, your line is open. Please go ahead. Barry Jonas: Great. Thank you. The prediction legal environment remains pretty active. Curious to hear your expectations for how you think this plays out in the courts. And does that weigh into how you think about your investment spend going into next year and beyond? Thank you. Peter Jackson: You are certainly right that there is a lot of noise around the legal position setting for these markets. I think it is important that we remember a few things. First, the team has made good progress recently—launching the market-making capabilities and the One app, which allows consumers wherever they are across America to access sports on FanDuel. That is important progress. We demonstrated the strength of our brand with the activity we did around March Madness. I am excited about the incremental opportunity this presents for us. Until we understand what the Supreme Court says, we will live with some uncertainty. In the meantime, we will continue to invest in the market prudently. We are pleased with the early indications we are seeing. It is a good opportunity to monetize. For the core fixed product, we ultimately want to acquire as many sports customers as we can onto our regulated OSB products. Our intention is to build a great sports experience for customers wherever they are in America. That is what we are going to do with the One app. Barry Jonas: Got it. And then just for a follow-up: a lot has happened since your 2024 Analyst Day, and Street numbers have adjusted. At a high level, how do you think about the path and timing to ultimately hitting those original targets? Rob Coldrake: Ultimately, we still see a very compelling pathway to growth in the short to medium term. From the targets that we set out at the Capital Markets Day in 2024, it is right to assume some things have moved out to the right slightly given underlying changes in the business since that time. But if you think about the key structural foundations we set out, we retain confidence in our ability to increase structural margin. We continue to see higher penetration. We continue to see a move into new states in terms of regulated OSB; we said that would be about 2% a year, and we have broadly seen that since. We said iGaming would take in the next three years; we are seeing some encouraging conversations and hopefully momentum moving in the right direction there. We are still very confident about the longer-term plans. We need to trade through the next couple of quarters and see where we are exiting 2026, and we will give more color then. Operator: Your next question comes from Jed Kelly with Oppenheimer. Jed, your line is open. Please go ahead. Jed Kelly: Thanks for taking my question. Going back to the market making—as you are able to integrate that into your product, does that give you the ability to merchandise that product better, either through customer credits or other things you can do to drive engagement? Can you talk about the importance of putting market making behind that? Peter Jackson: Jed, you are right. Market making is an exciting opportunity, and it is a great way to showcase the quality of our pricing capabilities across the business. When we think about the opportunities, it is principally around combos, and we aim to be market making on as many platforms as we can. It is a good opportunity for us to monetize our pricing expertise. Your point about doing it on our own platform and changing the dynamics of a customer objective—there are interesting possibilities there that we are considering. Jed Kelly: As a follow-up, philosophically in the U.S., how do you toggle maximizing for net win margin versus trying to drive more players? Do you ever think about toggling down the net win margins to get more players, and maybe net win margins in the U.S. might not be as high as other countries? Peter Jackson: The biggest driver of our net win margin is the bet mix and the extent to which customers build same game parlay products. This is something people want to do, and we are meeting that customer need. You then have to look at the relationship between structural gross margins and generosity and get the balance right. If you do not, customers can quickly become dissatisfied. We have lots of experience around the world, and we are well placed in the U.S. to deliver great experiences for our customers. Operator: Your next question comes from Trey Bowers with Wells Fargo. Trey, your line is open. Please go ahead. Trey Bowers: Thanks for the question. I wanted to revert back to the cadence in the U.S. As I run the math on the second-half loading, it looks like Q2 expectation is slightly down revenue and EBITDA down 75% year over year, but then the back half is 25% revenue growth and 100% EBITDA growth year over year. Can you dig in another layer on expectations—around promotional activity or signposts that should give confidence that the back-half loading is doable? Rob Coldrake: We set this up with our initial guidance with Q4 a couple of months ago. We anticipated sequential improvement as we move through the year on the top line, and we are starting to see that already. The best way to look at this is to view the year in two halves. In H1, it is broadly a continuation of the trends we saw as we exited 2025 with a slightly smaller customer base. We are seeing handle slightly down versus Q1. We have had some amendments year on year, albeit with some improvement in Q2, to structural margin impacted by the sports mix. With new launches in Arkansas that we talked about previously, and also with Alberta in July and the World Cup, we will see slightly higher generosity in the first half. For the year overall, we anticipate a broadly similar generosity envelope. In the second half, we lap a weaker prior-year NFL performance and expect handle and structural revenue margin to move to modest growth year on year. We also expect significant efficiency in generosity as we lap the launch of Missouri last year and get the benefits from the loyalty program we have launched, where we are already seeing positive signs. Putting it all together, we feel very comfortable. We always said we would have sequential improvement as we move through the year, and we are starting to see that at the start of Q2. Trey Bowers: As a follow-up on prediction markets, you are upping the investment a little for the year. As we exit this year, what would you view as success in terms of user levels in the non-licensed states to prove out that the investment is playing out as you would like? Peter Jackson: We are not upping the level of investment. There is opportunity to monetize this category through our market-making capabilities—particularly in combos—and you will see us do that. We are focused on delivery of the One app; it is in the market now and lets us leverage the FanDuel brand nationally. Wherever you are, you can open the FanDuel Sports app and access either regulated OSB if you are in a state like New York, or our fixed products in non-OSB states like California. We want to acquire as many customers as we can through that platform and leverage the national marketing we already have. The brand resonates very well. We are improving the quality of our Predicts experience, expanding the catalog, and delivering a much better experience. That is our focus this year. Rob Coldrake: As Peter said, we will remain very disciplined in our investment around prediction markets. We will invest more if we see opportunities to do so. It would be a great position to be in at the end of the year if we get real traction and want to lean in. Equally, we will follow the same rigorous framework that has driven our success in the sportsbook business, and we will continue to monitor returns and CAC to LTV as we move through. With the improved product in place for the World Cup and the start of the NFL season, we see exciting opportunities. Operator: Your next question comes from Jeffrey Stantial of Stifel. Jeffrey, your line is open. Please go ahead. Jeffrey Stantial: Good afternoon, everyone. Two from us. First, Peter, you mentioned some challenges shipping product for prediction markets at the velocity you would have expected given some regulatory constraints. Can you clarify where this bottleneck is most pronounced? Is this a function of the JV partnership? Is this more the lack of guardrails you are seeing from the CFTC? What explains the restriction in product development pacing? Second, a clarifying question: the release notes revenues were about $90 million ahead of your guidance in Q1 if you exclude the $45 million of hold impact. Can you clarify where this $90 million came from—is this core sports, core casino, Arkansas, or prediction markets—and the decision not to flush this through to the guide? Peter Jackson: I will pick up the Predicts product question first. We have made good progress in the first quarter. The fact that we are now aligned with our unified One app is important and a great step, and we have launched the market-making capabilities. We are working hard to improve the breadth of sports coverage we have, particularly around combos. There have been some challenges, principally around our ability to access the range of content we need, rather than a product front-end issue. I am confident our team has the capability to deliver great user experiences and products. If you look at the Betfair Predicts product in the UK, it is a fantastic example of what the teams can deliver. There is a lot of work underway to expand the range of product, particularly from a combo perspective, onto our own platforms, and we will adapt as needed to win in sports. Rob Coldrake: On the underlying beat, there were a couple of factors. We saw strong NBA handle in the quarter, which helped offset the impact of slightly unfavorable sports results and the Arkansas launch. When we set out our guidance a couple of months ago, we said we were taking a sensible and measured view. It is early in the year. Encouragingly, we are seeing early signs that our plans are gaining traction, but given it is early, we are not updating guidance at this stage aside from the technical factors mentioned in the release. Operator: Our next question comes from the line of Bernie McTernan with Needham and Company. Bernie, your line is open. Please go ahead. Bernie McTernan: Thanks for taking the questions. First, a follow-up on the second-half ramp. Any building blocks you can give in terms of how you get back to year-over-year handle growth in the second half of the year? And since NBA is trending positively, can you share quarter-to-date trends on handle to compare versus Q1? And then I have a follow-up. Rob Coldrake: As I mentioned, we are pleased with the momentum we are seeing. We are seeing positive year-on-year handle trends in NBA. As we have talked about many times, we are not obsessed with handle as the one metric—it is one factor and a building block for the full year. We do not need a huge incremental improvement from where we are in the year-on-year handle variance to hit the targets in our guidance. We are also anticipating a small amount of structural margin expansion as we move into the second half, helped by the mix of sports. For the overall generosity envelope, we expect it to be broadly in line for the full year. In the short term, we are seeing encouraging trends, in line with our expectations and phasing. Peter Jackson: When I look at the sportsbook improvement plan—the changes we are delivering and the benefits we are seeing in early cohorts—perception data clearly demonstrates the benefits from the very early cohorts on the program. I am excited to see what happens as we roll it out for the full year. The BetProtect product is getting real traction, so there are a lot of good things coming that we are already seeing benefits from. As we get to the back half of the year, we will see those in full rollout and get the full benefits. Bernie McTernan: Thank you. Then one financial question. Gross margin in the U.S. was almost 200 basis points lower year over year despite revenue growth. What was the major driver—any one-timers? Was this just launch impacting promotional spending? Rob Coldrake: A couple of factors. One would be tax increases year on year from a state perspective—New Jersey, Illinois, and Louisiana—which total approximately 220 basis points. That is the main moving part. Of course, when you look year on year, the sports results impact needs to be taken into account. We are making great progress on payments and fraud costs, and we have more efficiencies to come. But the main movement year on year in margin is down to the tax changes. Peter Jackson: Got it. Thank you very much. Operator: Your next question comes from the line of Ben Shelley with UBS. Ben, your line is open. Please go ahead. Ben Shelley: Hi. Thanks for taking my questions. Two from me. One on U.S. promotions: excluding state launches, how did online sports betting promotions fare on a same-state basis in the quarter? And with regards to prediction markets and CAC inflation, are you seeing any inflationary impact on customer acquisition costs from prediction market-related marketing spend? Peter Jackson: I will pick up the prediction market inflation question. We are not seeing any change in terms of market competitiveness. We have long-term deals in place for many of our marketing partnerships, so we are not subject to short-term fluctuations from others trying to spend more. It remains very competitive, but it has been for some time. The nature of our national partners and deals puts us in a good place. Rob Coldrake: On generosity year on year, we have about 50 basis points from the new states. Our focus is on getting the biggest bang for our buck from our generosity across the customer base. As Peter outlined, we have seen really encouraging responses from the changes we have made. Customer feedback has been incredibly positive on BetProtect Plus and in the early days of the new sportsbook loyalty scheme we have launched. We have previously said our generosity envelope for the full year will be broadly in line with 2025, and we have not changed our view. Ben Shelley: Thank you. Operator: Your next question comes from the line of Brandt Montour with Barclays. Brandt, your line is open. Please go ahead. Brandt Montour: Thanks for taking my questions. First on prediction markets: how do you think about the cadence of spend in 2Q, 3Q, 4Q, given the One app is not yet where you want it to be, and considering the sports calendar? Do you need to be there in a big way for the World Cup, or wait and save dry powder for NFL? How do you balance that? Rob Coldrake: In Q1, it was really about testing and learning—generosity and marketing around our Predicts products, demonstrating our ability to acquire customers and establish presence in the category. We spent circa $40 million in Q1. It is early days, but we have always said we anticipate the majority of our spend in the second half. We will invest behind the World Cup and expect to ramp our spend slightly from Q1 into Q2, but we retain flexibility and will closely monitor returns on a CAC and LTV basis. We really want to get behind the start of the NFL season in the second half, provided we have the right product in place. We will look at the prediction investment envelope alongside our core sportsbook. Our overall envelope does not change at this point, but it is evolving, and it would be great to be here at year end saying we are spending more because it is really taking off behind NFL. Brandt Montour: Separate question on iGaming. The U.S. market slowed a little sequentially and a key competitor hinted at a tougher competitive environment, yet you outgrew the market and gained share. How sustainable is that performance? Has the market gotten less growthy or more competitive sequentially? Peter Jackson: We were really pleased with iGaming in Q1—AMPs up 10%, revenue up 19%. Revenue growth from direct casino customers was even higher. Our performance was impacted somewhat by coming into the year with a smaller sports business. Our focus on our rewards club—now in its second year—more exclusive content, and our relationships with key influencers have been important. The team is executing well. As for market growth, it cannot keep growing at the same percentage rates as the base gets larger, so some slowdown is natural. But market penetration still has a long way to go. We have the leading position in iGaming and are performing well. Operator: We now ask that each analyst limit themselves to one question. Our next question comes from the line of Joe Stauff from Susquehanna. Joe, your line is open. Please go ahead. Joe Stauff: Thanks. On your generosity reinvestment in FanDuel OSB, is it fair to say that largely started in March? I am wondering if AMPs grew in April. And for the World Cup, Peter, you mentioned another exchange that you could plug into. Will you be plugged into that more than the CME going into the World Cup? Peter Jackson: I will take the World Cup question first. We want to make sure we have as compelling sports offerings for our customers as we can. We have a very exciting set of products that we will bring to our regulated OSB, leveraging the Flutter Edge and our global expertise in soccer. We are excited about the opportunity to bring customers onto the platform. From a Predicts product perspective, we do have the right connectivity with other venues. It is something we are focused on, and the timing is tight, but we will see where we can get to for the World Cup. Rob Coldrake: On your first question, from an AMPs and generosity perspective, we are laying down a number of new initiatives, and we are very pleased with the traction we are seeing. We are seeing sequential improvement across a number of KPIs from Q1 into Q2. We are not getting hung up on any one metric, but across the board we are seeing a lot of green on the dashboard. There is some noise around March Madness—last year was very customer-friendly—so you always get some noise around handle as you move through that period. But we would take the March Madness we had this year over last year every day of the week. We are pleased with the momentum we are seeing into Q2. Operator: Our next question comes from the line of Ed Young with Morgan Stanley. Ed, your line is open. Please go ahead. Ed Young: Good evening. In your shareholder letter, Peter, you said you have a clear plan of improvement for the sportsbook and laid out a lot of product iterations. Can you help us step back and diagnose what has gone wrong? You have made some changes, which is good to see, but on a bigger-picture level, where has the business not done what it should have been doing? And beyond organizational changes, any macro change in how FanDuel needs to approach the market in terms of competitive or promotional intensity? It does not sound like that is what you are saying, but you are also saying Dan Taylor is coming in to review and oversee the business. Please share your diagnosis. Peter Jackson: Good evening, Ed. We have been clear about the issues for us from a sports perspective in the U.S. As I described, the team’s intention is to get back to a customer-first approach. We have seen that with how we have been trading the business in the last quarter. I mentioned the activity around the Mets—some good justice refunds the team has been doing. It is engaging and gets you on the front foot socially, which is important and something we do around the world. The BetProtect product was important to deal with injuries, which have been a real challenge. We have a great solution in place, and we have seen double the level of engagement we expected already, with plenty of ways to evolve it over time. One way is integration with the loyalty or reward program—for example, tiers where we can give customers access to BetProtect. Integrating all aspects of the product is important to offer great value. There is no need for a big step change in strategy. We are also executing many small enhancements: iOS launch time is now less than two seconds; we have full-screen streaming for key sports; upgraded live betting with simplified same game parlay building; and you can track bets on the lock screen. There are lots of small enhancements that we will continue to roll out. The cadence of delivery is improving with our investment and focus in AI, and throughput from a product perspective is stepping up materially. It is exciting to see that translate into what customers experience. There is no change in strategy. We have clarity, we are putting customers first, and we are getting back on the front foot, with sequential benefits emerging. If we look at revenue, it was up 9% on a normalized basis in March, compared with flat for Q1 as a whole—good sequential improvements in sports. From a gaming perspective, we are also making progress. We had the highest customer acquisition volumes in five years onto the brands. Sky Gaming now has more than a million customers for the first time as of March, and the app was highly ranked by third parties for interface and accessibility. There has been a strong step up in customer perception. Operator: Thank you. This concludes our Q&A session. You may disconnect.
Operator: Welcome and thank you for joining the First Quarter 2026 Earnings Conference Call for Herbalife Nutrition Ltd. During the company's opening remarks, all participants will be in a listen-only mode. Following the opening remarks, we will conduct a question-and-answer session. As a reminder, today's conference is being recorded. I would now like to turn the call over to Erin Banyas, Vice President and Head of Investor Relations, to begin today's call. Please go ahead. Erin Banyas: Thank you, and welcome to everyone joining us. With us today are Stephan Paulo Gratziani, our Chief Executive Officer, and John G. DeSimone, our Chief Financial Officer. Before we begin today's call, I would like to direct you to the cautionary statement regarding forward-looking statements on Page 2 of our presentation and in our earnings release issued earlier today, which are both available under the Investor Relations section of our website. The presentation and earnings release include a discussion of some of the more important factors that could cause results to differ from those expressed in any forward-looking statement within the meaning of the Private Securities Litigation Reform Act of 1995. As is customary, the content of today's call and presentation will be governed by this language. In addition, during today's call, we will be discussing certain non-GAAP financial measures. These non-GAAP financial measures exclude certain unusual or nonrecurring items that management believes impact the comparability of the periods referenced. Please refer to our earnings release and presentation materials for additional information regarding these non-GAAP financial measures and the reconciliations to the most directly comparable GAAP measure. And with that, I will now turn the call over to our CEO, Stephan Paulo Gratziani. Stephan Paulo Gratziani: Thank you, Erin. Thank you all for joining us today. We delivered a strong start to 2026, with first quarter net sales and adjusted EBITDA exceeding guidance as we continue to build momentum. Importantly, these results reflect the underlying stability of our business and reinforce our confidence in the strategy we are executing. We are building a more connected, personalized approach to health and wellness by bringing together innovation, science, and the strength of our distributor network to better serve customers around the world. On April 14, as part of our debt refinancing, we released preliminary net sales growth expectations that exceeded the high end of our guidance on both a reported and constant currency basis. We also indicated that reported adjusted EBITDA was expected to be at or above the high end of our previously issued guidance. Our final reported results are in line with that release. Let's review a few of the financial highlights from the quarter. We delivered net sales of $1.3 billion, up 7.8% year-over-year and up 5.4% on a constant currency basis, exceeding guidance on both measures. This was our third consecutive quarter of year-over-year net sales growth on both a reported and constant currency basis. India achieved record quarterly net sales for the second consecutive quarter. Adjusted EBITDA was $176 million and above guidance, and we generated $114 million of cash from operations in the quarter. In addition to our first quarter results, we successfully refinanced and strengthened our capital structure in April, which we expect will result in approximately $45 million in annual cash interest savings. We executed this transaction in a highly volatile market and geopolitical environment. We achieved our pricing objectives, extended our maturity profile, and meaningfully reduced our borrowing costs while also enhancing our financial flexibility. This outcome reflects the financial and operational results we have delivered over the past two years. As we build on this momentum, we remain focused on executing against our vision, with personalization at the center of our strategy. Personalization has always been a foundational strength of Herbalife Nutrition Ltd., with our distributors delivering tailored recommendations through direct relationships and a deep understanding of individual goals. What is evolving is the level of precision we can now bring, which is enabled by enhanced data insights and technology. This evolution is especially important as consumer expectations continue to rise, driven by greater access to AI, wearables, and at-home diagnostics, which are increasing demand for guidance that is not only personalized, but also more actionable and continuous. We are evolving from personally curated recommendations to an approach that combines both personally curated and formulated solutions, extending our ability to deliver individualized outcomes at scale through better tools, better data, and expanded manufacturing capabilities, all delivered through our distributors. This builds on four core actions that have long guided our business: what to measure, including key health metrics like weight and muscle mass; what to take, which is products from our expanding portfolio; what to do, including daily habits like hydration and exercise; and who to do it with, which is our distributors who provide guidance and support through a variety of DMOs as they go to market. These actions have successfully built our business over the past 45 years. Our global network includes over 2 million distributors, more than 60 thousand nutrition clubs, and millions of customers across 95 markets. This reach is our differentiator and superpower. Building on that foundation, our recent acquisitions are enabling a more connected, personalized, and data-driven approach that is enhancing these four core actions, making them more precise, scalable, and actionable. On March 26, we announced an agreement to acquire substantially all of the assets of Vionic's core personalized nutrition business, which we completed in April. Vionic is an established UK-based business with an existing supply chain. Its patented product personalization engine uses an individual's health background and a proprietary database of biomarker data to develop personalized nutritional supplement formulas. This acquisition further accelerates our pathway into personally formulated products. In late June, our distributors will begin offering Vionic's personalized nutritional supplements to customers across 11 European countries. The U.S. will follow in July, with additional markets later in 2026. I'd like to take a moment to explain how our recent acquisitions work together to support the four core actions I mentioned earlier, with Protocol as a central operating system. Each acquisition plays a distinct role, and combined, they create greater value than any one capability alone. Let me walk you through how each contributes. Link Biosciences is a formulation and manufacturing engine. It translates insight into products by enabling us to manufacture personalized nutritional supplements in a powder format at scale, directly connecting data and recommendations to the finished product. Vionic accelerates our speed to market with a personally formulated vitamin and mineral complex, in a granule format, while broadening availability through a more accessible price point. Prüvit provides the opportunity to expand our portfolio into the ketone category with a channel-exclusive offering aligned with growing consumer interest in performance, energy, and metabolic health. It is an exciting addition to the portfolio; we will have more to share this summer. And Protocol brings it all together by providing the experience and intelligence layer. It digitizes and scales the four core actions I mentioned earlier—what to measure, what to take, what to do, and who to do it with—bringing greater precision to how distributors support and engage their customers through a more connected, data-informed experience. It translates consumer inputs and health data into actionable guidance that supports more consistent behavior change over time. In March, we expanded the Protocol beta program to include select 10 EMEA markets. That broader deployment is providing valuable feedback that is helping refine the roadmap, platform capabilities, and the digital experience. To enable integration of Vionic into Protocol, and incorporate feedback from the broader beta group, we are extending the beta program, with the next release planned for the North America Extravaganza in July. That release will include a new user experience, enhanced features, and additional capabilities that support our broader strategy. Part of that broader strategy is a multiyear rollout of new packaging across our global product portfolio. The rollout began in March, and we expect it to be substantially completed by 2027. For context, slide 8 highlights our packaging currently in market, and slide 9 highlights our new modern packaging design. Grounded in consumer insights and analytics, the new packaging reinforces scientific credibility and trust at every touch point. At a portfolio level, a consistent science-led visual system simplifies navigation and helps distributors and customers confidently build personalized product combinations. The new labels also reinforce product purpose and efficacy, strengthening confidence and differentiation, which are foundational in a competitive global marketplace. In April, we kicked off our first Extravaganza events of the year, which started in India, where we hosted three consecutive events across Delhi and Bengaluru with approximately 46 thousand attendees. We saw firsthand the strong energy and engagement across the market. These events are a critical part of how we operate. It is where we communicate our vision, build skills, share best practices, and reinforce strategic priorities in ways that directly shape distributor execution. They also drive momentum at the local level, leading to stronger engagement, more consistent business activity, and improved retention. We look forward to that momentum continuing as we kick off our summer Extravaganza events in China, Eurasia, South America, Asia Pacific, Europe, and North America. Before I turn it over to John to walk through the quarter in more detail, I want to take a step back and reflect on what we have accomplished over the past two years. Herbalife Nutrition Ltd. today is a fundamentally stronger company than it was two years ago. We have stabilized net sales and returned to growth, expanded adjusted EBITDA margins, strengthened our balance sheet by repaying nearly $540 million of debt since 2024, reduced our total leverage ratio from 3.9x in 2023 to 2.7x at the end of the first quarter, completed our debt refinancing, unlocking approximately $45 million in annual cash interest savings, and completed four strategic acquisitions. Importantly, we have done all of this with a disciplined approach, improving operational efficiency while executing against our plan. We are about to reach a major milestone this summer—the launch of our next-generation personalized nutritional supplements. This further strengthens our confidence in the path ahead. Our continued progress reflects strong momentum and clear direction as we advance towards our vision to become the world's premier health and wellness company, community, and platform. With that, I will hand it over to John to walk through the financials in more detail. Over to you, John. John G. DeSimone: Thank you, Stephan. Turning to our first quarter financial highlights on slide 11, we delivered another strong quarter, with net sales and adjusted EBITDA both above our guidance ranges, led by continued strength in India. First quarter net sales were $1.3 billion, up 7.8% versus 2025 and above the high end of our guidance range of 3% to 7%. This was our third consecutive quarter of year-over-year growth and our strongest year-over-year growth since 2021, building on the momentum we saw in 2025. On a constant currency basis, net sales increased 5.4% year-over-year, also exceeding guidance. We have now delivered year-over-year constant currency growth in eight of the last 10 quarters. Our first quarter net sales outperformance was driven primarily by India, where net sales reached a record $275 million, up approximately 32% year-over-year, marking the second consecutive quarter of record sales. We believe demand in the market remains strong following the reduction in the GST rate on the majority of our products in late September 2025. I will provide more details on our regional performance later in the call. Adjusted EBITDA was $176 million, above the high end of our guidance range of $155 million to $175 million. Adjusted EBITDA margin was 13.3%, down 20 basis points year-over-year, but up 240 basis points on a two-year stacked rate, including approximately 70 basis points of FX headwinds versus last year. CapEx was $11 million for the quarter, at the low end of our $10 million to $20 million guidance range, primarily due to timing with some spending shifting into the second quarter. Capitalized SaaS implementation costs were $10 million. Gross profit margin was 77.9% in the quarter, down 40 basis points year-over-year. This reflected approximately 50 basis points of input cost inflation, primarily from lower absorption rates; 30 basis points of unfavorable sales mix; 20 basis points from other unfavorable cost changes; and 50 basis points of FX headwinds. These factors were partially offset by 70 basis points of pricing benefits and 40 basis points from lower inventory write-downs. First quarter net income attributable to Herbalife Nutrition Ltd. was $62 million, with adjusted net income of $69 million. First quarter adjusted diluted EPS was $0.64, including a $0.03 FX headwind versus 2025. Our adjusted effective tax rate was 27.3%, compared to 21.8% in 2025, which resulted in an approximately $0.04 unfavorable impact to adjusted diluted EPS. The higher rate in 2026 was primarily driven by a decrease in tax benefit from discrete