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Operator: Thank you for standing by. Welcome to Matson, Inc.’s First Quarter 2026 Financial Results Conference Call. At this time, all participants are in a listen-only mode with a question-and-answer session to follow. To ask a question during this session, you will need to press 1 1 on your telephone. If your question has been answered and you would like to remove yourself from the queue, simply press 1 1 again. As a reminder, today’s program is being recorded. I would now like to introduce your host for today’s program, Justin Schoenberg, Director of Investor Relations and Corporate Development. Please go ahead, sir. Justin Schoenberg: Thank you. Joining me on the call today are Matthew J. Cox, Chairman and Chief Executive Officer, and Joel M. Wine, Executive Vice President and Chief Financial Officer. Slides from this presentation are available for download at matson.com under the Investors tab. Before we begin, I would like to remind you that during the course of this call, we will make forward-looking statements within the meaning of the federal securities laws regarding expectations, predictions, projections, or future events. We believe that our expectations and assumptions are reasonable. We caution you to consider the risk factors that could cause actual results to differ materially from those in the forward-looking statements in the press release, presentation slides, and this conference call. These risk factors are described in our press release and presentation and are more fully detailed under the caption “Risk Factors” on pages 12 to 23 of Form 10-Ks filed on 02/27/2026, and in our subsequent filings with the SEC. Please also note that the date of this conference call is 05/04/2026, and any forward-looking statements that we make today are based on assumptions as of this date. We undertake no obligation to update these forward-looking statements. I will now turn the call over to Matthew J. Cox. Matthew J. Cox: Thanks, Justin, and thanks to those on the call. Starting on slide three, in the first quarter 2026, Ocean Transportation operating income exceeded our expectations primarily due to higher freight demand post-Lunar New Year in our China service. In our domestic trade lanes, we saw lower year-over-year volume in Hawaii and Alaska. In Logistics, operating income was lower year over year primarily due to a lower contribution from supply chain management. To date, the Iran conflict has not impacted our operating performance or service levels; however, it has impacted fuel prices in all our markets. While we have effective mechanisms to recover the cost of fuel by the end of the year, for the second quarter, we expect a negative impact from the lag in the recovery of fuel costs. I will go into more detail later in the presentation on the effects of fuel prices and our recovery mechanisms. Lastly, we are raising our full-year outlook for consolidated operating income and now expect to modestly exceed the level achieved in 2025. The primary driver behind raising outlook for consolidated operating income is the strengthening of freight demand in our China service post-Lunar New Year that we expect now to continue through peak season. Joel will go into more detail on the outlook later in the presentation. I will now go through the first quarter performance in our trade lanes, SSAT, and Logistics, so please turn to the next slide. In our Hawaii service, container volume for the first quarter decreased 5.6% year over year primarily due to lower general demand and the drydocking of a competitor’s vessel in the year-ago period. For the full year 2026, we expect volume to be comparable to the level achieved in 2025 reflecting similar economic conditions in Hawaii and stable market share. Please turn to slide five. According to UHERO’s February economic report, Hawaii’s economy is expected to experience modest growth supported by construction activity, while tourism remains soft and inflationary pressures persist. Construction continues to be a bright spot for the labor market with a high level of public and private building activity, including the rebuilding of Maui. Regarding tourism, the outlook for international visitors remains weak, offsetting modest growth in domestic tourist arrivals. Lastly, inflation remains elevated and may continue to weigh on discretionary spending and overall demand. Moving on to our China service on slide six. Matson, Inc.’s volume in the first quarter 2026 was 9.5% lower year over year primarily due to lower general demand. As we noted on the fourth quarter earnings call, we expected volume in the first quarter to be lower than the prior year as we return to a more traditional Lunar New Year freight cycle. Please turn to slide seven for additional commentary on current business trends. In the first quarter, we did not see a traditional bump in demand prior to Lunar New Year. Post-holiday, the freight demand exceeded our expectation and was driven by higher demand across several of our key market segments such as e-commerce, e-goods, and garments. We saw continued air-to-ocean freight conversions, and further growth