events compared to 2025. For full year 2026, we continue to expect our adjusted effective tax rate to be approximately 30%, in line with 2025. We delivered strong cash generation in the first quarter, which is typically our lowest cash flow quarter in past years due to timing of our annual distributor bonus payments and employee performance bonus payments. Operating cash flow was $114 million, compared to relatively neutral cash flow in 2025. Consistent with last year, we paid approximately $75 million of annual distributor bonuses in the quarter. However, employee performance bonuses were paid in April, rather than in the first quarter. Credit agreement EBITDA for the first quarter was $194 million and our total leverage ratio was 2.7x as of March 31. Beginning this quarter, we are introducing net leverage ratio as an additional metric to provide greater transparency into our leverage profile and delevering progress. We define net leverage ratio as net debt divided by trailing twelve-month credit agreement EBITDA. At the end of the first quarter, our net leverage ratio was 2.1x, and we are establishing a target to reduce net leverage to below 2x by the end of this year. We believe this metric provides a more complete view of financial flexibility because it reflects debt relative to earnings while also incorporating cash on hand. For additional details regarding the adjustments between adjusted EBITDA and credit agreement EBITDA, as well as the calculation of net debt, total leverage ratio, and net leverage ratio, please refer to the presentation appendix and the earnings press release. As Stephan noted earlier, in April, we completed our $1.45 billion senior secured refinancing. I will provide more details on that in a moment. Turning to slide 12, reported net sales increased nearly $100 million in the quarter, or 7.8% year-over-year, while constant currency net sales increased 5.4%. Volume increased 4.1% worldwide, marking our third consecutive quarter of year-over-year volume growth. Pricing provided an approximately $40 million benefit in the quarter, while country mix was an approximately $26 million headwind to net sales. FX provided an approximately $29 million benefit, or a 240 basis point tailwind. Turning to slide 13, we have the regional net sales results for the quarter. As we noted in our April 14 pre-release, results were mixed across the business in the quarter. Strong growth in Asia Pacific and Latin America offset softer performance in EMEA and North America, while China continued to be a headwind. In Asia Pacific, reported net sales increased 17% year-over-year, while local currency net sales increased 21%, driven by approximately 22% volume growth and favorable year-over-year pricing, partially offset by unfavorable sales mix and FX movements. As I mentioned earlier, India delivered record quarterly net sales for the second consecutive quarter, with reported net sales up 32% year-over-year and local currency net sales up 39%. Growth was driven by a 37% increase in volume and favorable sales mix. Pricing was neutral, as we have not taken a price increase since November 2024, and FX was a meaningful headwind. We continue to believe market demand remains strong following the GST rate reduction on a majority of our products. Importantly, India has long been one of our strongest growth markets. While year-over-year reported net sales growth began to moderate in late 2024 to mid-2025, momentum began to build again, supported by distributor leadership training in 2025. We expect the GST tailwind to continue through September, with momentum extending beyond September although at a more moderate level. Latin America delivered its third consecutive quarter of double-digit reported net sales growth, with net sales up 17% year-over-year and local currency net sales up 7%. Results were driven primarily by favorable year-over-year pricing and sales mix, along with a significant FX tailwind, mainly from the strengthening of the Mexican peso, partially offset by a 2% decline in volume. Within the region, Mexico delivered another quarter of growth, with reported net sales up 22% year-over-year and local currency net sales up 5%, driven primarily by favorable year-over-year pricing. In EMEA, reported net sales increased 1% year-over-year, benefiting from FX tailwinds. Constant currency net sales decreased 6%, reflecting an 11% decline in volume that more than offset favorable year-over-year pricing. In North America, net sales declined 3% year-over-year, reflecting a 5% decline in volume, partially offset by favorable year-over-year pricing. As noted in our April 14 press release, U.S. net sales were negatively impacted by unusually severe weather in January and February, which led to temporary closures of distributor-owned nutrition clubs, disrupted distributors' daily consumption sales, and, in turn, reduced distributor product purchases from the company. Net sales were also impacted by higher levels of shipments in transit at quarter end compared to the prior year, with the related revenue deferred to the second quarter under our revenue recognition policies. Excluding these factors, North American net sales would have been slightly up year-over-year on both a reported and constant currency basis. We continue to expect full-year net sales growth in North America in 2026. In China, reported net sales declined 12% year-over-year, while local currency net sales declined 16%, reflecting a partial benefit from foreign exchange. The decline was primarily driven by an 18% decrease in volume, partially offset by favorable sales mix. Turning to slide 14, we see the key drivers of the $11 million, or 6.5%, year-over-year increase in first quarter adjusted EBITDA. Adjusted EBITDA was $176 million for the quarter, with a margin of 13.3%. On a constant currency basis, adjusted EBITDA was $180 million. Looking at the bridge, we first see the drivers of the year-over-year change in gross profit, including our third consecutive quarter of volume growth, along with pricing benefits, partially offset by unfavorable sales mix and input cost inflation, primarily due to lower absorption rates. Salaries were an approximately $2 million headwind, largely reflecting merit increases implemented in late Q1 2025. First quarter adjusted EBITDA included $5.5 million of China government grant income. Because this grant is typically received once annually, the year-over-year variance is timing-related, as the prior year grant of $4.8 million was recognized in 2025. Lastly, foreign exchange was an approximately $5 million headwind to adjusted EBITDA, and a 70 basis point headwind to adjusted EBITDA margin. Moving to slide 15, I will provide an update on our capital structure. We ended the quarter with $451 million of cash, up nearly $100 million from 2025. During the quarter, we made the scheduled $5 million amortization payment on the Term Loan B, and the revolver was undrawn as of March 31. At quarter end, our total leverage ratio was 2.7x, and net leverage was 2.1x. In April, we completed our $1.45 billion senior secured debt refinancing. We were pleased to execute this transaction in a dynamic market environment while achieving our pricing objectives, meaningfully reducing our borrowing costs, extending our maturity profile to more than seven years, and enhancing our financial flexibility. We also have no material maturities until 2028. The refinancing included $800 million of 7.75% senior secured notes due May 2033, a $225 million Term Loan A, and a $425 million revolving credit facility, with both the Term Loan A and revolver maturing in April 2031. At closing as of April 29, $200 million was outstanding under the 2026 revolving credit facility, with approximately $180 million available to borrow. As I noted, the refinancing meaningfully reduced our borrowing cost. The coupon on the senior secured notes was reduced by 450 basis points, and the spreads on the revolver and term loan were reduced by 300 basis points and 375 basis points, respectively, to 3%. Based on the total senior secured debt outstanding immediately before and after the refinancing, and current applicable interest rates, we expect the refinancing to result in approximately $45 million in annualized cash interest savings. Because the refinancing was completed during 2026, those cash interest savings will only be partially reflected this year. The $45 million represents the annualized benefit based on current conditions. That estimate may change as we pay down debt or as variable interest rates move, but it is reflective of our current expectations for the annual savings from the refinancing. Overall, these actions further strengthen our balance sheet and support our continued focus on deleveraging and financial flexibility. Looking ahead, we are targeting net leverage to be below 2x by 2026 and remain on track to reduce outstanding debt to approximately $1.4 billion in 2028. Separately, let me briefly touch on Vionic. As Stephan noted in his opening remarks, on April 30, we completed the acquisition of substantially all of the assets of Vionic's core personalized nutrition business, as contemplated by the agreement we announced on March 26. Base consideration was $55 million payable over five years, including $10 million payable subsequent to closing. The agreement also provides for up to $95 million in contingent payments tied to certain future Vionic product sales performance. We also obtained a call option to acquire Vionic Lab, a separate platform focused on small molecules and peptides. Importantly, this acquisition is consistent with our disciplined approach to selectively pursuing targeted capabilities that complement our business and can be scaled through our global reach. Turning to slide 16, I will review our outlook for the second quarter and full year 2026. We are continuing to provide net sales and adjusted EBITDA guidance on both a reported and constant currency basis, with reported guidance based on average daily exchange rates from the first two weeks of April 2026. Broadly speaking, since we provided our full-year guidance in February, overall FX impact has moved unfavorably, reducing the tailwind benefit to net sales. For the second quarter, we expect foreign exchange to be a modest tailwind to net sales and neutral to adjusted EBITDA due to timing. On a reported basis, we expect net sales to increase 1.5% to 5.5% year-over-year, including an approximately 50 basis point currency tailwind. On a constant currency basis, we expect net sales to increase 1% to 5% year-over-year. We expect second quarter adjusted EBITDA to be in the range of $150 million to $170 million on both a reported and constant currency basis. This outlook includes an approximately $10 million year-over-year headwind to adjusted EBITDA, or approximately 80 basis points of adjusted EBITDA margin, from two items. Approximately $5 million reflects the timing of the China government grant. We have historically received that grant once annually; in 2026, it was recognized in the first quarter, compared to 2025. The other $5 million relates to the September 2025 India GST rate change. As previously discussed, while the GST rate on most of our products we sell was reduced to 5%, the GST rate we pay on services remained at 18%, which created a mismatch between the GST we collect and the GST we pay, resulting in incremental G&A expense. We have partially offset that impact through a reduction in the sales commission percentage paid to our distributors, reflected in selling expenses. The net impact of those two items is an estimated $5 million headwind to second quarter adjusted EBITDA. Second quarter capital expenditures are expected to be in the range of $15 million to $25 million, above 2026 primarily due to timing as some spending shifted from the first quarter into the second quarter. For the full year, we are increasing the midpoint of our constant currency net sales guidance range while also narrowing the reported and constant currency net sales guidance ranges. The FX tailwind to full-year net sales guidance has been reduced to a 50 basis point benefit from 100 basis points assumed in our previous guidance. For adjusted EBITDA, we have narrowed the ranges on both a reported and constant currency basis, while increasing the constant currency midpoint. We are reaffirming our capital expenditure guidance. For the full year, we expect reported net sales to increase 1.5% to 5.5% year-over-year. On a constant currency basis, we expect net sales to increase 1% to 5% year-over-year. We expect full-year adjusted EBITDA to be in the range of $675 million to $705 million on both a reported and constant currency basis. Based on India's first quarter sales performance and our outlook for the balance of the year, we now expect India GST-related net incremental cost to be an approximately $20 million to $25 million headwind to full-year adjusted EBITDA and an approximately 40 to 50 basis point headwind to adjusted EBITDA margin. Our guidance also includes a preliminary estimate of the impact of higher oil prices. We continue to expect 2026 capital expenditures of $50 million to $80 million. In addition, we expect capitalized SaaS implementation costs of $35 million to $55 million, which are incremental to CapEx. Lastly, we continue to expect our full-year 2026 adjusted effective tax rate to be approximately 30%. Before moving to Q&A, I want to close my opening remarks with one final comment. As Stephan said earlier, Herbalife Nutrition Ltd. is a fundamentally stronger company today than it was two years ago, and we remain focused on driving shareholder value. We returned to net sales growth and expect year-over-year growth to continue the remainder of the year. We strengthened our distributor network through enhanced training and other targeted initiatives, including the Herbalife Premier League, which was launched in March 2024. At that time, we had experienced 12 consecutive quarters of year-over-year declines in new distributors. Since that launch, however, the trend has improved meaningfully, with new distributor growth up 13% on a two-year stack basis in Q1. And as we have now moved beyond the two-year anniversary of the Premier League launch, this metric becomes less relevant going forward. We have also expanded our Q1 adjusted EBITDA margins by 240 basis points since 2024, and we have reduced our total leverage ratio from 3.9x at 2023 to 2.7x at the end of the first quarter, driven by $540 million of debt reduction primarily through cash generated by the business. And lastly, as I have said, we completed our debt refinancing in April, unlocking approximately $45 million in annual cash interest savings. This concludes our opening remarks. We will now open the call for questions. Operator: Thank you. To ask a question, please press 11 on your telephone keypad. To withdraw your question, please press 11 again. Our first question will come from the line of Chasen Louis Bender with Citi. Your line is open. Chasen Louis Bender: Great. Thanks. Good afternoon, guys. Stephan, I wanted to first ask about Protocol. Now that the distributors and their customers have had some more time with Protocol in the U.S. beta group, could you discuss a little bit more the behaviors you are seeing from that group and how they are shaping up relative to your expectations? For example, are you seeing distributors able to sell more Herbalife Nutrition Ltd. product to their customers, and on the customer side, what are you seeing from the activity and the duration with which customers are interacting with the app and inputting their health data? Stephan Paulo Gratziani: Yeah, thanks for the question, Chasen. As you know, we launched beta last year, and the objective of beta is really to get distributor feedback and make sure that it is really fitting with their business flows and how they go out and talk to customers and engage with them. In terms of the distributors and their response, the amount of feedback that we get from different models and leaders that operate in different regions—especially now that we have expanded it to the 10 European markets—is helping us to formulate features, how people are coming into it, and how distributors will work with their customers. At the same time, there has to be enough there for the distributors to actually bring in the customers. We are really in this beta phase, and we did it on purpose. We have paused beta one, beta two; the phasing is because the more information that we have and the more people providing feedback, the more we can adjust it to make sure it goes across different DMOs with different leaders and the way that they operate. I would say that we continue this phase. For us, this was not a company that is going direct to consumer that has the relationship directly. Our entire business is based on distributors and their engagement with customers. So we are in the phase still, and we have enlarged the beta phase as we have gotten more countries in, to make sure that we bring the functions that are necessary to allow the impact and bring the value that we need to. So the beta phase continues. John G. DeSimone: Let me just chime in for a second. Like Stephan said, it is beta. We are seeing performance, getting feedback, enhancing it, and we have an enhanced version coming up with Extravaganza. What we want investors to know: this is an important part of our strategy, but we have not rolled into our forecast any direct revenue from this. So even though we are going to launch Vionic and we are going to launch Protocol, it is still going to be in the beta form. Any results end up being more opportunity to this year than risk to this year because we have not rolled that into the numbers yet. Stephan Paulo Gratziani: Let me just add: Protocol overall is not just a digital application to engage with customers. It really is designed as an end-to-end solution. We believe that the future is in the “what to measure,” meaning that people are going to want to measure more things like bringing their wearables in to inform blood biomarkers, which are going to get launched at Extravaganza, and those are going to come in. Then, personally formulated—or the next generation of personalized nutrition—through Vionic, for example. What ends up happening is it is the overall value proposition which gives it value. That is why we talked about all of the pieces individually being valuable, but it is all the pieces together that make it incredibly valuable. I think the most important thing—the core fundamental of our business—is distributors need to be able to go out into the market and have conversations, and the people that they are talking to, with what they are going to be offering them, say, “Wow. You can do all of this? I am interested.” If you were to ask 10 people on the street, would you rather have supplements that are more personalized for you, or would you rather buy supplements that are formulated for many, I believe that most people would respond, “I would be interested in the more personalized ones.” That is the opening of the conversation, but you also have to be able to deliver the products for it. We are really excited to get to Extravaganza and to be launching these 11 markets in EMEA in June and North America in July, to be able to bring this to market. The pieces are coming together, testing is coming. We are still in beta because there are still functionalities and features that we need to build in. But we are also launching this next generation of personalized supplements, so the pieces are there. This journey for us is really about making sure that our distributors have what they need in hand to go have conversations, bring more people into the company, keep them longer, increase LTV, increase the amount of people that are getting referred, and ultimately increase the amount of people who want to join the business and duplicate a business. Chasen Louis Bender: My second question is on India. Obviously very strong growth following the GST change. I am curious—given what you have seen—how has your thinking evolved on potential price reduction programs in other markets? And just as a housekeeping related to that, what are you assuming in guidance for India constant currency in the rest of the year? I know you mentioned you are expecting continued momentum, but should we expect that, or does your guidance contemplate the similar 30-plus percent growth in the rest of the year? Thanks so much. John G. DeSimone: Yes, Chasen. I will take this. Let me break it into pieces. There is a lesson in India. We had effectively a price decrease due to the GST reduction, and that created a lot of momentum. India had started building momentum just prior to that. A couple things I want investors to know. One is that momentum has been incredibly strong. We are going to annualize the GST in September, but we do not think that means we are not going to grow after. We think the momentum carries forward. Granted, we will be comping quarters that have the GST impact, so the growth rate will moderate, but that momentum we expect to continue. That gives you a little flavor of our thinking of India. India did beat our expectations in Q1. Going forward—if I may break this into buckets—for Q2 through Q4, so the rest of the year, we basically have not changed our sales expectations from where we were in February. They have come up a little, but we had some softness in the quarter in EMEA. We are going to run some tests based on what we learned in India, and hopefully that can work. We also had a price increase in Mexico, plus there was an incremental tax in Mexico, that had a little bit of a volume impact in Mexico on the negative side. That also supports the thesis we are working with the distributors on—that price matters. I think there is a lot of opportunity for us to affect volume in the future by modifying price and modifying the commission structure. So we are running tests. We have been running tests. We are now running more tests based on the results we have seen. Chasen Louis Bender: Got it. That is helpful. I will take the rest of my questions offline. Thanks so much, guys. Stephan Paulo Gratziani: Thanks, Chasen. Operator: Thank you. One moment for our next question. Next question will come from the line of Karru Martinson with Jefferies. Your line is open. Please go ahead. Karru Martinson: Good afternoon. You referenced higher oil costs. I was wondering how that is flowing through to the consumer, especially here in the North American market? John G. DeSimone: We are not flowing it through. We are absorbing it right now. At this point, for the rest of this year, that is what is assumed. We did say it is not material to the year, so we are going to cover it ourselves. We have not raised prices because of it. That does not mean it did not have an indirect impact—or does not have an indirect impact—on the consumer in general, but it does not have a direct impact on our price. Karru Martinson: Okay. So did you see a shift in the ordering pattern when the Iran conflict started and gas prices started going up, or is that too soon to tell? John G. DeSimone: It is too soon to tell, but we did have—as I said—the U.S., we can explain what happened. There were some timing differences, and there were some nutrition club closures during some really bad weather that we can quantify. We made that available to investors. I think the U.S. is on track. EMEA—Europe—had some weakness, and it is too early to tell if that was tied to the economics from the geopolitical situation or not, but there was definitely some weakness in Europe. Karru Martinson: Okay. And just lastly, when we look at China, it has been a work in progress for a while now. How should we think about that, and could you remind us where it stands today as a percentage of your sales? John G. DeSimone: It is really small. It is under 5% of sales—about 4%—so it is relatively small. It does not really contribute to profit in any meaningful way. What I have told investors over the last few quarters is we have a lot of strategies we are going to implement in China. I would wait and see. At this point, we are not rolling in the benefits of those strategies. We are going to wait until we see the benefits. Think of China long term as a huge opportunity for us. We are super underpenetrated. The model does well in China for some of our competitors. The products do well in China. We have not found our footing yet. We are working on it. I am confident over the long term we will. You will not see it rolled into our forecast until we see it coming through in results. Stephan Paulo Gratziani: And, Karru, on distributor leadership, we have spoken about it in the past. Historically, it has been really isolated, and we started at the beginning of this year to allow distributors and leaders from Greater China to come into the market. It is the first time they have ever had that opportunity. We see a continuing trend of more of them being interested, and at this Extravaganza that is coming up this month, there are a few hundred—approximately 500—that are looking at potential building business in China. We are seeing it as really positive from that standpoint, but as you said, it is a work in progress. We will update you over time. Thank you. Karru Martinson: Thank you very much. Appreciate it. Operator: Thank you. One moment for our next question. Our next question is going to come from the line of Nicholas Sherwood with Maxim Group. Your line is open. Please go ahead. Nicholas Sherwood: Hi. Thank you for taking my questions. Kind of going back to the Protocol launch, have you seen any use of the platform in nutrition clubs and any feedback of how it works in that space? Stephan Paulo Gratziani: Yeah, Nicholas. Super early. In nutrition clubs, especially here in the U.S., it is really a consumption-based business, and so it is one of the flows and integrations that we are working on because it is obviously a very large and important part of our business. There are millions of people walking in annually into a nutrition club to buy a shake or a tea, and we want to have an easy entrance into Protocol and getting exposure to being able to track and have physical results and move from a transactional to more of a transformational business. So it is one of the areas of focus for us, and it is a major DMO integration—early days. Nicholas Sherwood: That is helpful. And then looking at the packaging redesign, what sort of early metrics did you see coming out of testing the new design, and what have you seen from the early stages of the rollout of that new packaging? Stephan Paulo Gratziani: The first product was just rolled out in India, and it is very, very early. Overall, as we went through the process, distributor feedback and research were very positive. To see in the real world how it impacts is going to take time, but the initial feedback and research are very positive—again, very early. Nicholas Sherwood: Okay. And then my last question is, can you provide any color on the transition of preferred members to the new e-commerce platform, and how do you expect preferred members to interact with Protocol or get added to that platform in the future? Stephan Paulo Gratziani: I think you are referring to DS Commerce. That started to happen with a pilot group at the beginning of the year, and then it was just opened up. It is very recent, so very early to talk about it. John G. DeSimone: If I could step back for a second because we had a lot of questions—just to make sure we are aligned on where we are with a lot of these initiatives. We have launched them in beta form. We are getting the feedback. You get a lot of functionality, including the commerce app where people can buy on the app—or at least have the appearance of buying on the app if it takes us somewhere else. There is some functionality that we are launching where you will start seeing the benefits. Stephan Paulo Gratziani: Correct, John. One thing I think it is early to highlight, but we think it is quite a big deal, is that as a company, we have not really had a subscription business. Product purchases have been—some of them are continual—but we really implemented subscription recently. One of the early indications on the preferred customer on the new commerce platform is that the uptake on subscriptions is very positive. It is still early, but that is a very positive outcome from what we are seeing—early but exciting. It is also one of the things in terms of the launch of Vionic in Europe: we are going to be having a subscription product for the first time in the history of the company. So we are very excited about that. Nicholas Sherwood: Alright. Great. Thank you for answering my questions. I will return to the queue. Stephan Paulo Gratziani: Thanks, Nicholas. Operator: Thank you. One moment for our next question. Our next question comes from the line of John Baumgartner with Mizuho Securities. Your line is open. Please go ahead. John Baumgartner: Good morning. Thanks for the question—or, I should say, good afternoon. First off, going back to personalized nutrition, there is a lot of great detail here into the data expansion and products. I am curious—has there been any evolution in your thinking regarding segmentation, the levels of offerings, how you may tier those out, different levels of personalization? Have you heard any feedback from your distributors as to how they think the product-market fit is as you are going forward with this? Stephan Paulo Gratziani: Yeah, John. Thanks for the question. One of the reasons why we made the Vionic acquisition is for that reason. When we acquired Link, there is a manufacturing process to it: the equipment and the software take the inputs, create the formula, and then you manufacture the formula in powdered form. The price point for that is really more in a premium area. It also, quite honestly, has more functionality—because of the formatting, you can have other need states. Vionic gives us the opportunity—not only was it a company that existed with an existing customer base—but it had been in the business of formulating not only premium but also what we would consider a personalized vitamin and mineral complex at a lower price point, so a larger addressable market. That is part of the strategy: we want to hit different price points. We know our business around the world—from India to Switzerland—different demographics. The other aspect, besides making it more accessible to people—because this is a newer concept—is really what are the offshoots? Where can we go now that we have the capability of personalizing, and with all of the data and the customers for whom we have been personalizing, where does it lead us in the future? Specific product categories where personalization could make a lot of sense—for example, a probiotic that is more personalized than one you are buying off the shelf that has been formulated for everybody, or just for “men 50+,” for example. This is giving us more range and more demographics. I think where this leads in the future is that everything will become—and everyone will want—a more personalized version of whatever they are using today. It is absolutely part of the strategy. John Baumgartner: Thanks for that. And then coming back to EMEA, to drill down there a bit more, I am curious the extent to which there may be more structural change or softness in the direct selling market given the consistent declines you are seeing in sales leaders, or is it more of a productivity issue you think, or maybe some price adjustments can kickstart growth in that region? Stephan Paulo Gratziani: From a distributor lens—someone that worked in EMEA specifically, which was one of the areas that I spent a lot of time in—I think what has happened is the overall way people look at their health and wellness and make their decisions on what they are going to buy and where they are going to spend money is evolving over time. If you think historically, we started in 1980. The idea of a protein shake in 1980—and I will speak to myself—in 1991, when it came to France where I started, you had to convince someone that the idea of taking a shake instead of having breakfast was actually a thing. They would be like, “You are telling me I am going to mix this up, and I am going to drink this instead of having my coffee and croissant, and that is breakfast?” Today, we do not live in a world where a protein shake is novel and innovative. It is more of a commodity. It is an accepted form. I think part of what is happening is as the markets evolve and as technology evolves, the offer also needs to evolve. That is why I am very strong on, as a company, the superpower that we have of these 2 million distributors that are having conversations with tens of millions of people on a daily, weekly, and monthly basis—interacting and helping them with their health goals—that the conversation around personalized nutrition in this next generation is absolutely where the market is going, and we want to lead in that market. We can say, “How can you optimize your current product? How can you optimize with your DMOs? How can you bring more people and keep them longer and have them buy more and refer more people and want to do the business?” Fundamentally, if you have something novel and innovative to go to market with, and people are saying, “This is where things are going in the future. I want to be a part of it. I want to buy it. I want to use it. I want to tell people about it, and I want to sell it,” that is what we are building for. We do all the work in every area—train them, do everything we need to do—but we also work on the core offer. That is what we are doing. John Baumgartner: Thanks. And just a bit of a random question—looking at the U.S. market, I am curious to the extent to which you are seeing any benefits or traction from participation in the diabetes prevention program. I know it is not spoken about a lot, but just curious if there is participation and any learnings there thus far? Stephan Paulo Gratziani: We had started that as a pilot, and to be honest with you, I do not have the answer because I have not followed it that closely. My guess would be it has not had a material impact. Good follow-up. Thank you. Operator: Thank you. As a reminder, if you would like to ask a question, please press 11. Our next question comes from the line of Douglas Matthai Lane with Water Tower Research. Your line is open. Please go ahead. Douglas Matthai Lane: Yes, hi. Good afternoon, everybody. On the Vionic nutritional supplements being offered in Europe beginning in late June and then the U.S. in July, are they the same product offerings in both markets, and what actually are the product offerings that you are rolling out? Stephan Paulo Gratziani: They will be essentially the same. Obviously, different markets have different regulatory aspects to it. Essentially, Doug, think of this as your personalized vitamin and mineral complex stack. I do not want to get into too many details, but a man versus a woman, height, weight, age, objectives, personal conditions—then you put in biometrics, potentially blood biomarkers—and it would be clear that you probably would not need the same amount of vitamins and minerals in your individual compound as everyone else. That is the core offer of Vionic. The other thing—everyone is using supplements. If you ask how you actually buy supplements, even a vitamin and mineral supplement, most people are going down the aisleway at the grocery store or in the pharmacy, or their doctor said something, or someone recommended something to them—they buy it and use it. They might have been using it for a year, two years, three years, five years. We believe that personalization means not only should you have your formula as close to your individual needs as possible today, but also next month—when you have lost five pounds, when you have changed some things in your daily habits and in your diet—and over time as you age and your circumstances change. The capability to flex that on a monthly basis for someone and to personalize that is innovative and makes sense in the world that we live in today. No one is doing this at scale around the world, and so this is our opportunity. We also know that you can get people into the conversation and they look at Herbalife Nutrition Ltd. and say, “This is unique what you are doing.” We have an incredible portfolio—we are doing $5 billion in revenue currently—that is not Vionic. It is an opportunity to have people go beyond just this personalized vitamin and mineral complex. For us, this is not just a door opener. It is something that people are going to want, and we are going to be able to deliver it—especially through 2 million distributors that are having conversations with people every single day. More attraction to Herbalife Nutrition Ltd., a value proposition we think is unique, an opportunity in subscription, and an opportunity for the introduction to the entire portfolio so that we become that solution for people for their health and wellness. Douglas Matthai Lane: Now, Vionic has been around for a little while and has been producing product. Can I get Vionic anywhere else at this point? Stephan Paulo Gratziani: You cannot. As of the transaction, this is going to be sold through Herbalife Nutrition Ltd. distributors. Douglas Matthai Lane: So will it be rebranded under some sort of Herbalife sub-brand? What will that look like? Stephan Paulo Gratziani: We will do the reveal at Extravaganza, so I do not want to give it away, but the brand is definitely staying. Douglas Matthai Lane: Okay, fair enough. When can we see Link Biosciences product out in the marketplace? Stephan Paulo Gratziani: Link Biosciences will be Q1 of next year. Douglas Matthai Lane: Got it. And are you going to operate these four acquisitions as independently as is, or what is the plan structurally on how you are going to run these four acquisitions on personalization? John G. DeSimone: I will jump in. First, they all work together. I think you heard Stephan talk about Vionic and Link and the different versions of personalized nutrition, and they can work together. Protocol supports that—actually, it supports Protocol. The fourth acquisition, which is Prüvit, is a product line. Because there is a separate product associated with that, that may be a little distinct. But overall, those four are all connected. Douglas Matthai Lane: Okay, fair enough. And lastly, John, now that you have completed the debt refinancing, is there any change to your capital allocation priorities? John G. DeSimone: There is not. My number one priority is still to get our gross debt down to $1.4 billion by 2028, which would get our net debt below $1 billion. Douglas Matthai Lane: Okay, fair enough. Thanks. John G. DeSimone: Thanks, Doug. Operator: Thank you. I would now like to hand the call back over to Stephan Paulo Gratziani for closing remarks. Stephan Paulo Gratziani: Thank you, and thanks, everyone, for joining us today. We had a great quarter. We completed our debt refinancing. As Doug just mentioned, we have made four acquisitions. We are executing on our vision. Forty-five years of incredible history are behind us, but the future is even more exciting. As a company, we are evolving. We are advancing how we deliver what we do best—greater precision, greater scale, greater impact—and we are focused on the vision. We are well positioned to deliver what we believe is the next generation of personalized nutrition. Thank you for joining today, and we look forward to sharing continued progress next quarter. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Chegg, Inc. First Quarter 2026 Earnings Conference Call. All participants will be in listen-only mode. The question and answer session will follow the formal presentation. Please note that this event is being recorded. I will now hand over to Tracey Ford, VP of Investor Relations. Please go ahead. Tracey Ford: Good afternoon. Thank you for joining Chegg, Inc.'s First Quarter 2026 Conference Call. On today's call are Daniel Rosensweig, President and CEO, and David Longo, Chief Financial Officer. A copy of our earnings press release along with our presentation is available on our Investor Relations website, investor.chegg.com. A replay of this call will also be available on our website. We routinely post information on our website and intend to make important announcements on our media center website at chegg.com/mediacenter. We encourage you to make use of these resources. Before we begin, I would like to point out that during the course of this call, we will make forward-looking statements regarding future events, including the future financial and operating performance of the company. These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. We caution you to consider the important factors that could cause actual results to differ materially from those in the forward-looking statements. In particular, we refer you to the cautionary language included in today's earnings release and the risk factors described in Chegg, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission, as well as our other filings with the SEC. Any forward-looking statements that we make today are based on assumptions we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events. During this call, we will present both GAAP and non-GAAP financial measures. Our GAAP results and GAAP-to-non-GAAP reconciliations can be found in our earnings press release and the investor slide deck found on our IR website, investor.chegg.com. We also recommend you review the investor data sheet, which is also posted on our IR website. Now I will turn the call over to Dan. Daniel Rosensweig: Thank you, Tracey, and thanks, everyone, for joining Chegg, Inc.'s first quarter 2026 earnings call. Q1 was a strong quarter. We exceeded our expectations for revenue, profitability, and free cash flow while still significantly reducing debt, and we continue to optimize our cost base and capital expenditures. These results reflect the deliberate work we have done to re-architect Chegg, Inc. Our financials, our corporate structure, and our product experience are all optimized around AI, and the results are showing. The business is leaner and better positioned for future growth with high margins. Leveraging artificial intelligence, we provide a differentiated experience as we personalize learning paths, identify where learners are struggling, and trigger targeted interventions from coaches or systems before a learner falls behind. AI also allows us to create and update curriculum fast enough to keep pace with how quickly skills, especially AI skills, are evolving. All of this allows us to deliver better outcomes without increasing costs. We continue to expect double-digit revenue growth in skilling for the full year 2026, with acceleration as the year progresses. We are seeing positive traction broadly across skilling, including the addition of new enterprise partners and channel partners and momentum in the global category leaders across manufacturing, consulting, professional services, and technology. Notably, we recently signed a partnership with Cornerstone, a leading learning and talent management platform. This is expected to open up a meaningful enterprise distribution channel for Chegg, Inc. Skills and connect us with customers at scale. And for the first time, we are expanding our skilling platform through accredited offerings. With Wolf, a partnership we announced last quarter, we are launching our first AI master's program, combining applied learning with recognized credentials. We take the same AI-first approach in our language learning offering, as we are moving beyond structured lessons towards real-time, in-workflow coaching, helping learners apply skills in the moments that matter the most. What differentiates our offering is that AI enables us to surface skills performance data that HR and learning and development leaders can act on, shifting the conversation from reporting on learning activity to demonstrating measurable language capability in the workflow. Skilling is a large and growing market, and we believe we are building the most credible, outcomes-driven platform in the space. In our 2026 Skills for Business Impact report, more than [inaudible] of graduates surveyed report applying their new skills immediately. 43% say they are working more efficiently, and 41% report improved quality of work. On AI specifically, 75% of graduates report increased confidence, and 43% are actively applying those skills on the job. The impact extends to employers as well. 80% of the graduates we surveyed report a positive career impact, and 92% remain with their employers six to twelve months after completing the program, with 62% citing employer-sponsored education as a key reason for staying. Our investments in skilling are funded by the strong free cash flow being generated by Chegg Study, which outperformed our expectations in Q1. While search headwinds continue to impact traffic for Chegg, Inc., retention remains strong, an indicator that students continue to find real value in our product. The financial foundation we have built is what makes everything we are building possible, and it reflects the kind of focus and discipline this team has. Six months ago, I returned to Chegg, Inc. because I saw a company with all the ingredients to win: a trusted brand, proven curriculum, outcomes data that demonstrated a real return on investment for our customers, and an expanding global network of enterprise and institutional partners. What we needed was focus and clarity to lean into the opportunities ahead of us. In the last six months, this team has removed approximately 40% of our costs, put us on a path to zero debt, increased our free cash flow, and retooled the business to be AI-first, giving us a strong foundation to grow from. As a result, I am confident about the category we are in, the momentum in our skilling business, and the strength of our balance sheet. I feel confident about the opportunity in front of us and our ability to drive value for our shareholders and our customers. I look forward to updating you on the next call. With that, I will turn it over to David. David Longo: Thank you, Dan, and good afternoon. Today, I will review our financial performance for 2026 along with the company's outlook for the second quarter. Building on the progress outlined in our last earnings call, we delivered a strong first quarter, which exceeded expectations. Our results reflect continued execution on our priorities and increasing momentum in our businesses. Our strategic focus on the large and growing skilling market positions us for long-term sustainable growth with strong margins, while we leverage AI across the organization to improve efficiency and drive meaningful improvements in profitability and cash generation. In the quarter, Chegg, Inc. Skilling generated $17.6 million in revenue, representing 9% growth as we continued to invest in the business. We also signed exciting new distribution deals which we expect to contribute in the second half and help drive double-digit skilling revenue growth for the full year. Academic Services revenue was $45.7 million. We continue to manage this business with a focus on maximizing cash generation, which exceeded our expectations this quarter. While traffic remained under pressure, monthly retention rates were very strong in the quarter, further extending the operational runway of the business. Turning to expenses, non-GAAP operating expenses were $36.4 million, reflecting a reduction of $44.1 million, or 55% year-over-year. These results reflect our disciplined approach to expense management. We will continue to identify additional opportunities, including enhanced use of AI, to drive further efficiency. Importantly, these actions are generating cash flow that we can invest in our future growth. Adjusted EBITDA for the quarter was $15.5 million, representing a margin of 24%. We also delivered positive net income in the first quarter for the first time in two years. First-quarter CapEx was $1 million, down 88% year-over-year. For 2026, we are targeting a 60% reduction in CapEx with approximately 90% dedicated to our growing skilling business. Free cash flow in the quarter was $3.1 million, which includes approximately $12.9 million of severance payments related to prior restructuring actions. We expect an additional $2.1 million of severance payments in the second quarter. Despite these items, we expect to generate meaningful free cash flow in 2026. Looking at the balance sheet, we ended the quarter with $67.9 million in cash and investments and a net cash position of $34.1 million, providing us flexibility as we execute on our priorities. Looking ahead to Q2 guidance, we expect Chegg, Inc. Skilling revenue of $17.5 million to $18 million, total revenue between $49 million and $50 million, gross margins in the range of 51% to 52%, and adjusted EBITDA between $5 million and $6 million. In 2026, our capital allocation priorities remain focused on maximizing free cash flow, strengthening our balance sheet, and fully repaying our convertible debt by September. Additionally, we will continue to evaluate opportunities to deploy capital, including through our remaining securities repurchase authorization, with a disciplined approach aligned to long-term shareholder value. In closing, we have taken deliberate actions to position the company for long-term success. We are leaner, more efficient, and well positioned for double-digit growth in our skilling business and meaningful free cash flow in 2026, putting us on a clear path to sustained growth, profitability, and increased shareholder value. With that, I will turn the call over to the operator for your questions. Operator: We will now open the call for questions. Ladies and gentlemen, we will now be conducting a question and answer session. Please note, for participants making use of speaker equipment, it may be necessary to pick up your handset before pressing the star keys. If you would like to ask a question, please key in star and then one. You may key in star and then two to leave the question queue. Our first question comes from Ryan MacDonald of Needham & Co. Please go ahead. Ryan MacDonald: Thanks for taking my questions. Daniel, maybe on the Chegg, Inc. Skilling business, the trends you are seeing there, can you maybe unpack the two segments a bit in Q1? What were you seeing across B2B language learning versus Chegg, Inc. Skills? And then as you think about the back-half-of-the-year acceleration in growth and getting to the double digits, what kind of visibility do you have, or do you get from the partners, as you add those and those additional channels throughout the year? Daniel Rosensweig: Yeah, great question. It is exactly what we look at. So the trend in the first quarter was very strong because there were three things that we wanted to accomplish. On the cost side, we reinvented the way we are able to build content utilizing AI and the user experience, allowing us to scale at a lower cost with a higher quality using AI versus necessarily using humans. And we applied that across both what you would call the traditional skilling and the language skilling. We combine those businesses because whether we sell through channels in the U.S. or directly to corporations or businesses—or “corporate,” they call them in Europe—they actually buy them both as skills. So we are working to combine package and offerings to be able to offer both of those things. What you will see going forward is some pretty exciting capabilities that AI allows us to have, which is real-time intervention inside the course or inside the use of language, which we think will make them extremely valuable, and we expect to be able to see increased retention and utilization of those products going forward. They are rolling out now. The question over how these accounts build: So before I came back, Chegg, Inc. had one channel distribution, which was Guild, and we still have Guild, and Guild is still a terrific partner. However, we needed to renegotiate the contract with Guild to allow us to work additional partners, which we did not have the ability to do before. So what you have heard from us from announcements is that since the beginning of the year, we were able to renegotiate that and sign on a number of distribution partners for the combined assets of our skilling. So whether it be the skills, the skills with the language, or the language—all of those have yet to launch. We have signed those agreements, and we are building the courses, and we expect them to launch somewhere around—some of them—somewhere in this quarter, and then to build over the course of the year. So the reason we feel very comfortable at this moment in time is because we have set each of those to build revenue over the course of the year and then really accelerate going into 2027. So we are excited about that. So the first step was redesign the products and services to be more AI-centric—lower cost, better quality of outcome for the students. Second one was liberate ourselves from a single deal to be able to sign more deals, then sign more deals, which we have. You heard the Cornerstone, which we signed and announced today. You heard us announce Wolf on the last call. We have others signed that are not yet announced because our partners would prefer not to announce them until they actually launch, because they do not want to confuse the people in their channel. So we feel good about the fact that we have signed a number of deals that should build over the course of the year. None of them have to build particularly large for us to achieve the 10% year-over-year growth rate target that we desire for this year, and we expect that they will roll out shortly and continually over the course of the year. So it is pretty exciting. Ryan MacDonald: Really helpful. And then a trend and theme we have been hearing in the enterprise skilling and learning market this year is more commentary about learning in the flow of work—essentially the concept of if I am in my day-to-day role and whether I am interacting with Salesforce or whatever system I am in, it is pushing more learning as I am going through and using those tools. As you think about your content catalog, are you shifting what type of content you are building or the format you are building in to meet this new kind of thematic demand, if you will? Daniel Rosensweig: Yeah, that is exactly correct. You have tapped into—you know, I am used to three-letter acronyms, but this is the new terminology in terms of what people want to do. What does it really mean? It means that whatever you are teaching them should be able to be used while they are actually using the capability inside their company, and agents allow for that to happen in particular. So I will give you an example on the language side, which may be easier to understand. Let us say you are using VUSU to learn a language to be able to negotiate deals because you are in business development or legal or business affairs or something of that nature. The capability that we are building in—which goes to exactly what you said—is something that we will call Pulse, and so you might be negotiating in real time, and Pulse will be able to prompt you, in real time and in the flow of work, what language or capabilities or techniques you might need to use. So it goes beyond just the language, but into actually not only what to say, but how to say it. So yes, it all has to be inside the workflow. And within Skills, even within our Academic Services, we are building some of those capabilities, which we think is some of the reason that we are able to slow down the decline and extend the length of time, which will generate more cash for us. It is because you can go right inside and say, “Listen, do you want to learn how to do this right while you are here?” So think of it as just real-time intervention at the moment for what the person needs, where the technology can blend into what you are doing and what it is capable of doing. And yes, that is exactly why we retooled the company. In addition to that, there are a couple of elements that I believe the AI era is ushering in. They all seem pretty common sense, which is speed—how quickly can you do something? So some of our partners are requesting content every two weeks now rather than every quarter or every year. The other one is reduction of friction, which is at least partially what you are talking about, which is how do you remove all friction from the experience—for the users of it as well as the creators of it, as well as the distributors of it, as well as the buyers of it. So every step that you could take out of the way, you can do for the person while they are in it, is what you do. And then quality—the ability to do consistency of quality at scale, which is something difficult for humans to do and less difficult for machines to do. So all of that is at the core of what we are building. We think we are ahead of most people, and at least our partners hear we are ahead of most people, which is why we have been able to sign so many deals so quickly. Ryan MacDonald: Awesome. Appreciate all the color there. Thanks for taking my question. Daniel Rosensweig: You bet. Great question. Operator. Operator: Apologies, sir. Ladies and gentlemen, with no further questions in the queue, we have reached the end of the Q&A. This concludes this event. Thank you for attending, and you may now disconnect your lines.
Operator: Good afternoon, and welcome to Ibotta, Inc.'s Q1 2026 Earnings Conference Call. With us today are Bryan Leach, founder and CEO, and Matt Puckett, CFO. Today's press release and this call may contain forward-looking statements. Forward-looking statements include statements about our future operating results, our guidance for Q2 2026, our ability to grow our revenue, factors contributing to our potential revenue growth, our key initiatives, our partnerships, and the capabilities of our offerings and technology, all of which are subject to inherent risks, uncertainties, and changes. These statements reflect our current expectations and are based on the information currently available to us, and our actual results could differ materially. For more information, please refer to the risk factors in our recent SEC filings. In addition, our discussion today will include references to certain supplemental non-GAAP financial measures and should be considered in addition to and not as a substitute for our GAAP results. Reconciliations to the most comparable GAAP measures are available in today's earnings press release, our 10-Q, and our Q1 2026 earnings presentation, which are all available on our Investor Relations website at investors.ibotta.com. Unless otherwise noted, revenue and adjusted EBITDA comparisons to prior periods are provided on a year-over-year basis. With that, I will turn it over to Bryan. Good afternoon, everyone. Bryan Leach: Thank you for joining our discussion of first quarter results. We are pleased to report first quarter revenue and adjusted EBITDA that are both above the top end of the guidance range we provided on our fourth quarter earnings call. We continue to anticipate that our year-over-year revenue trends will improve sequentially, returning us to overall revenue growth in 2026, which is consistent with the outlook we provided in February. The improved trajectory of our business is mostly the result of our sales team's success in deepening and broadening the supply of offers available to us. Our core promotions product is demonstrating strong market fit, while our more recent offering, LiveLift, continues to receive positive early feedback. On the publisher front, we have added two new partners in quick succession, both of which have entered into multi-year exclusive partnerships with us. In late March, we announced the addition of Uber, meaning that later this year, Ibotta, Inc.'s digital promotions will appear within the Uber, Uber Eats, and Postmates apps. And today, we announced that Giant Eagle is also joining the Ibotta Performance Network. I will say more about the significance of these new publisher wins later on, but first I would like to provide a bit more context on our recent financial performance, and share additional details about the from-to pathway we see ourselves on. On a year-over-year basis, our redemption revenue performance has almost fully recovered. In the first quarter, it was down 1% year over year, compared to being down 15% in the third quarter of last year and down 5% in the fourth quarter. This gradual recovery has been partly driven by Redeemer growth, with 15% more Redeemers in Q1 than in the same quarter last year. That said, increased demand for offers alone does not move the needle unless we also source enough offers to take advantage of it. This is all about having the right team in place spending more time in market, multithreading our outreach to stakeholders at different levels within an organization, and being more immediately responsive to our clients' needs. Building trust in these ways is allowing our team to continue moving further upstream in our clients' strategic planning processes. We are also doing a better job of supporting our sellers and account managers with B2B marketing, training and enablement, and client-specific insights. Our product team is working hard to deliver new tools that make each step in the quote-to-cash process easier, faster, and more efficient. Encouragingly, our success has been broad based, which continues to increase our conviction in the path we are on. Our sales team is adding new clients, securing new—often larger—commitments from existing clients, and retaining the overwhelming majority of our clients. Our strategic partnership with measurement leader Surcana continues to generate sales and marketing momentum. We recently published a case study available on our website that independently validates Ibotta, Inc.'s ability to deliver successful results for our clients. Chomps, the fastest-growing meat snack brand in the United States, ran a campaign earlier this year to drive trial and household penetration. The results were outstanding and were independently verified through a sales study conducted by Surcana. Households exposed to the Ibotta, Inc. campaign spent an average of 15% more on Chomps than their unexposed counterparts. Even more impressively, the campaign outperformed Surcana's snack category benchmarks for sales lift by more than 4.5x and surpassed household penetration benchmarks by a staggering 9x. Stacy Hartnett, the SVP of Marketing at Chomps, summarized the impact well. She noted that achieving strong on-shelf presence was only their first milestone. Their strategy has now shifted toward winning new buyers through smarter promotional strategies. She stated that our partnership has become a key lever in that effort, and that the study reinforces that the IPN delivers impact well beyond a discount, helping them reach the incremental shoppers critical to their long-term growth. Turning to LiveLift, we continue to see positive signs of product-market fit even though it is still early days. We continue to limit access to those clients willing to spend a certain amount and run their campaigns for a certain duration. For this reason, the revenue contribution from LiveLift remains modest for now; we are not forecasting a significant ramp in revenue until we loosen those eligibility requirements. I will have more to say on what that will require in a moment. Actual re-up rates among clients that have completed a LiveLift campaign remain consistent with the approximately 80% level we have discussed in prior quarters. Those clients who have not yet re-upped are primarily smaller CPGs, which we believe reflects our eligibility criteria rather than any dissatisfaction with the product, consistent with what we have said previously. Repeat users represented approximately 60% of LiveLift in the quarter, with the remainder being first-time users running pilots. The average campaign size for LiveLift campaigns remains meaningfully larger than for our core product. The most common question I received after our last earnings call was, can you help me better understand what the pathway to greater adoption of LiveLift will look like? So let me try to shed some light on what that entails and why I believe we are making solid progress. Of course, as with any innovative product development process, it is impossible to know in advance everything we will learn along the way or exactly how long that will take. Our goal is to make it as easy as possible for our CPG clients to buy campaigns on the Ibotta Performance Network. Some will prefer to stick with managed service, while others may take advantage of our self-service tools, which we will continue to refine and improve. In the future, our clients may also rely on agents to make more autonomous media buying decisions. Whichever interface they choose, clients will start by identifying the goals of their campaign. Our LiveLift platform then takes this information and evaluates a wide range of possible campaigns and chooses the best fit for their goals, projects the amount of redemptions, incremental sales, and cost per incremental dollar we think they will achieve, tracks these metrics on an ongoing basis—providing profitability readouts at various points during the campaign—and optimizes the campaign as necessary along the way. Scaling LiveLift to our wider client base will require greater automation of these processes. With that in mind, we are focused on a few key initiatives. First, we are building a more sophisticated programmatic API layer so that our software, as well as any agents we create, interface with the various models and systems that power LiveLift, allowing our system to fully harness the power of AI to programmatically design, build, launch, optimize, and report on a campaign. This includes considering different scenarios and making the best possible projections and recommendations more quickly and at lower cost. Second, we are refining the underlying models that power LiveLift. These models become more robust as we train them on the data generated by running these early LiveLift campaigns, as we receive additional data from existing publishers, and as we expand the publisher network, gaining access to new sources of data. Widening the availability of LiveLift requires continued model training through repeated experiments, and those take time. We are building a novel capability in this industry, and that necessitates a disciplined phased approach to scaling. Third, we are working on what I would broadly call AI enablement. That means documenting processes to create additional context for AI, defining standard operating procedures, and simplifying our product catalog to reduce complexity. Creating this scaffolding takes time, but once we have a simpler set of products with the appropriate context, more reliable agentic AI flows become possible. We believe that the progress we are making along all these fronts will ultimately allow us to more meaningfully inflect the level of CPG offer supply. Switching to the demand side of the equation, we continued to see strong results this quarter, with healthy Redeemer growth driven by organic growth at our existing publishers and the 2025 launch of DoorDash. One of our top priorities has been diversifying our publisher base, and we have begun doing that with the recent additions of Uber and Giant Eagle, both of which entered into multi-year exclusive partnerships with Ibotta, Inc. Adding Uber to the IPN allows us to intercept consumers in high-intent commerce moments and solidifies our leadership position in the fast-growing and important e-commerce delivery space. Our partnership with Giant Eagle further validates the strength of our model and enhances our presence in the traditional grocery channel. As one of the nation's largest multi-format food and pharmacy retailers and a recognized industry thought leader, Giant Eagle chose to transition to Ibotta, Inc. in order to access a more robust and relevant offer gallery that moves the needle for their customers. We are pleased with the terms and the economic profile of both of these new partners. These partnerships demonstrate the extensive work of our business development and technology teams behind the scenes to enable these milestones. I will now turn the call over to our Chief Financial Officer, Matt Puckett, to walk through our financial results and guidance in more detail. Matt Puckett: Thank you, Bryan, and good afternoon, everyone. We are pleased to have delivered another quarter that was ahead of our initial outlook, further validating that we are very much on the right track. With that, let me jump into the Q1 results. We delivered revenue and adjusted EBITDA that were, respectively, 325% above the midpoint of the guidance range that we provided on our fourth quarter earnings call. Now to unpack our top line results for the quarter. Revenue was $82.5 million, a decline of 2% versus last year. Within that, redemption revenue was $73 million, down approximately $0.4 million or 1% year over year. Both redemption revenue and ad and other revenue trends improved on a year-over-year basis as compared to the fourth quarter. We continue to be pleased with the results our sales organization is driving and how both our core product offerings and LiveLift are resonating with our clients. As Bryan noted, the LiveLift re-up rate remains healthy, underscoring that clients are realizing the measurable benefits that these next-generation capabilities deliver. Third-party publisher redemption revenue was $54 million, up 12% versus last year and accelerating sequentially versus the prior quarter's increase of 8%. Direct-to-consumer redemption revenue was $19 million, down 25% year over year and similar to Q4's result, where, as anticipated, we have continued to see redemption activity shift to our third-party publishers. Ad and other revenues, which represented 11% of our revenue in the quarter, were $9.5 million, down 15% versus last year due primarily to continued pressure on ad revenue as a result of lower direct-to-consumer Redeemers. This reduction was partially offset by growth in data revenue. Turning now to the key performance