and penetration into Southeast Asia ports. E-commerce from South China continues to be a solid recurring contributor to volume demand. E-goods volume picked up post-holiday due to strong demand for data center servers and racks and has continued into the second quarter. With respect to air-to-ocean freight conversions, we have benefited from elevated freight costs and reduced air cargo capacity in select markets. In the first quarter 2026, we saw strong volume from our feeder network in North and South Vietnam and Thailand. Our Thailand feeder service, commenced operations in late December 2025, has received positive feedback and has exceeded our expectations to date on volume. Overall, the uptick in freight demand we saw post-Lunar New Year has continued to build in the second quarter as demand strengthens and volumes return to a more traditional seasonal pattern. With increasing demand, we remain focused on maximizing the yield on every sailing out of Shanghai and our freight rates remain at healthy levels. As a result, we expect second quarter 2026 container volume to be higher compared to the prior-year period, which included a market decline in transpacific demand due to the tariffs imposed in April 2025. As a reminder, our container volume declined 30% last April before recovering in May and June. Encouragingly, conditions are more stable today. For the full year 2026, we expect container volume to be moderately higher than the level achieved in 2025 as we expect the demand strength in the second quarter to continue through peak season. Please turn to the next slide. In our Guam service, Matson, Inc.’s container volume in the first quarter 2026 was flat year over year. In the near term, we expect Guam’s economy to remain stable. As such, for the full year 2026, we expect container volume to be comparable to the level achieved last year. Please turn to the next slide. In our Alaska service, Matson, Inc.’s container volume in the first quarter 2026 decreased 2% year over year. The decrease was primarily due to lower general demand partially offset by an additional northbound sailing and an additional AAX sailing compared to the year-ago period. In the near term, we expect continued economic growth in Alaska, supported by a low unemployment rate, job growth, and continued oil and gas exploration and production activity. As such, for full year 2026, we expect container volume to be comparable to the level achieved last year. Please turn to slide 10. In the first quarter, our SSAT terminal joint venture contributed $5 million, representing a year-over-year decrease of $1.6 million. The decrease was primarily due to lower lift volume. For the full year 2026, we expect the contribution from SSAT to be lower than the $32.5 million achieved in full year 2025. Turning now to Logistics on slide 11. Operating income in the first quarter came in at $6.8 million, or $1.7 million lower than the result in the year-ago period. The decrease was primarily due to lower contribution from supply chain management. For full year 2026, we expect operating income to approach the level achieved in full year 2025. Please turn to the next slide. Before I turn the call over to Joel for a review of our financial performance, I would like to share a few thoughts on the recent volatility in fuel attributed to the Iran conflict. We expect fuel price volatility to impact our near-term earnings due to a timing lag between when we incur fuel costs and when we can fully recover these costs through our fuel surcharge. These mechanisms are very effective at recovering the cost of fuel over time. Historically, in our maritime business, we have been successful in recouping the cost of fuel within any calendar year, although fluctuations can occur between quarters. In the first quarter of this year, the impact was not material as we experienced escalating fuel prices only during the last few weeks of the quarter. For the second quarter, we expect a lag in the recovery of fuel costs, but we expect to fully recover our fuel costs by the end of the year with most of that occurring in the third quarter. These expectations regarding the impact of fuel costs and the recoverability of these costs have been factored into our outlook. And with that, I will now turn the call over to my partner, Joel. Joel M. Wine: Okay. Thanks, Matt. Please turn to slide 13 for a review of our financial results. For the first quarter, consolidated operating income decreased $20.7 million year over year to $61.4 million, with Ocean Transportation decreasing $19 million and Logistics declining $1.7 million. The decrease in Ocean Transportation operating income in the first quarter was primarily due to a lower contribution from our China service. The decrease in Logistics operating income was primarily due to a lower contribution from supply chain management. We had interest income of $6.1 million in the quarter compared to $9.4 million in the same period last year. The effective tax rate in the quarter was 16.6% compared to 21.6% in the year-ago period. Our tax rate was lower year over year due to a discrete tax item that reduced taxable income. Given the lower income