metrics supporting redemption revenue. Total Redeemers were 19.7 million in the quarter, up 15% year over year. We saw another quarter of significant growth in third-party Redeemers across the IPN, including strong growth with our largest publisher partner, highlighting the continued health of the demand side of our network. In addition to organic growth with existing publishers, the quarter also benefited from the launch of DoorDash in 2025. Redemptions per Redeemer were 4.5, down 6% versus last year, a meaningful improvement in trend versus the second half of last year when redemptions per Redeemer were down 22%, but where the decline continues to be driven by both the quantity and quality of offers available to each Redeemer, as well as the growth in third-party Redeemers, which have a lower redemption frequency as compared to our direct-to-consumer Redeemers. Redemption revenue per redemption was $0.83, which was flat versus Q4 and down 7% versus last year, driven primarily by the mix of redemption activity. Summing it all up, total redemptions were 88 million, up 6% versus last year, driven by 15% redemption growth on our third-party publishers. This represents a more measurable return to year-over-year growth in redemptions for the first time since 2025 after being flattish in the fourth quarter. Now switching to the cost side of our business. As anticipated, non-GAAP cost of revenue was up $2 million versus a year ago, largely driven by an increase in technology-related costs along with a more modest increase in publisher costs. This resulted in a Q1 non-GAAP gross margin of 78%, down approximately 300 basis points versus last year. As we discussed last quarter, much of the increase in technology-related costs is a function of increased investment in product development, as well as a higher allocation of certain costs from R&D expense to cost of revenue. Before I review non-GAAP operating expenses, let me point out that we have made a change in how non-GAAP operating expenses are defined and shown on page 12 of the presentation that accompanies our earnings materials. You will notice we are now including depreciation and amortization in non-GAAP operating expenses. Now turning back to the results. Non-GAAP operating expenses were up 5% versus last year, and were 71% of revenue, an increase of approximately 470 basis points year over year. Within that, non-GAAP sales and marketing expenses were up 17%, driven by higher sales labor, the cost of third-party lift studies, and B2B marketing expenses. Non-GAAP research and development expenses decreased by 21%, primarily a result of higher capitalization of software development costs and a higher allocation of labor expense to cost of revenue. This is due to more of our investment in R&D being directly focused on product development. Lastly, non-GAAP general and administrative expenses increased by 5%, while depreciation and amortization increased by approximately $0.6 million or 60%. Similar to the last couple of quarters, while overall non-GAAP operating expenses grew year over year, our investments in areas related to our transformation—inclusive of both the P&L and what is being capitalized to the balance sheet—increased at a faster pace. This increase was approximately 12% and again was highlighted by higher labor costs in the sales organization and other technology-related costs. We delivered Q1 adjusted EBITDA of $8.7 million, representing an adjusted EBITDA margin of 11%. Non-GAAP net income of $6 million and non-GAAP diluted net income per share of $0.24. Our non-GAAP net income excludes $16.7 million in stock-based compensation and it includes a $0.3 million adjustment for income taxes. We ended the quarter with $164.6 million of cash and cash equivalents. In Q1, we spent approximately $45 million repurchasing approximately 1.9 million shares of our stock at an average price of $22.92. We had 25.6 million fully diluted shares outstanding as of 3/31/2026, and as of the end of the quarter, we had $90.3 million remaining under our current share repurchase authorization, which, as previously disclosed, was increased by $100 million upon authorization from the Board of Directors on March 11. Finally, we generated $23.3 million in free cash flow, an increase of 56% versus last year, largely driven by higher cash flow from operations as a result of decreases in working capital compared to 2025. Now shifting to Q2 guidance. We currently expect revenue in the range of $82 million to $86 million, representing a 2% year-over-year decline at the midpoint and at the same time a 2% sequential increase versus Q1 at the midpoint. We expect Q2 adjusted EBITDA in the range of $9 million to $12 million, representing about a 12.5% adjusted EBITDA margin at the midpoint. With that, let me provide a little more color on our outlook. First off, as both Bryan and I have mentioned, we continue to be pleased with the consistency of our execution with our clients and publisher partners, both with core product offerings and with LiveLift pilots. This has been the driver of improving revenue trends during the last couple of quarters and we expect that to continue. One other point to make on Q2 revenue: at the midpoint of our revenue outlook, we would expect redemption revenue to return to growth for the first time since 2025. Beyond our specific Q2 revenue guidance, we are confirming our expectation of a return to year-over-year growth in total revenue in Q3 in the low single-digit range. It is probably on your mind, so let me highlight the assumptions implied in our outlook specific to the two new publishers we are adding to the network. We have assumed an immaterial impact on Q2 during the testing and piloting phase, and expect a small benefit to revenue in the second half of the year as we ramp up with these partners. I will note that offer supply will be the governor on the near-term revenue impact of this expansion on the demand side of our network. As it relates to costs, our expectations are broadly unchanged from last quarter. We continue to expect to see a modest sequential increase in quarterly non-GAAP cost of revenue and operating expenses throughout the balance of the year. That continues to be a function of investing in areas that are critical to our transformation. Specifically within cost of revenue, as we said last quarter, we expect to have substantially less growth in publisher-related costs as compared to what we saw in 2025, and we do expect, similar to the first quarter, that the biggest factor driving an increase in cost of revenue will be higher technology costs, which is partially a function of where these costs are allocated in the P&L relative to last year. Lastly, with a healthy balance sheet and positive free cash flow, we will continue to prioritize investing in organic growth and the strategic priorities of the business while also returning cash to shareholders. We remain excited and energized by the opportunities ahead and look forward to returning to year-over-year revenue growth in the second half of this year. We will now open the call for questions. With that, operator, please open up the line for Q&A. Operator: For today's Q&A session, we will be utilizing the raise hand feature. If you would like to ask a question, click on the raise hand button at the bottom of the screen. Once prompted, please unmute yourself and begin with your question. We will pause a moment to assemble the queue. Thank you. Our first question will come from Ken Gawrelski with Wells Fargo. Please unmute your line and ask your question. Kenneth James Gawrelski: Can you hear me okay? Bryan Leach: Yes. Matt Puckett: Yes, we can. Thank you. Kenneth James Gawrelski: Okay, great. Thanks so much for the question. Could Brian, could you talk about how, as you move more to LiveLift over time and you get this sales process really humming, when you look into, you know, ’27–’28, how do you think the financial picture may change? What does it mean for the margin structure of the business relative to, you know, the kind of post-IPO? What fundamental differences do you see there? Maybe this is the first one. And then second, as you think about the progress you can make in the back half of this year and into early next year, how much of it is a change in the calendar year providing another opportunity to take another bite at the apple with some of those big CPG brands versus just getting your go-to-market strategy and process working? Thank you. Bryan Leach: Thanks, Ken. I will take those in turn. The first one I will answer at a high level and then let Matt provide additional detail, and then I will have him pass it back to me for the second question. For the first one, I would say, broadly speaking, we feel like we are in a good place with our expenses to be able to build the products we need to drive the increase in offer supply over the next few years. You asked about 2026, 2027, 2028, and so that should— in other words, we do not expect to have to continue to ramp expenses at the same rate that we are ramping revenue, and so that should be positive in terms of the margins and contribution to adjusted EBITDA over the next three years. We have ongoing innovation that is baked into the R&D that is part of our current effort. I think more time will allow us to get in front of our customers with the LiveLift message. It is an evolution in the industry that is moving from annual planning and annual allocation and annual measurement to more ongoing measurement and optimization using rule-based or outcome-based systems. That go-to-market takes some time to build the necessary trust and conviction and then have the cultural changes that need to happen on the client side. But I feel like the developments that I described in my remarks will put us in a position where there will be a greater variety of different ways that people can buy on our network, and those ways will be more sophisticated and allow us to meet the needs of our clients more often and allow us to earn our way into larger and larger budgets, which is what is really going to move the needle and drive revenue in this business. I will let Matt add any additional thoughts on that before turning to your second question. Matt Puckett: Yeah, Ken, just a couple of things I would add, without being precise regarding our financial algorithm. A couple of things I will say—one is kind of more medium term and then longer term, which is really reiterating Bryan's points. We have been talking for a couple of quarters now about the investments that we were making, first in the sales organization—restructuring, reorganizing, and really just leveling up the capabilities in sales—as well as the investments we have been making in our technology as it relates to the transformation of the business and the capabilities that we have been building. We are nearing lapping most of those investments. We are not fully there, but over the course of this year, we will lap all of those investments. That is factored into everything we have said about what the forward picture looks like. Once we have done that, then as we sit here today with what we see that needs to get done, we do not expect to have to add—there is not another step change in an investment profile from here. So as we see the top line stabilize and then we start to drive consistent, sustainable growth, we are going to see the opportunity to expand both gross margins and EBITDA margins over time. Hopefully, that helps answer. Bryan Leach: The second question, Ken, about the back half and the change in the calendar year, I would say that different clients have different fiscal years. Some of our clients reset in July, some of them reset in the fall, some of them reset on the calendar year. While that is definitely a factor in situations where we have kind of gotten through the budget that was allocated to us the previous cycle, we get a chance to demonstrate the effectiveness of that—the level of performance earns us into a larger budget. That is true. However, I think it is more a function just of being able to get in front of clients with our core product, demonstrate the scale that we have, that we are along the breadth of purchase in all these different places now, the addition of these new publishers—that allows us even intra-year to go back and make the case that this is where they should be spending more money at a time when they are aware that this is how they gain market share, by intelligently thinking about where they are pricing their products and how they are promoting their products. So I do not want to lean too much on that as some major driver. We are always selling both in the annual planning process and then within that year. Our whole goal here is to move the industry away from that mentality of annual planning and into a mindset of “I always want to buy this as long as these rules and constraints are being met.” I want every dollar of top- and bottom-line revenue and profit that I can get through this platform, and I will spend until I am no longer seeing that level of efficiency. That is ongoing, but I think it is safe to say that for now, we are still living in a world where we do participate in those annual re-up conversations—they are just thousands of brands happening all the time at different parts of the year. And Matt was going to add one more thing. Matt Puckett: Yeah, Ken, just one more thing to make sure we got to the essence of part of your question there on the margin profile. As we grow LiveLift over time as a bigger penetration of the business, that does not materially change the margin profile. Whether it is core product offering or LiveLift, we would not see a different outcome. It is really about the investments we have made to enable the growth that will flow through our business model. Kenneth James Gawrelski: Thank you. Operator: Our next question will come from Tim with Raymond James. Please unmute your line and ask your question. Analyst: Hey, guys. Thanks for taking my questions. I have a couple. First, if you could talk about some of the early progress with the Uber partnership and how that is tracking. Within that, on the initiatives surrounding LiveLift in terms of what it will take to ramp that a little further, any thoughts on what inning you are in and any progress made on those initiatives so far? Secondly, on the macro, are you seeing any impacts from energy prices, whether it be on CPG spend or on the health of the lower-end consumer? Thanks. Bryan Leach: Great. Thanks, Tim. First on the Uber partnership, we were pleased to have announced that a little while ago. Like all of our publishers, they do not just turn that on overnight to 100% of all of their customers across thousands of stores that they support. They do that in a stepwise function, and we are in the early part of that rollout. We will then begin working with them on other aspects of that partnership to make sure that we are able to do the most sophisticated forms of measurement and personalization, marketing, reactivation, and activation—those best practices. We are in a position where the technology to support this has been built, and we are early in the process of introducing that to different customers at Uber, and we are excited about that. As you know, we have a strong presence in that area, and that is something where we hope that it will also have the same level of uptake and high redemption rates that we have seen in that category more broadly. On the progress we have made on the ramp of LiveLift, I think we have made significant progress from the last time we had a conversation in late February. That is along all the different dimensions that I mentioned. AI is evolving very rapidly, and so we are investing heavily in AI enablement to take advantage of the efficiencies that are available to us through using tools like Claude Code, but also our ability to create this programmatic API layer. We are absolutely working on that around the clock, getting that to a place where we will be able to automate more of these processes, which will benefit our entire business—not just LiveLift, but also all of our core offers benefit from having it be easier to design, set up, revise, and so forth from beginning to end of a campaign. The models underlying LiveLift get better with more data, with more refinement of the model, and with more publishers you add. The addition of Uber and Giant Eagle will help us refine those models. That itself represents progress, but we also are seeing that as we get a second and third LiveLift campaign from some of these repeat customers—I mentioned 60% of LiveLift is from a repeat customer—they are able to test out different strategies and learn how the consumer responds to different structured promotions based on their goals. That then helps project the next campaign that much better. So those clients that are participating are gaining an advantage. They are all aware that doing that in this environment is important, which is a good segue to your last question about the macro. The news you are reading is the same thing we are hearing from our clients. The American consumer is looking for value. We are excited that we are an integral part of that. Whether that is driven by the war in Iran or gas prices or tariffs, or some other exogenous factor, there is a lot of focus on this topic. Even earlier today, the CEO of Kraft Heinz put out a message—Steve Cahillane—saying the new mantra is value. “Consumers are literally running out of money.” Those are the kinds of things that cause people to take a closer look at the product that we sell. We are making the case that there are smarter and less smart ways to deliver that value. We think the Ibotta Performance Network is a really good way to do that in a way that is also capitalizing on the latest technologies that are available. I also want to stress that this is nondiscretionary spending, so no matter what the macro environment is, people are looking for value on the things they have to buy week in, week out. If you look at the press release we put out today from Giant Eagle, they commented on why they switched to Ibotta, Inc. They switched because they wanted to see an 8x increase in value delivery for their customers, and they are hearing consistently that that is what makes the difference in why people shop at Giant Eagle versus somewhere else. So both on the CPG side, for example Kraft, and on the publisher side, for example Giant Eagle, being in this field right now is particularly important. Operator: Our next question will come from Stefanos Chris with Needham and Company. Stefanos Chris: Hey. Can you hear me? Bryan Leach: Yeah, we got you. Stefanos Chris: Awesome. Thanks for taking the question. Just wanted to ask on third quarter revenue reflecting positive. What are the assumptions in there? Are you baking in a certain ramp in LiveLift? Are you including Uber and Giant Eagle? Would love to go through the assumptions there and where there could be upside. Thanks. Bryan Leach: Great. I am going to hand that one to Matt. Matt Puckett: It is really what we are doing today continuing. We have seen sequentially improving results in our business, particularly driven by redemption revenue, and that is really the driver versus Q1, and the same to be true for Q3 versus Q2. We expect to see that get better in Q2, and that is all going to translate into growth. There is no step change assumed in terms of LiveLift adoption or us further opening the aperture to that. Where we are today is the expectation. We have assumed a very modest impact from the two new publishers in the back half of the year—that would be a little bit less in Q3, a little bit more in Q4, as a way to think about that—but it is really an ongoing kind of performance that we have seen to date driven by consistent execution, and the fact that our products, both core products and obviously LiveLift as well, are resonating with our clients. Stefanos Chris: Thanks. If I could squeeze one more in: on the monetization of Uber and Giant Eagle, I assume Uber is similar to a DoorDash, but how about Giant Eagle? Is that similar to a Dollar General, or are there any differences in these two partnerships? Thanks. Bryan Leach: Without going into the specifics of the economics of individual partnerships, broadly speaking, those are similar to how we have approached these in the past, and we are happy with the economics of those partnerships. As we get greater scale and more momentum and greater access to supply, we continue to see publishers more interested and motivated to deliver the best possible value for their customers, and we think that will continue to contribute to favorable economics going forward. Operator: Our next question will come from Nitin Bansal with Bank of America. Nitin Bansal: Thank you for taking my question. Bryan, can you provide some more details on your progress with the go-to-market transformation, specifically how the new sales motion impacted your Q1 results? And what additional changes are you making to the sales team that could impact your performance for the rest of the year? Thanks. Bryan Leach: Thanks, Nitin. Absolutely. There are a number of different things that have been going on since the arrival of Chris Reidy on our team. That started with taking a look at the team itself and making sure we have the right people in the right roles to help ourselves with the kind of selling that we are going to need to do, which is much more of a consultative sale where we have to be fluent in the businesses of our clients. We reorganized the sales organization to be no longer geographic, but focused on an industry-based approach. We have experts in beverage, for example, or in household products, and so on. We separated into enterprise clients versus emerging clients, with each having its own industry sub-verticals. We focused on a variety of support structures that were not in place that needed to be, such as bringing in an SVP of Enterprise Sales, an SVP of Business Marketing to help us with B2B marketing expertise, and we beefed up sales finance, sales operations, and training and enablement of our sellers. I think that was very important. We filled all those senior leadership roles by 2025, as I have said on previous calls, and we brought in excellent talent. That has helped us on a lot of different fronts. We mentioned on the last call the thought leadership and the ability to be proactive and get in front of our clients. The example I gave was the SNAP program—we had a playbook that was designed, we reached out, and that led to incremental dollars being committed to Ibotta, Inc. that were not in their previous annual plan, which were opportunistic and really valuable. We have talked about other things that we have done. “Multithreading” is a term we have used—meaning teaching our sellers to go in at multiple different levels of an organization at the same time to speak to different needs and pain points of the people in those organizations, using the language of their business. It is the simple fact of being on the ground more often, being in the room more often—the hustle factor—and continuity, so not handing people over between rep to rep. That is really about trust. Most of the structural changes were made last year, but we are continuing to build that trust. As we are doing that, we are getting invited into more important strategic conversations. We are getting clients that want to say, “Let us come out and spend a day with you,” and they are bringing significant senior members of their team to discuss where we think the industry is heading and how it is impacted by things like technology and AI. We are being embraced more as a thought leader and invited more into upstream strategic planning conversations. I think the introduction of Surcana and ABCS has allowed our sales team to provide third-party independent analysis. That has given them another platform. We have done a better job with event marketing—Chris Reidy has been on stage at Adweek, NACDS, and lots of different conferences. We are getting in front of all different parts of the CPG organization. It is not one thing; it is a variety of different upgrades to how our team sells. Of course, having something like LiveLift to discuss and having the ability to focus on incremental sales and really lead the conversation around rigorous measurement has given them a lot to talk about, and I am really proud of the work they are doing. Operator: Our next question will come from Tim Huang with Citizens JMP. Tim Huang: Hi. Thank you for taking my question. I wanted to follow up about the pricing changes that were talked about in the prior quarter's call with regard to pricing being more linked to AOV. Could you give any color on how that has been received, and further progress during the quarter on pricing and what has been flowing through? Bryan Leach: Thanks, Tim. Sure. You are right, and your memory is spot on. It is a question of moving from a flat fee that is applied based on the price band that a product falls within. The old system was: if your product was $3 to $4, you paid this cost per redemption; if your product was $4 to $5, $5 to $6, $10-plus, you might pay a different cost per redemption under the old model. The problem with that is that as you get to either side of that range, you get discontinuities. The ratio that your fee represents as a percentage of the overall product price—and the total economics available to the brand—varies, and that can create inadvertent inefficiencies. It might make it unnecessarily expensive, for example, to use Ibotta, Inc. with lower-cost products where our fee per redemption cuts a high enough percentage that it is hard to deliver a cost per incremental dollar that is attractive—meaning lower than the contribution margin of that product consistent with a goal of profitability. The solve for that is to shift toward a system where it is continuous—so it is a fixed percentage of the price itself. That way, whether you are at $1.01 or $1.99, you are equally able to take advantage of that structure. What we have been doing is introducing this transition in our pricing as part of a broader reset of some terms that we have in our preferred partnerships and agreements. That has been very well received. People view that as simplifying the system—dispensing with discrete fees for things like setup. It makes it simpler. Everything is wrapped into this one percentage-of-the-price fee. As I said, it is encouraging clients to promote lower-priced items. We are still very much in the middle of that transition because we did not want to just mandate that everybody turn on a dime. But as we come back through these conversations on our annual preferred partnerships, that—along with other conversations around things like payment terms—are a natural part of our conversation. Broadly speaking, that is going well. We are seeing success in that transition, although we are still very much in the midst of it. And Matt is going to add one more thing. Matt Puckett: I would just say—and you will see this in our results—our redemption fee metrics are going down a little bit in terms of the way to think about price. We pay attention to that and understand it, but it honestly does not scare us. In order to maximize revenue, in many cases it makes sense to lower fees. It allows our clients to have profitability objectives. Think about our business model: incremental revenue flows to the bottom line at a really high rate. So seeing revenue per redemption coming down as a result of fees, but then offset by higher volume, is actually a good answer for us in most cases. Bryan Leach: Broadly speaking, Tim, it is fair to say we have had a greater level of analytical rigor. Looking at that is one of the reasons why we arrived at this transition in our pricing. We had a lot of conversations with our clients before we settled on this, and fortunately we properly prepared for the transition. I am happy with how it is going. Operator: Once again, if you would like to ask your question, please use the raise hand button at the bottom of your Zoom screen. That now concludes the Q&A section. I would now like to turn the call back to management for closing remarks. Bryan Leach: Thanks very much, everyone, for your time today. We are pleased with the results that we have reported and the momentum in our business, and we look forward to speaking with you again soon. Operator: Thank you for joining today's session. This call has concluded. You may now disconnect.
Operator: Hello, and welcome to Vir Biotechnology, Inc. First Quarter 2026 Financial Results and Corporate Update Conference Call. As a reminder, this call is being recorded. After the speakers' presentation, there will be a question and answer session. I will now turn the call over to Kiki Patel, Head of Investor Relations. You may begin, Kiki. Kiki Patel: Thank you, operator. Welcome, everyone. Earlier today, we issued a press release reporting our first quarter 2026 financial results and corporate update. Before we begin, I would like to remind everyone that some of the statements we are making today are forward-looking statements under applicable securities laws. These forward-looking statements involve substantial risks and uncertainties that could cause our clinical development programs, collaboration outcomes, future results, performance, or achievements to differ significantly from those expressed or implied by such forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding the potential benefits of our collaboration with Astellas, the therapeutic potential of 5,500 and our PROXTEN platform, our development plans and timelines, financial terms and milestone payments, and our cash runway and capital allocation priorities. These risks and uncertainties and risks associated with our business are described in the company's reports filed with the Securities and Exchange Commission including Forms 10-K, 10-Q, and 8-K. Joining me on today's call from Vir Biotechnology, Inc. are Marianne De Backer, our chief executive officer, and Jason O’Byrne, our chief financial officer. During 2026, the Vir Biotechnology, Inc. team delivered meaningful advances across our T cell engager and hepatitis delta programs, underscoring our ability to execute towards key clinical and corporate priorities. The agenda for our call today is as follows. First, Marianne will share an update on our recent landmark global strategic collaboration with Astellas and our prostate cancer program. Next, she will provide an update on our hepatitis delta program evaluating tobevibart, an investigational neutralizing monoclonal antibody, and elebsiran, an investigational small interfering RNA. Then Jason will provide an overview of our first quarter 2026 financial results. And finally, Marianne will close the call and we will open the line for Q&A. With that, I will now turn the call over to Marianne. Marianne De Backer: Thank you, Kiki. Good afternoon, everyone, and thank you for joining us for Vir Biotechnology, Inc. first quarter 2026 earnings call. Since our last earnings call in February, we have remained highly focused on execution as we advance both our oncology and hepatitis delta programs with speed and focus. I will begin by providing a brief update on the current status of our recent collaboration with Astellas, a deal valued at up to $1.7 billion. In addition, in the U.S., commercial profits will be split 50/50 between the parties with Vir Biotechnology, Inc. having the option to co-promote alongside Astellas. As a reminder, on February 23, 2026, we announced that we entered into a collaboration with Astellas to co-develop and co-commercialize VIR-5500, our PROXTEN dual-masked PSMA-targeted T cell engager. Since then, the transaction successfully closed on April 15, 2026, marking an important transition from deal announcement to deal execution. With the deal closed, our joint teams are operational and partnering closely on a shared clinical development plan to enable rapid expansion and accelerate delivery to patients. This collaboration brings together Astellas’ global leadership in prostate cancer with our differentiated PROXTEN-enabled T cell engager. We chose to partner with Astellas because of their decade-long track record of successfully co-developing category-defining therapies, including Xtandi, the world’s number one prostate cancer drug. Metastatic castration-resistant prostate cancer, or mCRPC, remains a significant unmet need with a 5-year survival rate of only 30%, underscoring the urgency for new treatment options that can deliver even deeper, more durable disease control and improved quality of life. VIR-5500 is the most advanced dual-masked T cell engager currently under evaluation in prostate cancer. The foundational driver of the Astellas collaboration shaping our development strategy going forward is our Phase 1 data for VIR-5500. Johann de Bono shared an update from this study evaluating patients with advanced mCRPC as an oral presentation at ASCO GU in February. Today, I will highlight key takeaways from the data. For a more comprehensive update from the trial, please refer to our fourth quarter earnings call from February 23, 2026. Overall, the VIR-5500 data showed a favorable safety and tolerability profile with no observed dose-limiting toxicities. At the dose levels of 3,000 micrograms per kilogram and above, we saw mostly Grade 1 cytokine release syndrome, or CRS, defined as fever only. We did not observe any Grade 3 CRS at this dose, reinforcing the potential of the PROXTEN dual masking platform to widen the therapeutic index of our T cell engagers. We view the absence of high-grade CRS at our go-forward monotherapy dose, together with a lack of mandatory steroid premedication in our protocol, as a meaningful differentiator for 5,500. We believe that sparing steroids may help preserve T cell function and reduce treatment complexity for both patients and physicians. Collectively, these attributes support the potential for outpatient administration and could translate into significant clinical and commercial advantages over time. Importantly, this profile may support positioning 5,500 in both the pre- as well as post–radioligand therapy, or RLT, settings, offering flexibility across the treatment continuum and potential use in routine care settings relative to the specialized infrastructure required for RLT administration. Furthermore, the depth of PSA and RECIST responses we observed were particularly encouraging, with several patients sustaining responses for up to 27 weeks. Additionally, we saw emerging signs of durability up to 8 and 12 months, respectively, in patient cases with extended follow-up. One of the most compelling aspects of our data is that these deep responses were observed in heavily pre-treated patients with advanced poor-prognosis disease, including liver metastasis. This is historically the most difficult population to treat and resistant to immunotherapies, underscoring the clinical significance of the activity we are seeing. Additionally, we observed a complete response for a patient who previously relapsed on an actinium-based PSMA-directed radioligand. We view these findings as especially meaningful given historically poor outcomes and limited responsiveness of this patient population to subsequent therapies. Building on these encouraging Phase 1 dose-escalation monotherapy results, we have dosed a first patient in our Phase 1 dose expansion cohorts for VIR-5500 in late-line patients. This milestone represents an important step in evaluating VIR-5500’s best-in-class potential for people living with prostate cancer. In the monotherapy expansion cohorts, we are evaluating Q3-week 800, 2,000, and 3,500 microgram per kilogram step-up dosing. This study will measure safety and efficacy including PSA responses and objective response rate, or ORR, of VIR-5500 in patients with mCRPC who are refractory following treatment. These patients will have had exposure to multiple prior lines of therapy, including at least one second-generation androgen receptor pathway inhibitor and one taxane regimen. The expansion includes two distinct cohorts: patients who are naïve to prior RLT and patients who have previously received RLT in any treatment setting. Dose escalation of VIR-5500 in combination with enzalutamide continues in early-line mCRPC patients. We anticipate dosing the first patient in the combination dose expansion cohorts in both early-line mCRPC and metastatic hormone-sensitive prostate cancer over the coming months. Together, these cohorts highlight the potential of VIR-5500 across the prostate cancer continuum, including in the frontline setting. VIR-5500 has the potential to be a best-in-class T cell engager. We anticipate initiating our registrational Phase 3 program for VIR-5500 in 2027. These results provide validation of our broader platform, unlocking significant opportunities to develop next-generation masked T cell engagers in other solid tumor types. Turning now to the rest of our clinical-stage T cell engager programs. VIR-5818 is our PROXTEN-masked HER2-targeted T cell engager. We view this as a signal-finding study given the early stage of development and the basket design where multiple tumor types are evaluated in parallel. We expect to report preliminary response data evaluating VIR-5818 monotherapy and combination therapy with pembrolizumab in 2026. This update is intended to inform our understanding of dose and help identify which HER2-expressing populations may warrant further study, particularly in areas of high unmet medical need. For VIR-5525, our PROXTEN dual-masked EGFR-targeted T cell engager, Phase 1 study enrollment is progressing as expected. The study design incorporates learnings from 5818 and VIR-5500 to enable efficient dose escalation. We are evaluating both monotherapy and combination with pembrolizumab across multiple EGFR-expressing tumor types, including non-small cell lung cancer, colorectal cancer, head and neck squamous cell carcinoma, and cutaneous squamous cell carcinoma. We believe this program has the potential to address significant unmet medical need in these indications where existing EGFR-targeted approaches have limitations. Turning now to our hepatitis delta program. The hepatitis delta community is severely underserved, with approximately 180,000 actively viremic patients across the United States, UK, and EU based on a composite of high-quality epidemiology sources. In the U.S., the patient population is highly concentrated in major urban centers and can be supported by an efficient commercial approach with a targeted specialty sales organization focused on hepatologists, gastroenterologists, and infectious disease specialists. Overall, we expect our tobevibart plus elebsiran combination to have two clear advantages in chronic hepatitis delta versus our competitors. The first is that we are seeing potential best-in-class efficacy with a strong safety profile. The second is that our regimen is designed with once-monthly subcutaneous dosing with the potential for both at-home and in-office administration. For viral infectious diseases, clearing the virus is the key to improving long-term outcomes. KOLs in chronic hepatitis delta highlight undetectable virus as measured by “target not detected,” or TND, as the gold standard measure of viral clearance. Achieving undetectable HDV by this measure is the most stringent threshold available and means that the delta virus is completely cleared from the bloodstream. As the delta virus replicates so aggressively, patients need HDV to be completely undetectable for positive clinical outcomes and to avoid rebounds. Peer-reviewed evidence suggests that patients with hepatitis delta who achieve undetectable virus have significantly improved long-term clinical outcomes, including reduced progression to cirrhosis, hepatocellular carcinoma, liver transplantation, and death, compared with patients in whom virus remains detectable. These data support undetectable virus as a key clinically meaningful goal of antiviral therapy for patients with hepatitis delta. In January, we reported potential best-in-class efficacy in our Phase 2 SOLSTICE trial in patients with chronic hepatitis delta for a subset of patients at Week 96. Evaluable participants receiving the combination therapy of tobevibart and elebsiran showed increased and sustained viral suppression of HDV RNA versus treatment with the antibody alone. The data showed 88% of evaluable participants achieved undetectable virus, compared to 46% on tobevibart monotherapy alone. Additionally, we saw rapid onset of viral suppression, achieving 41% undetectable virus within 24 weeks. These results underscore the limited efficacy of hepatitis delta treatment with antibody monotherapy alone. In contrast, combining complementary mechanisms of action with tobevibart plus elebsiran raises the rate of undetectable virus to approximately 90%. Importantly, we see similar efficacy in cirrhotic patients, who will be a significant patient cohort at launch due to the delayed diagnosis of most hepatitis delta patients to date. The combination was well tolerated with no Grade 3 or higher treatment-related adverse events and no discontinuations. The second key differentiator is that tobevibart plus elebsiran will be administered only monthly, consisting of two subcutaneous injections administered at the same time. As a reminder, competitors’ lead regimens require either daily or weekly injections. For the hepatitis delta patient population, this frequency will be a significant challenge, so we see monthly dosing as an additional meaningful differentiator for our regimen. Additionally, due to the need for higher dosing frequency of competitive regimens, tobevibart plus elebsiran may have the potential to be the only product conveniently enabling both self-administration at home and physician administration in office. This is important because physicians have indicated that up to 20% of hepatitis delta patients might not be able to self-administer, so tobevibart plus elebsiran may be the only treatment available for this group of patients. Our hepatitis delta regimen has already been recognized by multiple global regulators with FDA Breakthrough Therapy and Fast Track designations, as well as EMA PRIME and orphan drug designation, underscoring both the unmet need and the strength of the data package. These designations provide ongoing engagement with both agencies and support a high level of confidence in our ability to achieve broad labels for our regimen. We are pleased to share that we will be presenting the complete 96-week SOLSTICE Phase 2 data in an oral presentation at the upcoming EASL 2026 annual meeting in Barcelona on May 29, 2026. We will also be presenting a poster of a 48-week subgroup analysis evaluating the impact of BMI on ALT normalization after successful viral control. As we look ahead to our ongoing registrational program, all three of our ECLIPSE studies are on track. ECLIPSE 1 enrollment is complete with approximately 120 participants randomized 2:1 to our combination therapy versus deferred treatment. The primary endpoint is a composite of undetectable virus as measured by HDV RNA TND plus ALT normalization at Week 48. We expect to report topline data from ECLIPSE 1 in the fourth quarter of this year. ECLIPSE 2 enrollment continues on track across multiple European sites. This study will enroll approximately 150 patients who are being randomized 2:1, evaluating the switch to our combination therapy in patients who have not adequately responded to bulevirtide. The primary endpoint for the trial is undetectable virus as measured by HDV RNA TND at Week 24. The strong enrollment momentum we are seeing in Europe reflects an important unmet need in patients previously treated with bulevirtide. For ECLIPSE 3, our Phase 2b head-to-head comparison, enrollment is complete, with approximately 100 patients randomized 2:1 to our combination therapy versus bulevirtide. The primary endpoint for the trial is undetectable virus as measured by HDV RNA TND at Week 48. In general, we view Gilead’s expected U.S. launch of bulevirtide as a positive for the hepatitis delta market overall and one that helps pave the way for next-generation therapies like ours. Hepatitis delta remains significantly underdiagnosed and undertreated, and the introduction of the first approved therapy in the U.S. should meaningfully raise disease awareness, expand screening, and establish treatment pathways among treating physicians. Complementing this, we have an experienced commercialization partner through our collaboration with Norgine, who holds an exclusive license across Europe, Australia, and New Zealand. Norgine’s established infrastructure in specialty pharma and hepatology positions us to maximize the commercial opportunity of our HDV regimen across these geographies. In summary, we have made exceptional progress across our entire clinical portfolio, and we believe these advancements leave us well positioned to deliver on our clinical and corporate objectives. With that, I will now hand the call over to Jason for our financial update. Jason O’Byrne: Thank you, Marianne. Before discussing the first quarter financials, I will share the latest news about our Astellas collaboration. We are pleased to report that the 5,500 global collaboration and licensing agreement closed on 04/15/2026 following expiration of the HSR waiting period. Upon closing, Vir Biotechnology, Inc. received a $75 million cash payment representing Astellas’ equity investment, and within 30 days of closing, we will receive a $240 million upfront payment. As a reminder, we are eligible to receive a $20 million manufacturing tech transfer milestone payment in 2027, will share global development costs 40% by Vir Biotechnology, Inc. and 60% by Astellas, and will split U.S. commercial profit/loss equally with Astellas. We are eligible to receive up to an additional $1.37 billion in development, regulatory, and ex-U.S. sales milestones, along with tiered double-digit royalties on ex-U.S. net sales. A portion of certain collaboration proceeds will be shared with Sanofi according to the terms of that licensing agreement. Overall, this deal provides immediate capital and significantly reduces our near-term development spend, preserving substantial long-term economic upside. The collaboration with Astellas can maximize the value of VIR-5500 through accelerated clinical development and global reach, potentially benefiting more patients and creating greater value for our shareholders. Shortly after announcing our global collaboration with Astellas and sharing updated Phase 1 data from the VIR-5500 program, we completed a follow-on equity offering. On 02/27/2026, the offering closed, and we received gross proceeds of approximately $172.5 million before deducting underwriting discounts and commissions and estimated offering expenses. We intend to use the proceeds from the offering to fund our share of the development costs for VIR-5500, to advance the broader T cell engager platform, and for working capital and other corporate purposes. Turning now to our balance sheet. We ended the first quarter with approximately $809.3 million in cash, cash equivalents, and investments, which includes the aforementioned proceeds from the follow-on offering. Subsequent to quarter end, we closed the Astellas collaboration; therefore, $315 million in proceeds from that transaction are not reflected in our 03/31/2026 cash position. Based on our current operating plan, and including the net effects of the recent Astellas agreement and capital raise, we expect our cash runway to extend into 2028, enabling multiple value-creating milestones across our pipeline. Now I will review our first quarter 2026 financial performance and overall financial position. R&D expense for the first quarter of 2026 was $108.9 million, which included $6.0 million of stock-based compensation expense. This compares to $118.6 million for the same period in 2025, which included $7.0 million of stock-based compensation expense. The year-over-year decrease was primarily driven by a $30 million payment to Alnylam in 2025, partially offset by hepatitis delta qualification batch manufacturing costs and, to a lesser extent, higher clinical expenses in 2026. SG&A expense for the first quarter of 2026 was $23.3 million, which included $6.1 million of stock-based compensation expense, compared to $23.9 million for the same period in 2025, which included $7.1 million of stock-based compensation expense. First quarter 2026 operating expenses totaled $132.3 million, representing a $10.3 million decrease compared to the same period in 2025. Net loss for the first quarter of 2026 was $125.7 million compared to a net loss of $121.0 million for the same period last year. Looking ahead, we will continue disciplined allocation of capital, prioritizing investments in those programs with the greatest potential for meaningful patient benefit and value creation. With that, I will now turn it back over to Marianne to close the call. Marianne De Backer: To close, we are exceptionally well positioned for long-term value creation at this inflection point. Since December 2025, the combination of our collaborations with Norgine and Astellas, together with a successful financing, has generated over half of $1 billion in capital, significantly strengthening our balance sheet. With the closing of our global collaboration with Astellas this quarter, we now have an established partner to advance VIR-5500 aggressively across the prostate cancer landscape while maintaining disciplined capital allocation. Overall, the combination of potent antitumor activity and a favorable safety profile underscores VIR-5500’s potential as a best-in-class T cell engager for the treatment of prostate cancer. Beyond our clinical programs, we are steadily advancing seven preclinical T cell engager assets that utilize the PROXTEN platform and broaden our pipeline’s optionality, positioning us well to generate the next wave of value creation. At the same time, our hepatitis delta program continues to generate compelling and increasingly differentiated clinical data with multiple near- and mid-term catalysts ahead across our ECLIPSE studies. Taken together with our progress in oncology, this momentum underscores the breadth of our scientific platforms and our ability to execute with focus, urgency, and discipline. Looking ahead, our priorities are clear: to deliver rapid, high-quality clinical execution, advance multiple expansion and registrational-enabling studies, and deploy capital thoughtfully in ways that maximize long-term value while keeping patients at the center of everything we do. With that, I will turn the call over to Kiki to begin the Q&A session. Kiki Patel: Thank you, Marianne. This concludes our prepared remarks. We will now open the call for questions. Joining me for the Q&A are Marianne and Jason. Please limit questions to two per person so that we can get to all of our covering analysts. I will turn it over to you, operator. Operator: Thank you. We will now begin the question and answer session. Star one to ask a question. We ask that you pick your handset up 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. Our first question comes from Paul Choi with Goldman Sachs. Paul Choi: Good afternoon, everyone, and thanks for taking our questions. My first question is on 5,818 in the HER2 setting. Can you comment on your level of interest in future development, particularly in HER2-positive breast cancer? It is not listed among the tumor types in your quarterly deck here, and so I am just curious, given the number of available therapies for that particular tumor type, what is the criteria from your upcoming dataset for potential development in that tumor type? And then I had a follow-up question. Marianne De Backer: Thank you, Paul, for that question. We will be sharing data on our 5,818 program in the second half of this year, and this will be both for our monotherapy dose escalation and dose escalation in combination with pembrolizumab. As to future development, we will, at that time, be able to provide a better picture as to what future expansion cohorts could be. Specifically to your question on breast, I would say that obviously the bar is high, but do keep in mind that this drug class, for example like in HER2, has a 1% mortality rate, so there is certainly still prospect to come up with better treatments. Again, we will be sharing data in the second half of the year and will then give a prototype of where we see the program heading. Regarding your follow-up question on 5,500 and potential development in earlier treatment settings, we already have a dose escalation ongoing for early-line 5,500 combined with an ARPI. Together with Astellas, our collaboration partner, we are planning to start an expansion cohort in the same setting, a combination of VIR-5500 with enzalutamide. That is expected in the coming months. Paul Choi: Okay. Great. Thank you for that. Operator: Your next question comes from Roanna Clarissa Ruiz with Leerink Partners. Your line is open. Please go ahead. Michael Ulz: Hi. This is Michael on for Roanna. Thank you for taking our question. Regarding 5,500 late-line mCRPC monotherapy expansion cohorts, what would constitute a clear signal as a green light to initiate Phase 3 in 2027? Are you anchoring on PSA-50, PSA-90, or RECIST or PFS, something like that? And I also had a question about the underlying biology for PROXTEN protease cleavage. How tumor-specific is the protease activation profile across different tumor types? For example, are you seeing differential cleavage kinetics in prostate versus colorectal or NSCLC that might affect the therapeutic index? Marianne De Backer: We have dosed the first patient in the baseline expansion cohort for VIR-5500 monotherapy. In that expansion cohort, we are going to explore more in-depth both pre- and post–radioligand therapy; that will be additional data we will be gathering, as we only had a limited set of such patients in our initial cohort on which we reported data on February 23, 2026. It is going to be the totality of the data—PSA, RECIST, rPFS—and we will have a fuller dataset to decide on next steps. Our goal, pending data, is to start pivotal trials in 2027. Regarding PROXTEN biology and protease cleavage, one of the founders of the company that was acquired by Sanofi, from which we licensed the technology, has been working in this field for over 20 years. The protease-cleavable linker is really a promiscuous linker across different families of proteases to ensure activity across a broad set of tumor types. This design supports consistent activation and helps drive a favorable therapeutic index across indications. Operator: Your next question comes from Cory Kasimov with Evercore. Analyst: Hey. This is Josh Gazzara on for Cory. Thanks for taking our question. Maybe one on HDV. As you approach the pivotal HDV data, what are your latest thoughts on pricing there? And then a quick follow-up on 5,500: especially in the late-line castration-resistant setting, is there a minimum durability you and Astellas are looking for before you move into a Phase 3—a specific number or competitive threshold? Marianne De Backer: Thank you, Josh. Hepatitis delta is an orphan disease. There are a number of anchor points for price that we can point to. The first is the price of bulevirtide in Europe, which varies somewhere between $60,000 and $165,000 gross price. You could also look at the price of bulevirtide in Canada, which was set at, I believe, $115,000. Across your fellow analysts, I see estimated prices vary somewhere between $150,000 and $250,000. We think that is very adequate for a severe orphan disease where we would be delivering substantial patient benefit. On durability for 5,500, we will be looking at the totality of the data rather than a single threshold. Several T cell engagers have shown durable responses. Our dataset is still a little early, but we have observed a number of patients with confirmed partial responses beyond 27 weeks, and we have case examples of one patient on treatment for 8 months and another for a year and continuing. We will look for greater consistency across the broader expansion cohort. Operator: Your next question comes from Alec Stranahan with Bank of America. Your line is open. Please go ahead. Analyst: Hey, guys. This is Matthew on for Alex. Thanks for taking our questions, and congrats on the progress. Two for us on competitive landscapes. First, for HDV: just curious your thoughts on Mirum’s data that came out recently and whether that changes your thoughts on your opportunity or the competitive landscape. And secondly, for EGFR T cell engagers, a competitor recently discontinued development of their dual-masked program—what gives you confidence that your strategy will pan out where others have failed? Marianne De Backer: On your first question, as I laid out in the introduction, we and key opinion leaders in this field strongly believe that what really matters in a viral disease is to get rid of the virus, measured by HDV RNA target not detected. For our monthly regimen of tobevibart and elebsiran at 48 weeks—our primary endpoint—we achieved about 66% TND, increasing from 41% at 24 weeks to 66% at 48 weeks and then to 88% at 96 weeks. We did not see this increase for our antibody monotherapy, which was about 30% TND at 24 weeks and then plateaued around 50%. Mirum’s monthly therapy appears to show only 5% TND, which may not be viable; for their weekly 300 mg regimen, they are showing 30% TND at 24 weeks. From a viral efficacy perspective, we believe we have a potentially superior, best-in-class regimen. For ALT normalization, results across different regimens appear similar in the roughly 40–50% range; we had 47% at 24 weeks and Mirum reported between 40% and 45%. Again, we believe viral elimination to undetectable is what really matters, and there we clearly have superior data. As to EGFR, yes, Janssen discontinued their EGFR T cell engager. The musculoskeletal issues reported as dose-limiting toxicity were unexpected and something we will watch. We strongly believe our masked T cell engagers are differentiated. Our masking technology uses steric hindrance—the same PROXTEN mask across all clinical programs—so we do not need to redesign a new mask every time. We can translate learnings across programs. With VIR-5500, the masking technology allows dosing much higher, which can deliver a better therapeutic index. Our masking approach is fundamentally different. Operator: Your next question comes from Philip Nadeau with TD Cowen. Your line is open. Please go ahead. Philip Nadeau: Good afternoon. Thanks for taking our questions. Two from us. First on 5818: you referenced the dose-escalation data in the second half of the year. Can you give us some sense of what will be disclosed at that time—number of patients, duration of follow-up, measures that you will talk about, and what tumor types will be in the update? Second, on HDV, your presentation cites about 104,000 patients with HDV in the U.S. and Europe. How many of those do you estimate are diagnosed and under the care of a physician, so could be amenable for therapy shortly after launch? Marianne De Backer: For 5818, we will be sharing data from both the monotherapy dose escalation and the dose escalation in combination with pembrolizumab in the second half of the year. We will provide the number of patients at that time. The 5818 trial is different from our 5,500 trial; it is a basket trial with a wide variety of tumor types. We have already shown initial results, for example in metastatic colorectal cancer, where we had a 33% confirmed partial response. Where we have enough patients in a given tumor type, we will share information on responses and tumor shrinkage. Importantly, we view 5818 as a signal-seeking trial to inform potential expansion cohorts. On hepatitis delta, we estimate about 61,000 actively viremic patients in the United States. It is a hugely underdiagnosed disease; we believe only about 10–15% are diagnosed at this time. Once a regimen becomes available, that could change. Diagnostic testing is getting better and is relatively affordable: Medicare reimbursement rates are about $17 for an antibody test and about $43 for a quantitative RNA test. The current challenge is patients often need two or three visits: first for an HBV test, then an antibody test, then an RNA test. Streamlining can help. In Europe, reflex testing—immediately testing for hepatitis delta on the same sample when a patient tests positive for hepatitis B—has increased diagnosis rates substantially. If such guidelines are adopted in the U.S., it could drive a significant increase. Operator: Your next question comes from Etzer Darout with Barclays. Your line is open. Please go ahead. Analyst: Hi. This is Luke on for Etzer. Thanks for taking our question. For HDV, with the ECLIPSE 1 trial reading out in 4Q and then you have ECLIPSE 2 and 3 reading out in 1Q next year, assuming a positive ECLIPSE 1 trial, is that going to be enough to support a BLA filing, or do you need to wait for 2 or 3 to do that? And then on 5,500, the partnership announcement with Astellas said they will be responsible for all development activities after Phase 1. What kind of visibility will you have into those trials as they enroll? Marianne De Backer: On the collaboration with Astellas, it is a global co-development and co-commercialization agreement with significant joint governance. We have a joint development committee, joint steering committee, joint manufacturing committee, joint IP committee, joint finance committee, and so on, with equal representation and joint decision-making, with standard escalation paths. We will remain very intricately involved. We are running the Phase 1 trials now, with Astellas very involved as well. Operational ownership of a given trial matters less than pre-alignment on the clinical development plan and budget, and we are set up to make joint, swift decisions. Regarding filing requirements, our guidance is that we would need a combination of ECLIPSE 1 and ECLIPSE 2 for filing. We will have ECLIPSE 1 data in 4Q 2026, and ECLIPSE 2 in 1Q 2027. Operator: Your next question comes from Sean McCutcheon with Raymond James. Your line is open. Please go ahead. Sean McCutcheon: Hi, guys. Just one quick question from us. You talked a bit about competitor data in HDV, but could you speak to the component of a competitor running an all-comer study with a meaningful proportion of patients with elevated ALT above five times the upper limit of normal, and any potential read-through to how you are seeing the patient population? Marianne De Backer: The estimation is that maybe about 5% of delta patients have an ALT above 5x the upper limit of normal. These very high ALT levels can have a lot of different reasons. We and KOLs strongly believe that the real measure of liver damage is cirrhosis status, and that is why we have enrolled more than 50% of patients in our trial who are CPT-A cirrhotic, and we have shown really good results—similar to slightly better—in those patients. Operator: Your next question comes from Joseph Stringer with Needham. Your line is open. Please go ahead. Joseph Stringer: Hi. Thanks for taking our questions. For the Phase 3 ECLIPSE 1 trial in HDV, what is your current thinking on the bar for success on the 48-week primary composite endpoint? Would replicating the approximately 38% response rates that you saw in Phase 2 set you up for success here? Marianne De Backer: ECLIPSE 1 compares treatment with our regimen of tobevibart and elebsiran versus deferred treatment. It is almost like a placebo-controlled trial, which makes it very likely to be successful. The bar for success is really low given the endpoint is TND plus ALT normalization. For example, for bulevirtide 10 mg in Phase 3, the level of TND you can reach is about 20%, and it was 12% for the 2 mg dose. So the bar for success is not that high. We believe we have a combination of best-in-class viral efficacy and ALT normalization that appears similar across regimens. First, patients who will be on bulevirtide will have to inject themselves daily, and it is a chronic treatment. Chronically, every single day, they will need to inject themselves, and for bulevirtide 10 mg, the expected level of TND you can reach is about 20%. In contrast, our combination regimen of tobevibart and elebsiran is a monthly subcutaneous administration with a TND at 48 weeks of 66%. The chances of success for patients are much higher, and convenience is also much better. We are also running ECLIPSE 2, which looks at bulevirtide failures—patients who have not achieved adequate response—so we will be prepared at launch to have both options available for at-home and in-office administration. Kiki Patel: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Hello, and welcome to Fortinet, Inc.'s first quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, we will conduct a question-and-answer session. Please be advised that this call is being recorded. I would now like to hand the call over to Anthony Luscri, vice president of investor relations. Please go ahead. Anthony Luscri: Thank you. Good afternoon, and thank you for joining us on today's conference call to discuss Fortinet, Inc.'s first quarter 2026 financial results. Joining me on today's call are Ken Xie, Fortinet, Inc.'s founder, chairman, CEO, Christiane Ohlgart, our CFO, and John Whittle, our COO. Ken will begin our call today by providing high-level perspective on our business. Christiane will then review financial results for 2026 before providing guidance. During the Q&A session, we will ask that you please limit yourself to one question and one follow-up question to allow others to participate. Before we begin, I would like to remind everyone that on today's call, we will be making forward-looking statements, and these forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those projected. Please refer to our SEC filings, in particular, the risk factors in our most recent Form 10-K and Form 10-Q for more information. All forward-looking statements reflect our opinions only as of the date of presentation, and we undertake no obligation and specifically disclaim any obligation to update forward-looking statements. Also, all references to financial metrics that we make on today's call are non-GAAP unless stated otherwise. Our GAAP results and GAAP-to-non-GAAP reconciliations are located in our press release and in the presentation that accompany today's remarks, both of which are posted on our Investor Relations website. As a reminder, this is a live call that will be available for replay via webcast on our Investor Relations website. The prepared remarks will also be posted on the quarterly earnings section of our Investor Relations website following today's call. Lastly, all references to growth are on a year-over-year basis unless noted otherwise. I will now turn the call over to Ken. Ken Xie: Thank you, Anthony, and thank you to everyone for joining our call. We are very pleased with our excellent first quarter result, exceeding our guidance through strong execution and broader-based demand. As a result, billings grew 31%, total revenue increased 20%, and product revenue grew 41%. Non-GAAP and GAAP operating margin were very strong at 36% and 31%. With GAAP operating margin and revenue growth totaled together at 51%, one of the highest in the industry. We also generated a record $1 billion of free cash flow, highlighting the strength and durability of our business model. GAAP earnings per share increased 29%, demonstrating our commitment to strong shareholder return. The convergence of networking and security approach Fortinet, Inc. has led for 26 years is accelerating in the AI era. Customers are adopting Fortinet, Inc.'s platform with secure networking, unified SASE, and security operations built on a single FortiOS operating system, enabling expansion across many use cases. By delivering all core SASE capability natively integrated in one operating system, our SASE firewall significantly reduces cost for customers. Innovations such as FortiOS 8.0 with its rich integrated functionality and FortiASIC technology deliver higher secure computing performance at significantly lower cost. And our direct supply chain management continues to differentiate Fortinet, Inc. and support market share gain. As AI drives strong demand for SASE and firewalls, secure networking billings grew 32%, outperforming the broader market. Today, we announced the 3500G and 400G series, delivering significant performance improvement over previous generations, further strengthening Fortinet, Inc.'s leadership. OT security accelerated in the quarter with OT billings growth over 70% as customers prioritized protecting critical infrastructure amid heightened threat. Unified SASE billings grew 31%. Our differentiation is powered by three key advantages: single operating system across next-gen firewall, SD-WAN, and SASE; our own global cloud infrastructure delivering better security and performance at roughly one-third the total cost of ownership of peers; and a much larger total addressable market, especially in sovereign and private SASE, which allow customers to deploy SASE in their own environment to meet data sovereignty and regulatory requirements. Beyond secure networking and SASE, AI is rapidly expanding opportunity in security operations, as AI-driven security operations billings grew 23%, supported by more than 20 AI-enabled solutions on our platform as customers consolidate vendors and simplify operations. Finally, given our strong results and confidence in the business, we are reiterating our 2026 guidance. We continue to expect balanced growth, strong cash generation, recurring revenue, and a shareholder-focused long-term capital allocation strategy, while consistently delivering GAAP profitability since IPO. As AI increases the demand for security, our platform approach continues to differentiate, supported by a strong direct operations model that enables us to turn supply chain challenges into opportunity to gain market share. I would like to thank our employees, customers, partners, and suppliers worldwide for their continued support and hard work. I will now turn