level in the quarter relative to the other quarterly periods in the year, discrete tax items can have a more pronounced impact on our effective tax rate in the quarter. In the first quarter 2026, net income and diluted earnings per share were $56.6 million and $[inaudible], respectively. Diluted weighted shares outstanding decreased 7.8% year over year. Please turn to the next slide. We continue to generate strong cash flows. For the trailing twelve months, we generated cash flow from operations of $552.1 million. We returned capital in the form of dividends and share repurchases of $333.8 million, and we had maintenance CapEx of $150.9 million. Our cash flow from operations exceeded the aggregate spend on maintenance CapEx, dividends, and share repurchases by $61.4 million. Please turn to slide 15 for a summary of our share repurchase program and balance sheet. During the first quarter, we repurchased approximately 400 thousand shares for a total of $54.4 million. Since we initiated our share repurchase program in August 2021, through March, we have repurchased approximately 14.2 million shares, or 32.7% of our stock, for a total cost of approximately $1.3 billion. On 04/23/2026, we announced the addition of 3 million shares to our existing share repurchase authorization. As we have said before, share repurchases are an important component of our capital allocation strategy, and this increase allows us to continue to be steady buyers of our shares in the absence of any large organic or inorganic growth investment opportunities. Turning to our debt levels, our total debt at the end of the first quarter was $351.1 million, a reduction of $10.1 million from the end of 2025. With that, let me now turn to slide 16 and walk through our outlook for 2026 at the top of the page. Based on the outlook trends Matt mentioned earlier, we expect Ocean Transportation operating income to be approximately $20 million higher than the $98.6 million achieved in 2025. We also expect Logistics operating income to approach the $14.4 million achieved in 2025. As such, we expect consolidated operating income in the second quarter to be approximately $20 million higher than the prior year, which includes the negative impact we expect from the lag in the recovery of fuel costs that Matt mentioned earlier. On the bottom half of the slide, we have our expectations for full year 2026. Starting with Ocean Transportation, we now expect year-over-year operating income to modestly exceed the level achieved in the prior year. The strengthening of freight demand in our China service post-Lunar New Year and our expectation that this demand strength continues through peak season is the primary driver behind our raise in outlook. For Logistics, we expect operating income to approach the level achieved in the prior year. As a result, we now expect consolidated operating income to modestly exceed the level achieved in the prior year. Our full-year outlook includes the expectation that we are able to recover fuel costs by the end of the year with most of the recovery occurring in the third quarter. We also expect a more normal operating seasonality pattern with consolidated operating income in the second and third quarters being the strongest relative to the first and fourth quarters. In addition to this full-year operating income outlook, we expect the following for the full year: depreciation and amortization to approximate $210 million inclusive of approximately $35 million for drydocking amortization; interest income to be approximately $16 million; interest expense to be approximately $6 million; other income to be approximately $7 million; an effective tax rate of approximately 21%; and drydocking payments of approximately $45 million. Moving to slide 17, the table on the slide shows our CapEx projections for the full year 2026. Our range for maintenance and other capital expenditures is unchanged at $150 million to $170 million for full year 2026. Our estimate for expected new vessel construction milestone payments and related costs for full year 2026 is $400 million. As of March 31, we had cash and cash equivalents of approximately $100 million and had approximately $522 million in our capital construction fund. Our CCF covers approximately 93% of our remaining milestone payment obligations, and when combined with our balance sheet cash, exceeds our remaining financial obligations. We continue to be in a great funding position on the new build program. Lastly, our targeted build schedule remains unchanged. In the first quarter, we made a milestone payment of approximately $16 million from the CCF. Looking ahead, we expect to make approximately $213 million of milestone payments in the second quarter. And then in the third and fourth quarters, we expect to make milestone payments of approximately $34 million and $110 million, respectively. With that, let me turn the call back over to Matt for closing remarks. Matthew J. Cox: Thanks, Joel. Please turn to slide 18 where I will go through some closing thoughts. We continue to navigate a period of geopolitical tension and uncertainty. While we have experienced higher fuel prices, we are