the call over to Christiane. Christiane Ohlgart: Thank you, Ken, and good afternoon, everyone. As Ken noted, we delivered a strong first quarter, exceeding the high end of our guidance across billings, total revenue, operating margin, and earnings per share. The success reflects broad-based demand and strong execution across customer types, industry verticals, our geos, and all three pillars. Total billings grew 31% to $2.09 billion driven by broad strength across secure networking and unified SASE. Our large enterprise segment was particularly strong. Secure networking billings grew 32%, driven by robust FortiGate demand as customers expanded protection across operational technology environments, contributing to OT billings growth of over 70%. Unified SASE adoption continued to build during the quarter with billings growing 31% driven by strength in SD-WAN and FortiSASE. FortiSASE expansion within our customer base also remained strong, with 18% of our large enterprise customers now having purchased FortiSASE, an increase of over 45%. AI-driven security operations billings grew 23%, highlighting our continued platform expansion within our installed base. Turning to revenue, total revenue grew 20% to $1.85 billion with product revenue increasing 41% to $645 million as customers shifted toward higher-performance products. This included a number of AI-related deployments where customers invested in FortiGates to support increased throughput, segmentation, and security requirements across AI infrastructure. Technology upgrades, upselling, and expansion into new use cases drove strong growth in both hardware and software. We again benefited from our strong supply chain execution. Recent pricing changes had a low single-digit impact on product revenue growth. Service revenue grew 11% to $1.21 billion, while service billings growth reaccelerated to 27%, and deferred revenue increased 15%, driven in part by SecOps ARR growth. We view service billings growth, deferred revenue, and SecOps ARR growth together with accelerating product revenue as leading indicators of future services revenue. Stepping back, these results reflect both strong execution in the quarter and durable demand drivers that continue to shape customer priorities as customers invest in and upgrade their network security solutions to defend against sophisticated attacks that are growing in both speed and complexity due to the availability of AI tools. AI is expanding the attack surface and increasing performance requirements, which is driving higher and more durable security spend across networking, SASE, and security operations. Our strong product revenue and service billings trends and outlook continue to be driven by key tailwinds, including the ongoing convergence of security and networking, rising customer investments and demand to secure AI infrastructure as traffic, segmentation, and performance requirements increase, and accelerating IT and OT convergence as customers recognize growing exposure across critical infrastructure. These drivers translated into strong demand this quarter, particularly in large enterprises, where both the number of deals greater than $1 million and total deal value grew over 60%. We saw strong growth in both Europe and the U.S. Looking ahead, we see these dynamics reinforced by durable tailwinds that support continued platform adoption over time. Tailwinds include vendor consolidation, ongoing technology upgrade cycles, and the continued expansion of enterprise attack surfaces across cloud, OT, and AI environments. In OT specifically, we are seeing strong demand driven by heightened ransomware and nation-state activity alongside rapid digitalization as organizations seek to deploy AI. These same dynamics are extending into SASE, where customers increasingly require flexibility to meet data privacy, sovereignty, and regulatory requirements. We support both cloud-based SASE and sovereign SASE, enabling enterprises and service providers to deploy SASE within their own data centers when required. Demand for our sovereign SASE continues to be strong, and no major SASE competitor currently offers a comparable solution. Rising cyber risk, heightened regulatory scrutiny, and growing data sovereignty requirements while dealing with economic pressures are further accelerating customers to adopt platform-based approaches. At the same time, rapid AI adoption and increased geopolitical uncertainty are expanding the cybersecurity TAM as organizations prioritize resilience, sovereignty, and consistent protection across increasingly complex and distributed global infrastructures. Importantly, these trends align with the reasons of our platform approach. Our platform approach continues to resonate. Fortinet, Inc.'s platform approach is differentiated because secure networking, unified SASE, and AI-driven security operations are all built on the single operating system FortiOS. Unified architecture enables customers to deploy security consistently across private, public, and hybrid multi-cloud environments, as well as across hardware, software, and SaaS form factors, while supporting seamless expansion across use cases. As AI rapidly expands the attack surface, customers are prioritizing integrated platforms that share telemetry and reduce operational complexity, accelerating vendor consolidation. Against this backdrop, our strong network security foundation remains a core differentiator, driving adoption of SD-WAN, SASE, and security operations and supporting continued wallet share expansion as customers simplify architectures and consolidate vendors. This contributed to growth of 28% in unified SASE and SecOps combined, with momentum continuing across our more services-rich pillars. We are also introducing a new SD-WAN and SASE services bundle designed to broaden adoption and further support services revenue over time. We also benefit from durable competitive advantages, particularly as performance requirements increase. Our proprietary ASIC technology and integrated operating system deliver superior performance and lower total cost of ownership, which is increasingly important in high-throughput environments as customers scale AI-driven traffic inspection. Finally, customer demand remained broad-based across segments, demonstrating the durability of our platform strategy, with over 6.6 thousand new organizations selecting our FortiOS platform during the quarter, reinforcing the breadth of demand across SMB, mid-market, and enterprise customers. Overall, these results reflect consistent demand drivers and durable long-term trends. As the market continues to evolve toward platform-based security architectures, we believe Fortinet, Inc. remains well positioned to take share and deliver sustained growth and long-term shareholder value. Now I would like to highlight some key seven-figure deals that demonstrate our market leadership and customer expansion. First, a cloud infrastructure provider focused on GPU compute for AI workloads selected Fortinet, Inc. to secure a new AI data center as part of its continued expansion. The customer chose our FortiGates to deliver high-performance perimeter protection, segmentation, and secure connectivity for a new production environment. The win was driven by Fortinet, Inc.'s ability to provide scalable, high-throughput security aligned with the customer's standardized architecture, enabling rapid deployment of new capacity as demand for accelerated compute continues to grow. In another AI-related deal, Fortinet, Inc. was selected for the initial phase of an AI data center project in the Middle East for a leading generative AI company. This win positions Fortinet, Inc. as a key security partner for next-generation AI data center infrastructure, which demands significant scale, performance, and architectural flexibility. The customer selected Fortinet, Inc. for the strength of our security architecture to address the complexity of securing high-performance AI environments. This deployment also reinforces the importance of standardizing Fortinet, Inc. security solutions to enable consistent, scalable, and efficient protection as AI data center deployments continue to expand. Next, a multinational energy company selected Fortinet, Inc. to standardize and secure its network through the deployment of our full SD-Branch solutions across more than 3 thousand locations, alongside OT security for an additional 300 global sites. The win reflects strong customer confidence in our ability to support large-scale distributed infrastructure environments with a unified approach to networking and security. By consolidating networking and security onto a single platform, the customer simplified operations while improving resilience and highlights Fortinet, Inc.'s ability to scale securely within complex mission-critical infrastructure environments. The customer is also exploring an expansion into FortiSASE, highlighting the opportunity to further extend secure access capabilities across the enterprise. Lastly, a global manufacturer selected our 40 thousand users as part of a strategic initiative to modernize its remote access environment. The win was driven by our lower total cost of ownership and commitment to ongoing feature development, positioning us ahead of the competition. The customer chose FortiSASE for its unified FortiOS platform, which provides a single security policy across FortiSASE and FortiGates, with globally distributed PoPs for simpler, consistent protection across on-premises and cloud environments, enabling them to build a scalable security architecture. Turning to margins and cash flow, non-GAAP gross margin of 81% was better than expected, which is impressive given the strong product revenue growth of 41% and the related mix shift toward product. Our GAAP gross margin was also strong at 80.3%. Non-GAAP operating margin of 35.8% was a first-quarter record, up 160 basis points and exceeded the high end of the guidance range, mainly due to better-than-expected revenue growth and continued cost management. Our GAAP operating margin of 31.4% continues to be one of the highest in the industry. Non-GAAP earnings per share increased 41% to $0.82, while GAAP earnings per share grew 29% to $0.72, significantly outpacing our top-line growth, reflecting high-quality earnings, supported by disciplined stock-based compensation and continued return of capital over the past year. Free cash flow was a record of $1.01 billion and adjusted free cash flow was $1.07 billion, up 27% and represented a margin of 58%. We repurchased 10.6 million shares of common stock for $827 million during the first quarter, and an additional 1.9 million shares for $146 million quarter to date. The remaining share repurchase authorization as of today is approximately $766 million. Now moving on to guidance. As a reminder, our second quarter and full-year outlook, which are summarized on Slides 30 and 31, are subject to the disclaimers regarding forward-looking information that Anthony mentioned at the beginning of the call. Consistent with our disciplined and prudent approach to guidance, our strong first-quarter execution supports a higher second quarter and full-year outlook. We are raising our full-year guidance across all top-line metrics including billings, revenue, and service revenue, while managing the second half of the year on a quarter-by-quarter basis. For the second quarter, we expect billings in the range of $2.09 billion to $2.19 billion, which at the midpoint represents growth of 20%; revenue in the range of $1.83 billion to $1.93 billion, which at the midpoint represents growth of 15%; non-GAAP gross margin of 79.5% to 80.5%; non-GAAP operating margin of 33% to 35%; non-GAAP earnings per share of $0.72 to $0.76, which assumes a share count between 736 million and 740 million; infrastructure investments of $50 million to $100 million; a non-GAAP tax rate of 18%; and cash taxes of $160 million to $180 million. For the full year, we expect billings in the range of $8.8 billion to $9.1 billion, which at the midpoint represents growth of 18%; revenue in the range of $7.71 billion to $7.87 billion, which at the midpoint represents growth of 15%; service revenue in the range of $5.09 billion to $5.15 billion, which at the midpoint represents growth of 12%. We continue to expect services revenue growth to pick up in the second half of the year, driven by accelerating product revenue growth, a key leading indicator. We expect non-GAAP gross margin of 79% to 81%, non-GAAP operating margin of 33% to 36%, non-GAAP earnings per share of $3.10 to $3.16, which assumes a share count of 743 million to 749 million, infrastructure investments of $350 million to $550 million, a non-GAAP tax rate of 18%, and cash taxes of $400 million to $450 million. I will now hand the call back over to Anthony to begin the Q&A session. Anthony Luscri: Thank you, Christiane. As a reminder, during the Q&A session, we ask that you please limit yourself to one question and one follow-up question to allow others to participate. Operator, please open the line for questions. Operator: Thank you. If you would like to ask a question, please click on the raise hand button at the bottom of your screen. When it is your turn, you will hear your name called and receive a message on your screen that you may unmute yourself. We will allow one moment for the queue to form. Our first question comes from Shaul Eyal at TD Cowen. Your line is open. Please unmute and ask your question. We will now open the call for questions. Shaul Eyal: Thank you. Good afternoon, guys. Congrats on the quarter and the guidance. Ken or Christiane, what drove the strength this quarter? But probably more so, what provides you with the confidence in this strong guidance? It would appear that even second quarter could be prudent, to put it very mildly. Just curious as to your thoughts about it. Ken Xie: Shaul, great question. Thank you. First, definitely AI is a tailwind to drive the growth. And for us, we also have invested in AI for, like, 15 years, with over 500 patents and a lot of internal usage and also building of the product. So that is where we prepared for this growth, also from the operations side, with our direct manufacturing operations, inventory, all these things. So we see AI as an opportunity. Also, AI accelerates the convergence of our network and our security. Like I mentioned months ago in the forum, this accelerates, which is why a lot of companies need to upgrade their internal network, their servers, data centers, all these things. So we see this growth probably will be more long term. At the same time, we differentiate ourselves a lot with other competitors. I actually put a slide on the investor presentation, Slide 10, going back almost 30 years with all these different point solutions compared to integrated solutions. Fortinet, Inc. is probably the only company where, for every major new demand for network security, we in-house develop a solution, including SASE. At the same time, we also integrate well with all the previous functions, and we keep improving on all this with our ASIC acceleration and our own infrastructure to deliver better security at lower cost. I think all this drives the company to keep gaining market share in the last 20-plus years. This time, we definitely want to leverage this opportunity, whether AI or supply chain, and we feel we are gaining market share very quickly right now. Saket Kalia: Okay. Great. Hey, guys. Thanks for taking my questions here, and great start to the year. Ken, maybe for you, the security environment feels different after Methos. Maybe the question is, because I know you spend a lot of time with customers, what are customers saying to you about how they are reacting, and what parts of Fortinet, Inc.'s portfolio do you think could benefit most? Ken Xie: I keep telling customers, you need to use AI to secure AI. It is interesting and definitely exposes a lot of vulnerabilities, and you have to react very quickly and leverage AI to react in operations. So for the long term, security operations, where we have over 20 products using AI and building AI, is really helping customers. On the other side, to meet AI demand, there is also a lot of infrastructure buildout. That is why we see, especially as we are the only leader in the OT area, OT grew 70%. It is very strong growth, because OT really secures the bottom few layers of the AI five-layer cake, whether the energy level, infrastructure level, all leveraging OT security. We are probably the only leader in that space, giving us strong growth. We also see customers start to realize the value of integrating more functions into a single OS, our ASIC advantage, and also the supply chain operation model we have. It is all long-term investment, but it is starting to pay off now. Saket Kalia: Makes sense. Christiane, maybe for you for my follow-up. I would love to get a little bit of a historical perspective. Back in the early 2020s, post COVID, we had the benefit of some early ordering which then created a bit of an air pocket in later quarters. How do you think about how much early ordering maybe helped this quarter, and what gives you the confidence that this also does not create an air pocket at some point in the future? Christiane Ohlgart: I think the situation in 2026 is a little bit different from COVID. The threat landscape is accelerating significantly. During COVID, there were some new requirements where companies needed to secure remote access and digitize their business a little bit more. Now it is about significantly more threats. So the demand for our products is going to continue as AI data centers are going to be built out and as customers are deploying AI internally. We see significant tailwinds for our business and for our products specifically. Ken Xie: Also, on Slide 25 of the presentation, you can see during COVID we were the one gaining a lot of market share compared to peers. We feel this is an opportunity because our operations model and long-term investments have more advantage than competitors. We do not believe anyone can predict how long this supply chain situation will last, but we feel we have a strong direct operations model, which is better than pretty much all other competitors. A lot of long-term investments show advantages now. Slide 25 shows during COVID five or six years ago we were gaining a lot of market share. Even with some digestion in 2024 or early 2025, we still kept gaining share. We feel this is another opportunity that works better for us than for competitors. Rob Owens: You guys, thanks for taking my question. Ken, I appreciate the throughput and segmentation arguments relative to AI, but I want to dovetail a little bit more on Saket’s question around the 20 or so products that use AI within your portfolio. Are there a couple things that customers are honing in on that are driving that sense of urgency for them right now? Ken Xie: Christiane gave a few cases about supporting some AI data center buildout. Initially, it is like the five-layer cake. You need to have the lower layers built up first, from energy and infrastructure, and then secure the data center. After they build out some AI infrastructure, the security needs to come in, especially when the application starts to deploy. When companies leverage AI, there is a lot of opportunity for security companies to help them use AI to secure AI. We are ahead of competitors with long-term investment, patents, and investments in R&D, G&A, support, and product. I have an engineering background and love new technology. In the last 30 years, as on Slide 10, we are the only one to internally build new technology, meet challenges, integrate together, while most competitors have to go through acquisition to meet new demand. That gives us confidence to continue growing faster and gaining market share. Christiane Ohlgart: What we hear from customers that are not building out their own AI infrastructure and are more on the AI use side, they are most concerned about traffic flows and shadow AI. A lot of our products can help them, and with FortiOS improvements and upgrades, there is a lot of interest in what our existing products can do and which additional products, like FortiAIGate, they can deploy to have more visibility, transparency, and monitoring of traffic flows. Brad Zelnick: Excellent. Thank you so much for taking the question. I wanted to follow up on what Rob had asked and Ken's comments about the AI data center, and Christiane, what you shared about the win in the Middle East in securing AI infrastructure. What are you seeing specifically in this market for securing AI data centers? Who are you competing with? Who are you partnering with? How long are the cycles? And how much of the pipeline for these opportunities is contributing to the strong guidance that you have given us for the year? Ken Xie: If you look at Fortinet, Inc.'s technology, we are the only cybersecurity company that builds our own ASIC chip from day one. That gives us much better performance and lower cost, both on computing power cost and energy cost, fitting data center internal segmentation well. None of our competitors can compete with us on performance and cost, including the two products we announced today. On average, on the top functions we use, we have about 3x to 5x better performance for the same cost and much lower energy. That fits well for bigger infrastructure data center buildout and internal segmentation. AI-generated traffic generates a lot of additional east-west traffic, and all the servers or even different departments need additional security for internal segmentation. We see strong demand not just in data centers but also for internal segmentation to get better manageability and visibility for AI traffic. Christiane Ohlgart: Related to your question on pipeline building, my comments around the customer wins were also about reference architectures and scalability. Most providers that are starting to build out data centers are creating their reference architecture to build out more as demand increases for their services. We are confident this creates a tailwind for us. Ken Xie: Especially for technology like ASIC, systems, and hardware, these are more long-term investments compared to software, where most other security companies focus. Now is the time to see the long-term hardware and ASIC investment benefits. Customers appreciate the hardware and ASIC now. Brad Zelnick: Thanks, Ken. It reminds me of the heritage of Fortinet, Inc. and early success in the service provider market segment and why it is so important today in AI data centers. Maybe a quick follow-up for you, Christiane, to get your latest thoughts on memory pricing and any further price increases you might be contemplating throughout the year, and specifically what is baked into the guidance? Christiane Ohlgart: From a guidance perspective, we have baked in a low single-digit amount specifically into product. Regarding pricing, we have said multiple times that we are trying to maintain gross margin. As our component costs increase, we contemplate pricing actions, but we will also bring it down again when we do not have the pressures anymore. Ken Xie: Our policy is not like some other companies using these opportunities to increase margin. We want to maintain a healthy margin. When our costs increase, we adjust pricing, but when costs come down, we also lower prices to maintain the same margin. That was the policy five years ago in the last supply chain, and it is the same during this memory shortage. Because we have a much bigger quantity than other competitors—we have almost 60% market share on unit shipments of network security systems—and with our direct manufacturing operations, we prepare better, operate better, and negotiate better than competitors. We feel it is a chance to gain market share again like we did five years ago. Tal Liani: You got me back. You cannot get rid of me. I have everyone asking about AI. I am going to ask about the other thing. The most surprising part of your result is actually the billings growth of legacy—32% year-over-year growth in secure networking billings. Check Point said their firewall growth decelerated and that the market is weaker. What are the firewall trends? What drives this 32% growth in secure networking billings, and how sustainable is it? Ken Xie: Tal, I prepared Slide 10 in the presentation for you. We go back 30 years. The most growth in network security comes from FortiGate. Every year you need to meet new functional demand. We are probably the only company that in-house keeps meeting new function development, from early UTM and next-gen firewall, to sandbox, to SD-WAN, SASE, to today’s AI and quantum computing. Once you innovate, you also need to integrate. FortiOS 8.0 integrates about 30 functions. You also need to keep improving—that is where the ASIC comes in—to improve performance and add secure computing, and at the same time invest in infrastructure to make it more secure and lower cost. I use the three I’s to describe what happened in network security over 30 years: innovation, integration, and improvement. Some competitors cannot come up with new functions quickly or integrate; they have to go through acquisitions and become multi point-solution stacks. The blue area shows many companies, including some competitors, needing multiple solutions to meet one FortiGate/FortiOS solution we have, whether SD-WAN, SASE, and other functions. There are still many point-solution providers, including in SASE—they cannot offer customers total security infrastructure. The benefit of a single OS with integration, new functions, ASIC improvements—all of this gives more advantage over other players. This supply chain situation shows our advantage and operations model. Tal Liani: How sustainable is 32% growth? Is there an easy comp situation this year that boosts growth, or is there something more fundamental that could be sustained over time? Ken Xie: Look at Slides 24 and 25 compared to five years ago. It is pretty comparable. That time, we also grew around the low-40%s. Christiane Ohlgart: Tal, we can really see interesting demand in network security. The drivers are not only AI. It is consolidation, simplicity, and the security posture across the products that are driving significant interest into the network security portfolio. Fatima Boolani: Good afternoon. Thank you for taking my questions. Ken, at a very high level, we are in one of the most consequential CapEx and infrastructure investment cycles across the board. You are clearly seeing the benefits based on the seven-figure transactions related to AI infrastructure buildout. Specifically, what is the impact to your secure networking portfolio and the higher-end FortiGate appliances? Should we expect the product mix to trend toward very high-end SKUs? And for Christiane, related to the product growth upswing and presumably the higher-end mix, why are we not seeing a more visible catch-up on the services side? You only really tightened the services revenue range by bringing up the low end. Ken Xie: Great question. Fortinet, Inc. has more advantage in the high end with our own ASIC solution. It is much better performance and much lower cost, both on product and on energy cost. We see strong growth in the high end. At the same time, unified SASE also grew 31%, and 4Q last year grew 40%, driven a lot by SD-WAN in the low end. That is also why we launched a new bundled service to accelerate adoption of SD-WAN and SASE. Slide 14 shows the bundle—it is very attractive for customers to adopt new SASE and SD-WAN services. So growth is both high end—more data center—and low end—more driven by SD-WAN. AI data center buildout is still in a very early stage, and once applications start leveraging AI, that will be a long-term growth driver. We also believe the bundled service will drive additional service revenue after customers have the hardware. Christiane Ohlgart: Fatima, to address your concern, I am very enthusiastic about our services billings at 27% growth. Deferred revenue grew 15%. It all trends in the right direction. The conversion from the balance sheet into revenue just takes longer, so you do not see it immediately. But the trends are all positive. Our growth was really good. I am very happy with the quarter results and also with the rate of services with hardware. Gabriela Borges: Hi. Good afternoon. Ken, it sounds like there has been a bit of a step-function change in the pipeline related to AI data center. If that is right, why do you think that is happening now? Is there a shift with sovereign AI projects or the mix from training to inference? Ken Xie: Both connect together. AI data centers combined with sovereign SASE and sovereign AI are driving growth together. It is interesting—it is the same FortiGate and FortiOS to do both AI security and SASE in a zero trust environment. They both drive growth together. Gabriela Borges: And a follow-up: Fortinet, Inc. has been transparent on some vulnerabilities that you found in your own technology. How is your internal process for hardening your infrastructure changing as you get access to leading-edge LLM models that can help upgrade the quality of your own infrastructure? Ken Xie: We are working more closely with leading AI companies, whether handling vulnerabilities or helping automate a lot of operations for our customers. At the same time, we also build our own infrastructure, which has better security and more performance than some third-party infrastructure. We feel we do better than most. We are also developing new technology, using AI to secure AI. Brian Essex: Great. Thank you for taking the question, and congrats on results for the quarter. A quick one and a follow-up. With regard to unified SASE billings, could you unpack that a little bit? How much is SD-WAN? How much is SASE? And could you help reconcile the deceleration in SASE ARR so we can understand the primary drivers? Ken Xie: On Slide 4, we have the three pillars. Unified SASE includes SD-WAN, and SASE is more like FortiSASE and other things. FortiSASE is one of our strong growth areas, including AI-related. We believe the new bundle will also accelerate SD-WAN and SASE services going forward, as shown on Slide 14. Unified SASE grew 31%. About 25% of billings right now come from SASE. It is a pretty big number. We believe we are a top-three player and one of the fastest growing right now. Brian Essex: How much was contribution from sovereign SASE? There is focus on sovereign data centers and sovereign infrastructure. Would love to understand the contribution there. Ken Xie: Sovereign SASE is probably almost the same size as cloud-based SASE, perhaps even bigger. Sometimes with sovereign SASE, because we are using the same OS and FortiGate, customers may buy us as a firewall and gradually turn on SASE functions and deploy in their data center or infrastructure. We also see service providers starting to ramp up sovereign SASE quickly, especially in Europe. A few large telecom service providers are launching sovereign SASE services with our products, which is also driving a lot of product revenue. Gray Powell: Okay. Great. Thanks. Specifically, are you starting to see more branch office firewall customers turn on SD-WAN components and then convert their firewall subscriptions to secure service edge? If so, how should we think about the ballpark uplift to a customer's annual spending, or just directionally think about that opportunity? Ken Xie: That is very good field feedback. That is also why, on Slide 14, we launched a new bundled service to help accelerate SD-WAN and SASE. We combine four to five separate services into one bundle, including some SASE licenses based on the FortiGate model—from 40, 60 up to midrange products—together with SD-WAN and application monitoring. Customers are increasingly turning firewalls into SD-WAN and then into SASE/zero trust. It helps accelerate additional services. On Slide 11, we track big enterprises and the adoption of SASE and SD-WAN. Last quarter, SASE was about 16%; now it is 18%. It is strong growth and the clear trend. Christiane Ohlgart: And Gray, as we upgrade our customer base, these features become more interesting. It allows us to sell the next higher-end model typically for the edge, which is very beneficial for us as well. Analyst: Hey, guys. Thanks for the question. I want to unpack the current service billings strength—it was a nice acceleration. What was the driver there? Subscription, support, moving away from prior-year headwinds? And can we expect that line to further accelerate this year? Christiane Ohlgart: We had good linearity that helped us a little bit in the current quarter already, and then with the strong overachievement, it helps for the rest of the year. We believe our growth rates are picking up. As I said earlier, it takes time. This is where we adjusted the low end of the range to bring up the midpoint, but you cannot get super-fast acceleration of the balance sheet. We are confident not only this year, but also about the benefits that service billings give us for next year. Analyst: As a quick follow-up, did you see a change in buying behavior in 1Q related to people pulling forward because of higher memory costs? And what metrics give you confidence that you have not seen a change in buying behavior? Ken Xie: During COVID, we did see some pull-forward, especially in retail with scheduled deployments where they ordered ahead. This time, we do not see much pull-forward, but we do see strong demand. We cannot control channel inventories; in March, we did not see an increase there either. We are managing better. We tell customers we want to maintain margin—we do not want to raise margin like some other suppliers. When our costs are higher, we raise price, but when costs come down, we lower price in real time. That builds trust with partners and customers, and the direct model helps. It is difficult to judge how long this will last, but we operate to maintain healthy margin and respond quickly with our direct manufacturing model to better support customers. Junaid Siddiqui: Thank you, and good afternoon. Ken, you mentioned in the past how the edge is eating the cloud as customers move latency-sensitive and cost-intensive workloads to the edge. How are you adapting your security architecture to support this shift to capture demand redistribution, and does this shift meaningfully change the value proposition or monetization opportunities at the edge versus traditional data center deployments? Ken Xie: The edge over cloud point is because we have built ASIC for 20–30 years. We want to increase computing power and real-time processing on the appliance at the edge. That is a long-term investment that was criticized before compared to cloud, but AI and new trends show the edge has strong value now. We will continue investing in ASIC, hardware appliances, and because many new physical AI or modern applications need edge-time computing decisions instead of going to the cloud, with the cloud more for management. OT shows strong growth—over 70%—with deployments in the field and real-time edge traffic management. It is a hybrid approach: not 100% cloud or 100% edge; both have value. A few years ago, there was too much emphasis on cloud only. We insisted on investing in ASIC and systems at the edge. Now customers and partners see the benefit of this hybrid approach. Operator: We have no further questions at this time. I will now hand it back to Anthony Luscri for closing remarks. Anthony Luscri: Thank you. I would like to thank everyone for joining today's call. We will be attending investor conferences by JPMorgan and Bank of America during the second quarter. Fireside chat webcasts will be posted on the Events and Presentations sections of our investor website. If you have any follow-up questions, please feel free to contact me, and have a great day.
Operator: Good afternoon, and welcome to the MannKind Corporation First Quarter 2026 Financial Results Earnings Call. As a reminder, this call is being recorded on 05/06/2026 and will be available for replay on the MannKind Corporation website shortly after this call for approximately 90 days. This call will contain forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from these expectations. For further information on the company's risk factors, please see the Form 10-Q for the period ended 03/31/2026, the earnings release, and the slides prepared for this presentation. Joining us today from MannKind Corporation are Chief Executive Officer, Michael E. Castagna, and Chief Financial Officer, Christopher B. Prentiss. I would now like to turn the conference over to Michael E. Castagna. Please go ahead, sir. Michael E. Castagna: Thanks, operator, and good afternoon, everyone. Thank you for joining us for our Q1 2026 earnings call. Here is today's agenda, and I will start with some opening remarks. In the first quarter, we continued to execute our strategy to evolve MannKind Corporation into a diversified company positioned to deliver sustained long-term growth. The company is fundamentally different than it was even a few years ago, and we are excited about the near-term milestones that will further advance the company's evolution. Today, we will discuss the recent positive developments with United Therapeutics and articulate our growth plans that we expect will drive significant shareholder value over the coming years. Let's begin with our announcement earlier today that MNKD-1501 has been unveiled as ralinepag DPI, which United Therapeutics optioned back in August. Our formulation team has been moving ralinepag DPI forward expeditiously, and we recently received a $5 million payment to prioritize the continued rapid advancement of this program. We have the potential to receive up to $35 million in development milestones plus a 10% royalty on net sales. Of those milestones, we expect about $15 million to be earned over the next 12 months. This expanded collaboration is significant for a few reasons. First, it deepens an already productive partnership with United Therapeutics. Second, ralinepag DPI has the potential to be used across pulmonary arterial hypertension, pulmonary hypertension associated with interstitial lung disease, idiopathic pulmonary fibrosis, and progressive pulmonary fibrosis, collectively impacting more than 250 thousand patients and representing a substantial opportunity to improve outcomes across these conditions. Third, it continues to validate our unique Technosphere platform. In addition to ralinepag DPI, we have also confirmed MannKind Corporation as the sole manufacturer of Tyvaso DPI under a supply agreement that includes contractual minimums. This provides us with a solid foundation as we continue to scale our Danbury, Connecticut facility for our own pipeline, including a manufacturing buildout to support the growth of FURO6 ReadyFlow. Now let's move on to Q1 performance. We delivered quarterly revenues of $90 million, a 15% increase over the prior year, as this now includes the addition of FURO6. Q1 was a challenging quarter for several reasons. Number one is structural. Each year, Q1 typically declines relative to Q4 due to annual deductible resets. As patients face higher out-of-pocket costs at the start of the year, we see both fewer fills and lower doses per prescription. For FURO6, doses per prescription were down roughly 20% in Q1 compared to Q4. Number two is transitional. As we prepared for our upcoming launches of Afrezza Pediatrics and the FURO6 ReadyFlow auto-injector, we reorganized field teams, leading to customer disruptions in Q1 as we did not want to disrupt the field in Q4 or the upcoming next two quarters given the potential launches. Additionally, we reallocated marketing resources away from Afrezza adult, which slowed the growth year over year as we thought it would be more prudent to shift these investments toward the pediatric Afrezza launch and FURO6 nephrology opportunity. We have made the adjustments, and the field teams in place today are talented, highly experienced in their therapeutic areas, and have the right resources to deliver quarterly growth over the balance of the year. Number three, as we prepare for the launch in Q3 of the auto-injector, we want to ensure an efficient conversion. We transitioned our inventory levels to minimize volatility and inventory stocking of the current on-body infuser at the specialty pharmacies. As this adjustment is now behind us, we expect future product outflows to better reflect underlying prescriber demand, which will help us accelerate the transition upon FDA approval. When you put these three things together, Q1 came in lighter on the revenue side, but even so, the underlying indicators were more encouraging than the top line may suggest. We saw growth in both overall writers and repeat writers of FURO6, hitting a record number of prescribers in Q1, and demand momentum improved as the quarter progressed. Doses dispensed are up nearly 60% through April compared to the same period last year. Chris will walk through the quarter in more detail. We are confident the underlying business is moving in the right direction, and we remain on track to meet our full-year 2026 FURO6 revenue target of $110 million to $120 million. Now let's walk through the Q1 highlights. The FDA approved the updated Afrezza label, which now provides clear starting dose guidance. That is an important enabler for the pediatric launch as this was the dosing used for the pivotal trial. We have also completed our launch buildout for Afrezza Pediatrics ahead of the May 29 PDUFA date. We completed the pilot phase enrollment in our Inhale First pediatric trial evaluating Afrezza in youth with newly diagnosed type 1 diabetes. That is the long-term goal I have talked about for years. Additionally, we settled the convertible notes, which strengthens the balance sheet. Finally, on the SC Pharma integration, we are now approximately seven months post-close, and I am very pleased with how the integration has progressed. For most functions, integration is substantially complete, and we have identified synergies that exceeded our $20 million annual target we previously set. I want to thank both teams for the way they came together. These integrations are always challenging, and ours is going exceptionally well. Now I will take a step back to talk about strategic evolution because this tells a really important story. Until 2022, we were essentially a single-product company with Afrezza. Since then, United Therapeutics and Tyvaso DPI specifically have played a critical role in funding our transformation, including enabling the SC Pharma acquisition last year. With that acquisition, we added FURO6, which brought an incredible team with deep cardiology experience. That has expanded our portfolio and our commercial infrastructure in a meaningful way. As we look at 2026 and beyond, we are now a diversified cardiometabolic and orphan lung company with multiple FDA-approved products, two near-term regulatory catalysts, and a potentially transformative pipeline opportunity with inhaled nintedanib DPI advancing into Phase 2. The United Therapeutics partnership will remain a reliable pillar of the business, providing stability and significant growth potential. It also gives us flexibility to advance the pipeline, reduce debt, and pursue business development opportunities. But the MannKind Corporation story is increasingly about the products and development candidates we own and the brands we are building for the long term. Turning to the major catalysts for 2026 and beyond, we have two regulatory catalysts and one clinical catalyst stacked up in a narrow window over the next three to four months. First is the Afrezza pediatric indication. If approved, Afrezza will be the first and only needle-free mealtime option for children and adolescents in more than a century and would address a long-standing unmet need with a highly differentiated value proposition. Importantly, this opportunity compounds over time as adolescents initiate therapy early and continue into adulthood, supporting durable long-term growth for the brand. Second is the FURO6 ReadyFlow auto-injector. If approved, this changes the administration profile for FURO6 from several hours to just seconds, which has real implications for patient convenience, training, and widespread adoption. It supports broader use and would significantly reduce our cost of goods. Third is the MNKD-201 nintedanib DPI program. There remains an urgent need for more effective therapies in IPF. Current options are limited by tolerability. Our lung-targeted delivery approach is designed to address those barriers, and we are on track to report Phase 1b top-line data in the third quarter, a key clinical de-risking step. In parallel, we are advancing MNKD-201 into a global Phase 2 trial this quarter. Each of these catalysts will be significant on its own. Having all three in a single calendar year is a powerful testament to our progress and execution over the last ten years. Together, these milestones strengthen our foundation and position us to potentially deliver meaningful growth in the years ahead. We have two near-term regulatory events, a growing commercial business, a strong revenue base from United Therapeutics, and a pipeline approaching important data milestones. Now let us go deeper on the upcoming commercial expansion opportunities for our products, starting with Afrezza. The pediatric opportunity is a well-defined new population entry point with the ability to expand across even broader populations over time. There are roughly 360 thousand people between 8 and 22 years old living with type 1 diabetes in the U.S., with about 30 thousand newly diagnosed each year. While our launch focus is type 1 in children and adolescents, when you look at the broader picture where Afrezza is already indicated, the long-term opportunity for inhaled insulin is significant with over 38 million patients that we are indicated for today. The pediatric opportunity is one of the most important for Afrezza since its initial approval, and our extensive research highlights why. Despite decades of technology and drug innovation in diabetes, A1c control is still not meeting goals, largely because of mealtime challenges that exist in the everyday life of patients. Afrezza is the solution. After more than a decade on the market, Afrezza is poised to finally live up to its potential. Managing mealtime insulin in children and adolescents often means multiple daily injections, rigid meal timing, and significant burden on both parents and caregivers. Afrezza directly addresses those challenges by eliminating mealtime injections through a novel route of administration, providing greater flexibility around meals, and easier timing for kids. When you think about what it means for a child with type 1 diabetes to not have to take a shot at lunch or wear a pump while playing sports, or count carbs at a birthday party or even forgo the cake, that is a really big deal to the average life of a child. This is a therapy backed by more than a decade of real-world data and now a completed Phase 3 pediatric trial. The American Diabetes Association now positions inhaled insulin as an equivalent option to multiple daily injections and insulin pumps including AID in their guidelines. This guideline support puts Afrezza on equal footing with the standards of care, a significant milestone that recently happened. The evidence base has never been stronger. Families and physicians continue to highlight the significant daily burden of diabetes management and are telling us that Afrezza has the potential to fundamentally change that experience. With peak share potential in the range of 23% to 37%, and each 10% share representing approximately $150 million in net revenue, the opportunity is significant and will continue to compound over the coming years. Pediatric represents a fundamentally different dynamic. As we look at our key areas at launch, we are continuing to be very disciplined. We are directly addressing the mealtime challenge for about 35% of patients who have real friction with insulin and mealtime today, compounded by the fact that 25% to 35% intentionally miss their mealtime injections or pump boluses. We are engaging consumers through highly targeted outreach—about 93% of families are motivated to speak to their HCP to request a change in the child's diabetes management, so patient requests matter. We are targeting roughly 60-plus prioritized academic medical centers with about 20 key account managers, where the highest-volume pediatric prescribers are. In parallel, the broader Afrezza sales team extends coverage by engaging community-based healthcare providers as well as these academic centers to ensure comprehensive reach and frequency at launch. We are enhancing the customer experience through ease of access, with commercial or Medicaid patients able to get on Afrezza for $35 or less. In parallel, we have engaged in a number of payer discussions to ensure formularies are positioned to support the pediatric launch, and we are seeing receptivity to expand access for children and adolescents as we approach approval. The pediatric approval for Afrezza offers the brand a new beginning—new patients, eager physicians, and a clear unmet need. If approved, we are ready to launch. Let us turn our attention to FURO6. As we look at the addressable opportunity, there are roughly 700 thousand fluid overload events we can address outside the hospital setting. There are multiple intervention points along the patient journey. Since launch, we were historically targeting when fluid first presented at home and oral diuretics were not enough. We are moving to address the post-discharge setting; it can impact length of stay and 30-day readmissions. With the FURO6 ReadyFlow, we believe we can unlock several additional intervention points both earlier and later in the treatment paradigm, where FURO6 logistics can break this cycle of admissions and readmissions. Next, let us talk about the ReadyFlow auto-injector and why we are so excited about it. We consistently hear from HCPs that the current FURO6 on-body infuser, while effective, can be a barrier to adoption in certain patient segments. With the PDUFA date of July 26, if the ReadyFlow auto-injector is approved, it will reduce the administration time of FURO6 from five hours to just seconds. That could broaden use among prescribers who have been more selective with the current presentation. Our research also supports this: 65% of HCPs anticipate they would expand their FURO6 use with the ReadyFlow auto-injector. Patients are already familiar with the auto-injector delivery format through other therapies. It is a simple, reliable delivery system with minimal training required. It has comparable efficacy and safety to IV and the current on-body infuser. The auto-injector allows earlier intervention and enhances patient independence because there is less hesitancy to use it. Importantly, the ReadyFlow auto-injector would significantly reduce our cost of goods, which improves our margins and frees up capital to reinvest. On FURO6 ReadyFlow launch readiness, we are building from a position of strength. To support the launch, we have identified four key tactics. Number one, approximately 60% of FURO6 patients require prior authorizations today, so simplifying access and reducing friction in the onboarding process is critical to ensuring patients can start therapy without delay. Based on recent payer conversations, they are receptive to removing access hurdles given the overall cost benefits of FURO6 and reducing the number of patients going into the ER related to fluid overload. Number two, from an adoption standpoint, our market research is encouraging. Roughly 85% of existing FURO6 patients are expected to convert to the ReadyFlow auto-injector, reflecting strong confidence in the ReadyFlow profile. In addition, 65% of healthcare providers anticipate expanding their use as they have earlier and more productive intervention. Number three, we have a clear focus on accelerating time to patient start. We are exploring alternative distribution partners that will improve our ability to get FURO6 in the hands of the patient the same day. Lastly, we have deployed our key account manager team to deepen integrated delivery network relationships and get FURO6 integrated into hospital discharge protocols. That is where the post-discharge intervention opportunity lives. It is where we believe we can make the most meaningful difference in reducing hospital readmissions. We have prioritized more than 60 key accounts supported by the entire sales force, in addition to our newly established key account managers who completed training in March. This approach should drive consistent uptake and appropriate utilization, which we expect will accelerate in the second half. Taken together, these tactics position ReadyFlow for rapid adoption by accelerating patient starts, establishing earlier use in the treatment pathway, and ensuring focused, disciplined execution across the accounts that matter most. Moving on now to the nintedanib DPI, our MNKD-201 program. IPF is a devastating disease. These patients cough up to a thousand times per day, and with the poor tolerability of current treatments, their quality of life is significantly compromised. Eight out of ten patients die from this disease within five years, and many would rather forgo treatment than endure the side effects of today's standards of care. Our approach is to bypass the GI tract through targeted pulmonary delivery. The Technosphere platform is a proven platform. We have two FDA-approved products with less than a 3% discontinuation rate due to instances of cough and demonstrated safety and tolerability in patients with underlying lung disease. So when you combine a proven molecule like nintedanib with direct lung targeting and consider our Phase 1 volunteer observations showing no GI tolerability issues and our Phase 1b in actual IPF patients showing no discontinuations due to cough or serious adverse events in the first 12 patients, we have strong confidence in the potential to improve tolerability while maintaining or potentially enhancing efficacy. Onto our MNKD-201 program updates. We have completed enrollment of Cohort 1 in our Phase 1b INFLow study, which is in active IPF patients. Our top-line data are expected to be shared during Q3. That is a key de-risking point as we generate safety and tolerability data in these patients. Simultaneously, we are initiating enrollment in our global Phase 2 study now that we have received our first country approval. We are advancing both programs in parallel to accelerate data generation and development timelines. Here are the key things that differentiate MNKD-201: a two-second inhalation, a proven delivery platform with no cleaning required, and the potential to dramatically reduce side effects while meeting or beating the efficacy of oral nintedanib. Each step further de-risks a program that we believe has tremendous potential to target a disease with limited treatment options. Taken together, our inhaled nintedanib DPI program, along with United Therapeutics’ Tyvaso DPI and ralinepag DPI, gives us three differentiated shots on goal in IPF. Importantly, nintedanib DPI is not only well positioned to serve as the backbone of therapy, but also opens the door to combination use alongside other current and emerging IPF therapies, which is increasingly how we expect this market to evolve. Together, these programs reinforce the potential for inhaled delivery to improve tolerability and play a central role in redefining how IPF is treated. Before I turn it over to Chris, I want to highlight some of the key upcoming scientific conferences we will be at, including the Respiratory Innovation Summit where we have a small presentation at ATS, the American Diabetes Association where we have almost 10 presentations at the Scientific Sessions, and the American Association of Heart Failure Nurses in San Diego in late June. These are exciting times with lots of data dissemination and hopefully upcoming FDA approvals. I will now turn it over to Chris to review our first quarter 2026 financial results. Thanks, Chris, and good afternoon, everyone. Christopher B. Prentiss: For a summary of our financials, please review our press release issued before this call and our Form 10-Q, which is now on file with the SEC. Let us start with FURO6. For Q1 2026, FURO6 net sales were $15.5 million. As a reminder, the acquisition closed on October 7, and only post-acquisition results are included in MannKind Corporation financials. Underneath the revenue number, the demand metrics for the brand remain strong. We had a record number of writers in the first quarter, and 75% of those writers are repeat writers, which is a really good signal. Doses dispensed grew 64% year over year, and our IDN business grew 97% year over year, reflecting the early traction of our key account manager team. If you look at 2025, approximately 14% of annual volumes were generated in Q1. If you apply this to our Q1 units dispensed, we remain on track to achieve our annual target and are reaffirming our 2026 FURO6 revenue range of $110 million to $120 million. Turning to Afrezza global sales, Q1 2026 net sales were $15.3 million, up 3% year over year. As we discussed earlier, we have shifted our marketing efforts toward our two anticipated launches this year and transitioned nephrology sales responsibility to the legacy Afrezza sales team. As expected with a new call point, this created some near-term disruption, which we expect to improve steadily over the remainder of 2026. Tyvaso DPI-related revenues provide a durable revenue base. Our collaboration services revenue is driven primarily by manufacturing revenue based on volumes sold through to United Therapeutics plus the recognition of deferred revenue. For the quarter, CNS revenue was $23.5 million compared to $29.4 million for the prior-year quarter. As we have noted previously, this revenue stream may fluctuate between periods depending on production scheduling at our Danbury facility across Afrezza, development programs, and Tyvaso DPI. However, it is important to note that the amendment to our Tyvaso DPI supply agreement we signed earlier this quarter established annual minimum quantities, effectively fixing our annual manufacturing revenue for Tyvaso DPI. As a result, period-to-period fluctuations are driven primarily by manufacturing planning and scheduling requirements, and to a lesser extent by the timing of revenue recognition from other collaboration activities. One such collaboration is our development of ralinepag DPI with United Therapeutics. We recently received $5 million to accelerate its development. We will begin to recognize this in Q2. An additional $35 million of development milestones remain, of which we expect to earn $15 million over the next 12 months. Q1 2026 royalties reflect year-over-year growth of 9% to $32.7 million. In 2026, royalty revenue will support key capital priorities including funding the March retirement of our senior convertible notes, our CVR obligations, and our pipeline programs. Turning to the bottom line, for Q1 2026, we reported a GAAP net loss of $16.6 million, or $0.05 per share. On a non-GAAP basis, we reported a net loss of $6.9 million, or $0.02 per share. For comparison, in Q1 2025, we reported GAAP net income of $13.2 million, or $0.04 per share, and non-GAAP net income of $21.6 million, or $0.07 per share. The year-over-year change reflects the planned increase in commercial spend associated with the potential FURO6 ReadyFlow auto-injector and Afrezza pediatrics launches, as well as the incremental cost structure associated with the SC Pharma acquisition, including amortization of acquired intangible assets, which is non-cash. For the full details on non-GAAP adjustments, please refer to our press release and 10-Q filing. On the expense side, R&D expenses increased over the prior-year period, driven by ongoing enrollment in the Phase 1b study and preparations to begin enrollment for the Phase 2 study of MNKD-201. We expect R&D spending to remain at this level as we advance the MNKD-201 program, as well as our pipeline programs such as our inhaled bumetanide program MNKD-701. Selling, general, and administrative expenses increased compared to the prior-year quarter, primarily driven by the expanded commercial infrastructure supporting the anticipated pediatric Afrezza and ReadyFlow auto-injector launches, as well as the full-quarter impact of the SC Pharma commercial team and operating structure. Having two PDUFAs within months of each other is unusual for a company of our size and makes 2026 a deliberate investment year. We are investing to ensure both potential launches are properly supported across the field and in promotion, which is reflected in SG&A this quarter. Going forward, we will continue to evaluate commercial performance and adjust investment levels with discipline as we execute on these launches. Turning to our balance sheet, we ended Q1 with a solid liquidity position after settling the remaining balance of our senior convertible notes. We believe we have sufficient capital to support our planned commercial launches and continue advancing our pipeline. In addition, our credit facility provides financial flexibility if needed, and we remain focused on deploying capital in a manner that maximizes long-term value for our shareholders. Before I turn it back over to Mike, I want to mention that we will be at the Jefferies Global Healthcare Conference in New York in June. We look forward to engaging with many of you there. With that, I will turn the call back over to Mike. Michael E. Castagna: Thank you, Chris. Let me close by summarizing why we believe MannKind Corporation is well positioned for the next phase of growth. Number one, as we look at the remainder of 2026, we are in the middle of a meaningful corporate transformation. Since 2022, we have evolved from a single-product company into one with multiple FDA-approved products and a more diversified growth profile. United Therapeutics revenue continues to provide a strong foundation while our revenue mix is shifting steadily toward MannKind-owned brands, with owned revenue moving from roughly 40% just prior to the SC acquisition to over 65% with the anticipated FDA approvals as we exit 2026. That represents a fundamentally different company than the one we experienced a few quarters ago. Number two is FURO6. We have a clear line of sight to achieving our $110 million to $120 million revenue range for 2026. The ReadyFlow auto-injector, pending its July 26 PDUFA date, represents a meaningful opportunity to extend and accelerate the brand's growth trajectory. The fact that 65% of healthcare providers indicate they would expand their use with the FURO6 ReadyFlow auto-injector reinforces our confidence in its potential. Number three is Afrezza. A pediatric approval would unlock a significant growth opportunity and represent the most important milestone since the approval of Afrezza in 2014. Pediatric demand indicators are strong, the value proposition is clear, and we are launch ready with disciplined, targeted investment. If approved, our team is ready to execute. Number four is our partnership with United Therapeutics. The Tyvaso DPI franchise continues to deliver durable economics with the potential for expansion into IPF, and ralinepag DPI extends the partnership into multiple indications, reinforcing both the strategic depth and long-term value of this relationship. Number five is nintedanib DPI. Completion of the Phase 1b in IPF patients—where we expect top-line data in Q3—and first patient enrollment in the global Phase 2 program this quarter represent important de-risking milestones and position this asset as the next meaningful pipeline value driver. When we put all these together—a durable revenue base from United Therapeutics, two near-term regulatory catalysts, and a pipeline with meaningful upside—our priorities are clear, our team is focused, and MannKind Corporation is poised to capitalize on some of the most fundamental and transformational moments in the history of the company. We will now open the call for questions. Operator: Thank you. At this time, if you would like to ask a question, please click on the Raise Hand button, which can be found on the black bar at the bottom of your screen. When it is your turn, you will receive a message on your screen from the host allowing you to talk. Then you will hear your name called. Please accept, unmute your audio, and ask your question. We will wait one moment to allow the queue to form. Our first question will come from Roanna Clarissa Ruiz with Leerink Partners. You may now unmute your audio and ask your question. Roanna Clarissa Ruiz: Great. Good afternoon, everyone. A couple from me. I will start off with ralinepag DPI and get a little bit more context. How long have you been working on it, and what additional formulation work do you think needs to be done from here to go from the oral ralinepag to an inhaled version? Any gating factors you might expect as you are working through this? Michael E. Castagna: Thank you, Roanna. Before I start, I just want to apologize to everyone for the technical difficulties we had and the length of the call. We will get to Q&A, but I just want to apologize. On ralinepag DPI, we have been working on this since we announced the agreement back in August. It takes a while to onboard powders and API. All that has been moving very smoothly. We had a bunch of prototype powders; we have selected some leading ones, and they are moving forward. There is always some fine-tuning as you go through manufacturing, but overall we are moving full scale ahead on United Therapeutics’ timelines. Roanna Clarissa Ruiz: Okay, great. And then I wanted to ask about the nintedanib DPI program as well. Now you have a few different shots on goal in IPF, with ralinepag DPI, etc. How are you thinking about these products evolving in the landscape given their different active ingredients, and any physician feedback you have heard so far? Michael E. Castagna: We believe there will be combination use going forward. We know the current orals have overlapping toxicities and the data in combination have not always looked that positive. But if you look at the TETON data 1 and 2, the combination of treprostinil and nintedanib looked very strong, and we know pirfenidone is a little bit weaker of an agent, so we see a bigger gap there. In general, I would see an evolution of a combination market. That is one of the reasons we are running a QID arm in our Phase 2, so that if you were on QID Tyvaso DPI or Tyvaso nebulizer, you could look at a QID nintedanib DPI as well. We are hoping to show in that trial whether using 4 mg twice a day or 2 mg four times a day, outcomes are comparable. If one is better, that is great and we will lead with that. That is one of the things we are exploring in Phase 2. Roanna Clarissa Ruiz: Great. Last one for me on FURO6. Any extra color on trends you saw in the quarter? You reiterated your guide, which is encouraging, but anything interesting you are watching for in the next couple of quarters in terms of underlying demand? Michael E. Castagna: First, we know two competitors launched last October. We are keeping an eye on that, but not much activity—maybe 40 to 50 scripts since launch, so nothing of significance. We did hear anecdotal reports of people switching back; some had tried the nasal and may not have gotten the efficacy they wanted and went back to FURO6. That is an early indicator of patient or physician satisfaction for us, which makes us more confident as we go forward. On the FURO6 side, new prescribers looked great, nephrology picked up a lot in March as we closed out the quarter. We think the transition of the sales force caused a pretty big disruption in January and February. As they get relationships re-established, lunches on calendars, and dinner events now taking place, we think nephrology will continue to accelerate throughout the year. Overall, especially with the auto-injector, FURO6 should grow a lot faster in Q3 and Q4. Looking at volume, the percent of units that shipped in Q1 last year versus Q1 this year gets you close to our reported number. Q1 co-pay resets are a headwind; we heard the same from other companies. March and April pick back up, which gives us confidence for the rest of the year. We feel pretty good, and all the feedback and anecdotal evidence we hear for FURO6 is very positive. Operator: Our next question comes from Wells Fargo. Please go ahead with your question. Analyst: Hey, good evening, and thank you. I also wanted to ask about ralinepag DPI that was disclosed this morning. Going back to what you were saying a minute ago, how far along in the process are you, and what gives you confidence that you can actually formulate this as a DPI? I believe there is also discussion in the disclosure that once-daily is on the table. What is the confidence around that as well? Michael E. Castagna: I cannot comment on the pharmacokinetics; I will defer to United Therapeutics and their modeling and all the work they have done and what they know about ralinepag. We will not know the real answer until we get into humans and see the pharmacology. Hypothetically, what they believe is probably the best we have today. In terms of my confidence, I feel pretty confident we have a lead powder that can go forward into animal and human trials now. The amount of powder we have to make for those things is not very significant, so that is ahead of schedule. United Therapeutics has done an excellent job moving this as quickly as humanly possible, and we are doing our best to keep up and stay ahead of them. Overall, there is a lot of energy to accelerate this as quickly as possible, and I think there will be good updates throughout this year and next year. Analyst: Excellent. On the two PDUFAs coming up—Afrezza pediatrics and FURO6—assuming both are approved, how soon after those approvals would you anticipate seeing the adoption curves impacted? Michael E. Castagna: On pediatrics, the approval should come the week before the American Diabetes Association meeting. If that timeline holds, it would be ideal