confident in our ability to fully recover our increased fuel costs. Our focus remains on what we can control, which is to put our customers first, maintain operational excellence, and uphold our high standard of service. We remain confident in the demand consistency of our businesses because of our focus on serving niche markets where we are an integral part of the supply chain. In our domestic trade lanes, we provide a vital lifeline to the communities we serve. And in our China service, our value proposition is differentiated based on speed, reliability, and schedule integrity. Building on these strengths, we have successfully moved with our customers into Southeast Asia markets to extend our geographic reach and diversify our origination ports. Our China service has also become an important means for our e-commerce customers to meet the increasing consumer demand in the U.S., and we continue to expect e-commerce to be a long-term driver of growth for our CLX and MAX services. Lastly, we remain disciplined in our return of capital to shareholders. In the absence of sizable growth projects or acquisitions, we expect to continue to return excess cash to shareholders. As Joel mentioned and we recently announced, we added 3 million shares to our authorization to repurchase stock. We will now open the call for questions. I will turn the call back to the operator. Operator: Certainly. Our first question for today comes from the line of Jacob Gregory Lacks from Wolfe Research. Your question, please. Jacob Gregory Lacks: Hey, Matt. Hey, Joel. Thanks for your time. You mentioned that you expect demand strength to continue through peak season. Last year was a little bit unique with the MAX service below 100% utilization during peak. Do you think you can get back toward more full ships this year as we move into the third quarter? And as I look at air freight versus ocean freight, air tends to be a lot more fuel intensive. Are you seeing more shippers look to convert freight to your service the longer this high fuel price environment persists? To the extent we start seeing some jet fuel shortages in Asia, could that accelerate volume growth from some of the non-China geographies? And lastly, can you give us a sense of how much the fuel lag headwind you are expecting in the second quarter is? I know it is volatile, but any quantitative color would be helpful. As you get into the third quarter, could you even over-recover given the investments you have made in scrubbers and LNG, or is this really a true pass-through? Matthew J. Cox: Yes, I do, Jake. I think we said at the beginning of the year, and we continue to see it as it is unfolding in front of us, a more traditional cycle in the China trades—meaning a post-Lunar New Year slow build to the second and third quarter with full or nearly full ships as we have traditionally seen. We have vessels that are slightly different sizes, but we expect to be full or nearly full in the second and third quarters as we build into the traditional peak season. We expect it to remain busy until the traditional October pattern into the Lunar New Year. Overall, we expect to end up above where we did last year, and we are at a point where we feel like we are going to exceed last year’s marks. On the air-to-ocean conversion, you are right. Although we have been mentioning air freight conversion for the last couple of years given this expedited space that we created, there has been a long-term trend with periods where that growth would go up or go down. We think we are entering a period where we are going to see more air freight conversions, some of which will be temporary and some of which will continue to convert. The longer that energy prices and availability are issues, the more the air freight markets are dislocated, especially in places where they primarily import their jet fuel. While we have not seen significant impacts yet, we are seeing, both from a price standpoint and a potential availability standpoint, a lot of passenger airlines cancel flights or cancel marginally profitable flights. That is happening all over the world, including in the U.S., although that is not our core market. Just a reminder that 50% of air freight flies in the bellies of passenger planes. So we see it as a tailwind rather than a huge catalyst. Our ships are likely to be in a more traditional peak cycle—nearly full—so I think it will be helpful as a tailwind. Regarding the near-term fuel lag, we are not exactly sure where we will end up given the volatility, and it is not central to our story. We remain highly confident in our ability to recover fuel for the year. The first quarter had very little impact because prices escalated late in the quarter and we consume fuel over longer voyages. We think the impact will primarily be felt in the second quarter, and we are highly confident that we will be able to recover that in the second half of the year. There is not a margin erosion story. Our second quarter guide is inclusive of the amounts we are contemplating, but we would rather stay away from point-specific items. I will let Joel address the recovery mechanics. Joel M. Wine: If it is fuel-related items, we