because we have nine or 10 presentations and posters, as well as an evening event at ADA. That will be a good blast-off, not just for the U.S., but also internationally. We plan a staged rollout across the first 30, 60, 90 days to get into the top 10 to 15 institutions, set up best practices, and then expand. We are updating the reimbursement hub and leveraging the FURO6 hub model for a more white-glove service. We should see a little impact in Q2, but we will be watching Q3 and the summer closely. On the Inhale First trial, the first nine or 10 patients’ anecdotal feedback is really positive; first-insulin use in newly diagnosed children could be a game-changer if that continues. On FURO6, with a July 26 PDUFA, we expect launching in August. We would see a little impact in Q3 and a fuller impact in Q4. That one should go faster given the acute-use dynamic. Operator: Our next question will come from Cantor Fitzgerald. Please go ahead with your question. Analyst: Hey, this is Sam on for Olivia. Piggybacking on FURO6 questions, it is encouraging you are still confident hitting $110 million to $120 million in sales this year. Is that including both the on-body and the auto-injector? You mentioned weighting more toward Q3 and Q4. Is that due to the potential approval of the auto-injector, and do you expect the auto-injector to cannibalize the on-body infuser quickly? Michael E. Castagna: The forecast for the year basically looks at how units came out in 2025 and proportionately how demand curves look today; they are consistent with 2025. The auto-injector is a small portion of that range, not the reason we expect to hit $110 million. The on-body infuser should be able to get us in that direction, and the auto-injector will bring it there faster. Timing of launch and speed of rollout will determine the incremental. One challenge in the first half is we do not have samples this year as we prepare for the auto-injector and manage inventory. We are gearing up to sample the auto-injector to drive faster adoption. Operator: Our next question will come from Truist Securities. Please go ahead with your question. Analyst: Hi, it is Dinesh on for Greg. Congrats on the progress. One on the ralinepag DPI update: can you remind us on the relative positioning of prostacyclins and treprostinil-based drugs in PAH—patient applicability and physician choice—and how that frames your view on commercial and royalty opportunities to MannKind Corporation via United Therapeutics? Michael E. Castagna: It is a little early to speculate. United Therapeutics has Tyvaso DPI and Tyvaso nebulizer. Over the next two to three years, the major focus will be continued penetration, including IPF for the DPI scenario. Tyvaso should be a growth driver. As ralinepag launches, that probably goes earlier due to convenience, but that is United Therapeutics’ positioning and expertise. On IPF, you heard in United Therapeutics’ call that ralinepag DPI will be the predominant formulation in that development program, so we expect that to become the dominant driver overall for IPF. Operator: Our next question will come from Brandon Richard Folkes with H.C. Wainwright. Please unmute your line and ask your question. Brandon Richard Folkes: Thanks for taking my question. On Afrezza pediatrics, do you have to do anything on the contracting side post-label expansion, or does that fall into current coverage contracts? Secondly, how will you assess success of the pediatrics ramp early on, and what objectives would drive you to invest further versus keep investment where it is or pull back? Michael E. Castagna: Because it will be the same SKUs, we do not have to add another SKU to contracts, so no fundamental updates there. We have presented to large PBMs and some regionals, and we are exploring freeing up prior authorizations and simplifying access for pediatrics. There is appetite to reduce friction for kids. We are making sure Medicaid access exists and the big three PBM commercial lives have access. It will not all happen July 1, but through the year and into January next year, we expect updated clinical guidelines at most payers to support Afrezza use—even in adults—because ADA guidelines put Afrezza equal to AID systems and multiple daily injections. Step edits that put Afrezza behind those are now against standards of care, so we expect payer criteria to update in a positive way heading into 2027. In terms of pediatric success, the key metrics are breadth and depth of prescribing rather than early revenue: number of prescribers, number of institutions initiating and repeating use, and patient referrals into our hub. We will share those in the quarters ahead. We will have access programs to ensure payer friction is not a reason to avoid prescribing. We have also decided our 20 key account managers will be supported with local coverage to help with reach and frequency at launch. Operator: Next question will come from Yun Zhong with Wedbush. Please unmute your line and ask your question. Yun Zhong: Hi, good afternoon. Questions on the MNKD-201 program. It is encouraging to hear good safety and tolerability with no discontinuations. Given you will enroll the first patient in Phase 2 in Q2 without waiting for Phase 1b top-line in Q3, do you plan to confirm anything else besides safety and tolerability from the Phase 1 study? Also, United Therapeutics discussed a bridging study for Tyvaso DPI for IPF starting with healthy volunteers and then patients. Do you expect any impact on patient enrollment and your overall program? Lastly, including ralinepag, there will likely be three DPI products for IPF. Do you envision patients taking different inhalations with the same DPI, or is co-formulation reasonable to improve convenience? Michael E. Castagna: Several questions. On MNKD-201, we did a Phase 1a last year with healthy volunteers, particularly looking at cough-related incidents, FEV1, FVC, and GI side effects like diarrhea. We can confirm cough was not a major concern and GI side effects did not occur even at the highest doses, which gave us confidence. On FEV1 and FVC, there were no significant issues beyond expected variability. In the 1b study, we are in IPF patients, taking a stepwise approach to show you can dose a dry powder inhalation safely and effectively. After the first 12 patients at 2 mg TID (about 30 mg powder to deliver 6 mg nintedanib), tolerability, cough, and discontinuations presented no concerns. That cohort is now closed. The DSMB will meet next week, and hopefully post-meeting we will open Cohort 2. We are already screening and expect to enroll that faster and have top-line in Q3. That top-line will likely show that 8 mg BID versus 2 mg QID does not show a meaningful difference in tolerability or cough, which helps wrap up questions as we expand Phase 2. On Tyvaso DPI bridging, remember United Therapeutics is focused on Tyvaso DPI for the U.S. market in IPF. Our Phase 2 is, as of today, 100% ex-U.S. We are considering adding a few U.S. sites pending additional FDA steps. We have submitted the protocol to FDA and received comments, so we know what it would take. We are focused on accelerating European and other ex-U.S. enrollment, including Canada and Australia, to minimize any potential impact from Tyvaso’s IPF acceleration in the U.S. On co-formulation, our technology, given dose sizes and the common excipient, has potential for fixed-dose combinations. I have worked on fixed-dose combos previously. First we need to confirm dosing regimens are tolerable, which is the first step for any fixed-dose combo, and then you need two parties willing to come together. Stay tuned, but we are all moving in the same direction to help patients live longer, healthier lives versus today. Operator: Our next question will come from Mizuho Financial Group. Please go ahead with your question. Anthony Charles Petrone: [inaudible] Michael E. Castagna: Okay, may have dropped. Operator: Our next question will come from RBC Capital Markets. Please go ahead with your question. Analyst: Good afternoon, Michael. On discharge protocols and integrating FURO6 into the 60 key accounts, can you walk us through the process to open those accounts or have changes made to discharge protocols, and how long they may take? And a second one on Afrezza: of the 60 priority accounts, what would they represent in terms of your targeted market share of 23% to 37%? Over 50%? Can you fine tune that? Michael E. Castagna: They take time. If this were fast, we would be blowing out numbers now. Think six to 15 months, not three months. Every health system is different. I have met with several at the C-suite level, cardiac surgery, and discharge quality teams. Consistently, there are patient navigators responsible for 30-day readmissions. You need to engage quality, pharmacy, get local contracts set up, and get adoption into protocols—that all takes time. Cleveland Clinic is already doing it. Kaiser is running a large experiment in Northern California that looks promising. We expect trial results later this year looking at early discharge by a day or two, which is the type of data people want. Other clinics focus on ensuring patients leave with FURO6 so they are not coming back within 30 days. It is a hodgepodge of systems. As we find commonalities, we will get those across the finish line. Cleveland Clinic shares their protocol with other customers, which is great. On your Afrezza question, I would estimate roughly 75% to 80% of the target opportunity is concentrated in those key accounts. About 20% of patients fall in the community setting and 80% in the key account setting. It is very concentrated. Operator: Final question comes from Mizuho Financial Group. Please go ahead and ask your question. Anthony Charles Petrone: Thanks a lot. On FURO6 and the July 26 PDUFA date, are you expecting a panel meeting on the auto-injector? As a follow-up, FURO6 is moving from a hospital or infusion clinic five-hour infusion to under 10 seconds at home. What does that transition look like? How long to get adopted in the home, and what level of patient training is needed? It seems pretty seamless and a game-changer—just trying to frame the transition. Michael E. Castagna: We do not expect a panel. We have had various information requests from FDA—nothing that looks like a showstopper. We believe we are on track for that PDUFA date and are working on labeling and manufacturing so we are ready when FDA gives the green light. On the transition, because it is an acute-use drug—every cycle is new—conversion can happen very quickly. Today, probably 90% of use is preventing people from going into the ER and about 10% is post-discharge within 30 days, roughly. The auto-injector should really help with hospital discharge because it is much easier. We are targeting more local distribution and same-day delivery to the patient, which is important when someone is suffering fluid overload. That is harder with the on-body infuser given higher COGS. We expect a quick transition overall. There will be a group who still prefer the on-body infuser, and we will make it available, but we believe the preponderance of growth will come from the auto-injector. Operator: That concludes the question and answer portion of today's call. I will now hand the call back to Michael E. Castagna for closing remarks. Michael E. Castagna: Thank you for joining our call today. Apologies again for the technical difficulties. We appreciate your continued support and look forward to keeping you updated as we execute on the multiple regulatory and clinical catalysts expected in the months ahead. These are exciting times. We have never been busier here at MannKind Corporation—stay tuned for updates as we go. Thank you. Operator: That concludes today's call. You may now disconnect.
Operator: Hello, and welcome to Alpha Teknova, Inc. first quarter 2026 financial results. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. I would now like to hand the conference over to Jennifer Henry. You may begin. Jennifer Henry: Thank you, operator. Welcome to Alpha Teknova, Inc.'s first quarter 2026 earnings conference call. With me on today's call are Stephen Gunstream, Alpha Teknova, Inc.'s President and Chief Executive Officer, and Matthew C. Lowell, Alpha Teknova, Inc.'s Chief Financial Officer, who will make prepared remarks and then take your questions. As a reminder, the forward-looking statements that we make during this call, including those regarding business goals and expectations for the financial performance of the company, are subject to risks and uncertainties that may cause actual events or results to differ. Additional information concerning these risk factors is included in the press release the company issued earlier today and they are more fully described in the company's various filings with the SEC. Today's comments reflect the company's current views, which could change as a result of new information, future events, or other factors, and the company does not obligate or commit itself to update its forward-looking statements except as required by law. The company's management believes that in addition to GAAP results, non-GAAP financial measures can provide meaningful insight when evaluating the company's financial performance and the effectiveness of its business strategies. We will therefore use non-GAAP financial measures for certain of our results during this call. Reconciliations of GAAP to non-GAAP financial measures are included in the press release that we issued this afternoon, which is posted to Alpha Teknova, Inc.'s website and at sec.gov/edgar. Non-GAAP financial measures should always be considered only as a supplement to, and not as a substitute for or as superior to, financial measures prepared in accordance with GAAP. The non-GAAP financial measures in this presentation may differ from similarly named non-GAAP financial measures used by other companies. Please also be advised that the company has posted a supplemental slide deck to accompany today's prepared remarks. It can be accessed on the Investor Relations section of Alpha Teknova, Inc.'s website and on today's webcast. And now I will turn the call over to Stephen. Stephen Gunstream: Thank you, Jennifer. Good afternoon, and thank you, everyone, for joining us for our first quarter 2026 earnings call. It was a relatively straightforward quarter for us across the board, with revenue and operating expenses delivering in line with or better than our expectations. Revenue grew 13% compared to the same period last year, led by 85% growth in Clinical Solutions. Gross margin, operating expenses, and free cash outflow were in line with our expectations, including the planned incremental spend in sales and marketing. From a macro environment perspective, we continue to see stabilization across our end markets, and as we learn more about how our customers are planning for late-stage clinical trials and commercial production, we are growing increasingly confident in our ability to deliver long-term, sustainable, above-market growth. Building on that, I would like to provide a little more detail around our thoughts on the current macro environment. In the first quarter, we saw an increase in the number and total dollar value of orders over $25 thousand compared to the same period last year, which we believe indicates that some of our customers are shifting their focus from cash conservation to strategic execution. While there are still accounts focused on conserving capital, we believe this headwind has now been offset by an increase in customers placing orders to move their research and clinical studies forward. Notably, we are seeing growth in nearly every end market segment we serve, including life science tools, diagnostics, and biopharma. Moreover, some of our leading indicators, such as customer engagement and funnel health, provide us more confidence in a predictable market backdrop going forward. We are therefore encouraged that we began ramping our commercial investment at the beginning of 2026. As a reminder, the roughly $2 million annual increase in commercial spend is split between marketing and sales to increase lead generation activities, build lead qualification infrastructure, and onboard sales associates with experience in tools, diagnostics, and large pharma. I am happy to say that these initiatives are on track and that we should be able to see their impact on revenue by early 2027. We believe these investments, combined with the rebound in biotech funding and the progression of our customers' therapies and diagnostics towards commercialization, should position us for approximately 20% revenue growth in 2027. Operationally, we continue to focus on driving throughput, process improvements, automation, and software implementation. In the first quarter, we increased our high-volume bottle production by tripling our single-batch size and implementing an automated aseptic filling line. This project allows us to not only scale production volumes but also to reduce labor hours per unit. From a software perspective, we have now migrated 90 of our 3 thousand-plus paper batch records to digital, providing enhanced data analytics, increased visibility, better documentation quality, and improved standardization. We are fortunate to have dedicated engineering and software development teams on staff to lead these initiatives as we look to scale and achieve profitability. In the meantime, we remain focused on executing our plan by driving growth in Lab Essentials customer wallet share and increasing our active Clinical Solutions customer count. We are excited about the traction we are seeing so far in 2026 and believe the substantial investments we have made over the past three years have positioned the company to scale and generate significant value for our customers and stockholders alike. I will now hand the call over to Matthew to talk through the financials. Matthew C. Lowell: Thanks, Stephen. Good afternoon, everyone. As Stephen explained, revenue was up 13% for the first quarter of 2026 compared to the same quarter in the prior year. This was also the first Q1 in which we earned over $11 million in revenue in nearly three years. I am also very pleased with our progress on key profitability measures and cash usage. Overall, we delivered strong financial results for the first quarter of 2026. For revenue, Lab Essentials products are targeted at the research use only, or RUO, market and include both catalog and custom products. Lab Essentials revenue was $8.4 million in the first quarter of 2026, up 3% compared to $8.1 million in 2025. The increase in Lab Essentials revenue was attributable to higher average revenue per customer, partially offset by a decreased number of customers. Clinical Solutions products are made according to Good Manufacturing Practices, or GMP, quality standards, and are primarily used by our customers as components or inputs in the development and manufacture of diagnostic and therapeutic products. Clinical Solutions revenue was $2.1 million for the first quarter of 2026, an 85% increase from $1.2 million in the first quarter of 2025. The increase in Clinical Solutions revenue was attributable to an increased number of customers and, to a slightly lesser extent, higher average revenue per customer. We expect revenue per customer to increase over time when a subset of these customers ramp up their purchase volume as they move through the clinical phases. However, this metric can be affected by the addition of newer Clinical Solutions or GMP catalog customers, who typically order less. Just as a reminder, due to the larger average order size in Clinical Solutions compared to Lab Essentials, there can be more quarter-to-quarter revenue lumpiness in this category. Onto the income statement. Gross profit for the first quarter of 2026 was $3.8 million, compared to $3.0 million in the first quarter of 2025. Gross margin was 34.2% in the first quarter of 2026, up from 30.7% in the first quarter of 2025. The increase in gross profit was driven primarily by higher revenue. Operating expenses for the first quarter of 2026 were $8.1 million, and for the first quarter of 2025 were $8.0 million. The increase in 2026 was primarily driven by higher spending in sales and marketing resulting from higher headcount and increased marketing expenses, partially offset by lower general and administrative expenses attributable to lower stock-based compensation expense and professional fees. Net loss for the first quarter of 2026 was $4.6 million, or negative $0.08 per diluted share, compared to a net loss of $4.6 million, or negative $0.09 per diluted share, for 2025. Adjusted EBITDA, a non-GAAP measure, was negative $2.0 million for 2026, compared to negative $2.5 million for 2025. Capital expenditures for the first quarter of 2026 and 2025 were both $200 thousand. Free cash outflow, a non-GAAP measure which we define as cash provided by or used in operating activities, less purchases of property, plant, and equipment, was $3.6 million for the first quarter of 2026, compared to $4.3 million for 2025. This decrease compared to the prior year was due to lower cash used in operating activities. Turning to the balance sheet. As of 03/31/2026, we had $17.8 million in cash, cash equivalents, and short-term investments, and $13.2 million in total borrowings. 2026 outlook. Turning to our 2026 guidance and outlook, we are reiterating our 2026 total revenue guidance of $42 million to $44 million. At the midpoint, this implies approximately 6% revenue growth compared to 2025. As our underlying end markets continue to recover, we have seen improvement in orders of custom products from both biopharma and life science tools and diagnostics customers. Customer conversations about future 2026 custom product orders continue to be encouraging, and we have started to see more large orders, those greater than $25 thousand, but are waiting to see more durability before we consider changing our guidance for the year. As we have indicated before, due to the high percentage of fixed costs associated with our operations, we estimate that each additional dollar of revenue drops through at a marginal cash rate of approximately 70%, with some variability quarter to quarter in reported results due to GAAP accounting. We continue to expect gross margin in the mid-30s percentage range for the full year 2026. The company posted operating expenses of $8.1 million in Q1 2026, which reflects our scaled investment in sales and marketing, which we expect to be approximately $2 million for the full year 2026. Our expectation is that these investments will pay off as soon as the end of 2026, but more likely in 2027, in the form of double-digit revenue growth rates. At this higher spending level, we expect to become adjusted EBITDA positive in the range of $52 million to $57 million in annualized revenue. As customer end markets are stronger in 2027 and our stepped-up commercial activity bears fruit as expected, we should report a positive adjusted EBITDA quarter by 2027. The company continues to see a reduction in free cash outflow during the first quarter of 2026 compared to the same quarter in the prior year. While the company saw an increase in free cash outflow compared to Q4 2025, this is consistent with the company's expectations for the year and is higher due to certain larger payments typically occurring during the first quarter. We anticipate lower average quarterly free cash outflow for the remainder of the year. As such, the company continues to expect free cash outflow of less than $10 million for the full year 2026, even with the increased investment in our commercial capabilities. With that, I will turn the call back to Stephen. Stephen Gunstream: Thanks, Matthew. Overall, we were very pleased with the start to 2026 and the progress we have made against our strategic priorities. We believe the outlook for our end markets remains positive, and we are committed to executing on our strategy to help our customers accelerate the introduction of novel therapies, diagnostics, and other products that improve human health. We will now open the call for questions. Operator: Thank you. Please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please stand by while we compile. Our first question comes from the line of Mackie Tau with Stephens. Your line is open. Mackie Tau: Hey. Good afternoon, and thank you for taking my questions. Great to hear about the updated macro outlook. I have heard some of your peers talk about maybe a little bit of bifurcation between earlier-stage biotech and later-stage biotech. I would love to get your sense of what you are hearing at this point from these individual customers and whether you are seeing a similar trend in your customer base. Thank you. Stephen Gunstream: Yeah, thanks, Ben. In some ways, yes, we are seeing some similarities. We had some nice large pharma growth in the quarter, but on the clinical side of our business, we did still see some of these earlier-stage phase one, phase two place some nice orders with us. A lot of that probably has to do with the work we have been doing with them for some time. In the very early stage, on the research in the Lab Essentials, there is a little softness there, but we have not seen it as much. It could just be some of the accounts that we are supporting today, but we are starting to get more customer engagement from these smaller biotechs, and it is looking pretty encouraging right now. Mackie Tau: As we think about your different end markets, it sounds like all of them are coming back together as one. Are there any that are leading the pack more so than others? Stephen Gunstream: Yeah. Like I just mentioned, we had some nice growth in large pharma in the quarter. We did get some nice growth on the diagnostic side as well and the tools and diagnostics, but particularly on the biotech side we had some nice orders come in there. We are seeing some growth there. I think, like I said, the biopharma as a whole is a little bit slower, but you are starting to see some growth there. There are certainly pockets where we expect that to increase throughout the year. Mackie Tau: I appreciate the color. Thank you. Operator: Our next question comes from the line of Brendan Smith with TD Cowen. Your line is open. Brendan Smith: Great. Thanks for taking the questions, and congrats on the quarter. Following up on the commentary regarding customers advancing through clinical development, do you have a sense, even broad strokes, what percent of customers are in that preclinical/phase one bucket versus those in phase three or approaching commercial? I am wondering how that funnel is looking at this point, especially if the funding environment continues to improve. Stephen Gunstream: Yeah, Brendan. It is not that different than what we put out in our slides for the 2025 full year. We are supporting approximately 70 therapies. There are five therapies in phase two or phase three that are nearing completion at the moment, and then 12 in phase one, and then the rest are preclinical. We would expect those numbers to increase as we go throughout this year. That is our strategy as you onboard more of these clinical customers, and certainly if biotech funding comes back, we would expect that to continue, and we have done that really since we started targeting these clinical customers back in 2020. Brendan Smith: Got it. And as a quick follow-up, we have started to see some increases in wet lab spending activity as a result of customers rolling out AI capabilities and needing to validate models and new targets. It feels early, but do you have any sense of this materializing in your customers' ordering patterns, and is there any reason why that would not be a notable tailwind for Alpha Teknova, Inc. over the coming quarters? Stephen Gunstream: Yeah. I think these AI data generation programs are significant, and it is lots of reagents. They are generating significant amounts of data. We are supporting many of the customers that are supporting the end users here to generate that data, or directly. So the standard products we offer in our catalog, products like LB broth for bacteria, or the buffers and things to purify proteins, I would expect that to be a tailwind for us. There are customers we are supporting that we are seeing pick up their spend with us for those reasons, but it is not yet significant or material. Operator: Thank you. Our next question comes from the line of Matthew Richard Larew with William Blair. Your line is open. Matthew Richard Larew: Nice upside in the quarter relative to the Street, but the guide was maintained. You referenced wanting to see more durability before changing the guide. It seems like more companies than normal have called out benefit from more days in the quarter that reverses later in the year. Was there any timing impact like that or any orders that got pulled forward into the print, or is it just an effort to be conservative given the broader macro picture? Matthew C. Lowell: Good question, Matt. We do have some of this phenomenon where we have business days impacts, particularly in the catalog portion of our business, which is about 60% of the total business. I would say that was not really a factor for Q1. It will be and usually is for Q4. We saw pretty typical ordering and delivery behavior in Q1, so I do not think that really impacted the quarter. As you noted, and I did as well, there is still macro uncertainty, and while we are off to a good start here, we are certainly optimistic, but not ready to increase our guidance range at this time. It is definitely something that we are evaluating each quarter, and it is encouraging to have this great start. Matthew Richard Larew: You brought up 2027 in your remarks and being in position for 20% revenue growth. If I look at TTM revenue, it has improved over a year ago, particularly on the Clinical Solutions side, and Lab Essentials has stabilized at least in the mid-single digits. From where we are today, what elements do you see improving the most to get to 20% in 2027? Stephen Gunstream: A couple of things come into play. First is an improving backdrop. We have seen biotech funding now two quarters ahead of where it has been. From past data, we think it is pretty similar this time that we will start seeing an impact with about a three- to four-quarter lag, and we are expecting to see that towards the end of this year. That will drive a portion of that growth, so the baseline is picking up a little bit. On the clinical side, we are supporting more customers, and more of them are moving later into the pipeline, including where we would expect either diagnostic or therapeutic commercial approval by the end of next year. Even moving from phase one to phase two or phase two to phase three or phase three into commercial will drive significant growth. That base is relatively small, and on the diagnostic side there are a couple in there, including on the leukocyte side, that we may be supporting larger volumes for next year. In addition, the investment we are making on the commercial side, both in marketing and in the field, will take six to twelve months to ramp up, and that will help us as well. Historically, Lab Essentials has grown 11% on average since 2008. I think we start to see that pick up a little bit, and combined with these other things, that should get us into that 20% range. Operator: Thank you. Our next question comes from the line of Matthew Hewitt with Craig-Hallum Capital Group. Your line is open. Matthew Hewitt: Good afternoon, and congratulations on the nice start to the year. Regarding Clinical Solutions, phenomenal Q1, up 85% year over year. Was there a larger order that drove some of that, or was it more broad-based as you noted several large orders? And how should we be thinking about cadence for that bucket over the remainder of the year? Stephen Gunstream: I will let Matthew touch on the cadence in a minute, but when you look at the customers we supported in Q1—and we have talked a lot about the lumpiness—the question is right: Is this just a lumpy quarter, or is this more broad-based? In this case, it is more broad-based. In fact, we had a fairly large customer last year order, and then we came over that, and we had a number of customers that we delivered for in Q1. I would say it is pretty positive that this one is not just a one-time lumpy piece for a quarter. I will let Matthew talk a little bit about the cadence for the rest of the year. Matthew C. Lowell: I would echo what Stephen said. We are feeling pretty good about the diversity in that part of the business in Q1 and also based on the discussions we are having now for the rest of the year. That is an area where we should continue to see results at these kinds of levels, let us say in the $2 million range per quarter or better, depending on how things go later in the year. That is definitely going to be an important component of growth this year. All to say that part is looking good, and we should continue to see good results there. Matthew Hewitt: Thank you. Switching gears a bit, with the investments you have been making—digitizing paper, creating larger batch sizes—as I think about your target 60% to 65% gross margins in a few years, how much of that comes from volume leverage versus these strategic initiatives? Matthew C. Lowell: That is a good question. I believe the single biggest driver, and it will continue to be, is volume growth. But we are not going to sit and rest on our laurels and wait for that to play out. There are lots of other things we can be doing and are doing. The example you gave is a good one, and they are meaningful. These are not trivial things. Sometimes they play out as productivity benefits where we see the benefit more as we grow than immediately in terms of cost reduction. It can show up as cost strength as we grow. We have that digitization and a lot of other projects always going on, and there is a never-ending set of opportunities. But I would still say the main driver is volume growth, and we are seeing that happen right now, and we are excited about it. Matthew Hewitt: Got it. Thank you. Operator: Please stand by for our next question. Our next question comes from the line of Matthew Moriarty Parisi with KeyBanc Capital Markets. Your line is open. Matthew Moriarty Parisi: Hi. This is Matthew Parisi on for Paul Knight. Congrats on the quarter, and thanks for the question. You mentioned the onboarding of new sales associates during the call. How long does that ramp period take? Stephen Gunstream: Typically, my experience is six to twelve months until you really start to see the impact. I mentioned that probably towards the end of this year we will be able to see it. We are starting to see some early indicators with more meetings and more engagement with some of the target accounts that we are after. It has been great to onboard them, and we are very happy we started in January. I think all is going to plan. Matthew Moriarty Parisi: Thank you. That is all for me. Operator: Ladies and gentlemen, I am showing no further questions in the queue. That concludes today's conference call. Thank you for your participation. You may now disconnect.