will put them in the recovery basket, Jake. For instance, for a scrubber—which we have not done recently, but we did many years ago—that is a fuel-related item that allows us to purchase fuel at lower cost. It is part of the overall equation. So if something is very specific to fuel, then yes, that goes into our overall recovery basket. Operator: Thank you. Our next question comes from the line of Analyst from Stephens Inc. Your question, please. Analyst: Hey, thanks for taking the question. You previously disclosed transshipment mix around 20% of CLX and MAX. Was there any change in that figure in the first quarter? And then any regions in particular that made you more optimistic on near-term growth? As a follow-up, on the China service, last year was really volatile with a lot of changes in trade. How would you describe overall hesitancy on China trade as we move through the year among customers? And then on the competitive backdrop within expedited ocean, have you seen any increase in blank sailings or capacity losses as competitors had less confidence on the trade backdrop with China? Matthew J. Cox: I think the 20% we previously cited—we are in the 20% to 25% range—and we expect to continue to be in that range as we grow both our China origins and our Southeast Asia origins as we look toward filling our ships into the more traditional peak season. We do expect our customers to continue to move some of their manufacturing base out of China, although we continue to believe that China will remain an important element of our story and remain an important part of the world’s productive capability for manufacturing products. Could we go up from the 20% to 25%? Sure, it is possible. Importantly, it allows us to move with our customers as they relocate their plants. We are a trusted supply chain partner, and they have confidence in us, so we will continue to move as our customers move. On hesitancy, customers are looking at producing their products from an all-in standpoint—including tariffs and transportation charges—to meet their retailing needs. There are a lot of factors, but our view, embedded in our commentary, is that while there will be moments where tariff issues pop up, in our world we think that tariff uncertainties are largely behind us. President Xi and President Trump will be meeting in a few weeks. We are optimistic that we are past the period like last fall where there was significant uncertainty. Regarding the expedited ocean competitive backdrop, on the broader generic ocean side we are seeing relatively good utilization. There are small roll pools. The ocean carriers are trying to get ocean freight rates up. Many of them have significant increases in fuel and other costs and are seeking to raise rates in part to recover those costs. I would call the broader generic ocean market orderly. For the second-tier expedited carriers, we have not seen dramatic changes in capabilities. We have not seen significant cancellations of sailings. The market for that secondary carrier set—there are three or four of them that vie for that space—has been relatively similar. Our belief was and continues to be that if we remain the fastest and second fastest—CLX and MAX—we will get the lion’s share of the expedited market, and that continues to be true now. Operator: Thank you. Our next question comes from the line of Analyst from JPMorgan. Your question, please. Analyst: Hello everyone. Your second quarter Ocean Transportation operating income guidance is $20 million up year over year. Which services or customer segments are driving this growth, and what are the key risks to achieving it? And if you could share some more color on Hawaii and Alaska demand and economic conditions, especially regarding tourism and construction and energy—and again, what risks do you see for 2026? Lastly, the Logistics segment operating income declined in the first quarter. What specific actions are you taking to drive recovery in the second quarter and beyond, and what is your outlook for the rest of the year? Joel M. Wine: Thanks. The primary driver to that increase is the continued strength in our China trade post-Lunar New Year that we talked about. Our domestic businesses we expect to hang in there on a relatively similar basis year over year. So the primary uptick is really the China trade and the demand drivers in some of our core segments that Matt talked about earlier—e-commerce, e-goods, garments—returning to a more normal traditional demand in the second quarter compared to last year’s second quarter, which had a lot of tariff impacts on it. The risks would be a dislocation—tariffs reenacted or other shocks to the system. Absent a shock that would impact consumer demand or direct trade relationships, we expect it to be a relatively orderly, demand-driven second quarter, which is how we expect it to be up year over year. On Hawaii, the bright spot is construction. There has been more construction activity, fairly consistent for a year to a year and a half, and we see that driving some demand in 2026. It has not been enough to really buoy the economy in a meaningful way because tourism has been sluggish. U.S. tourism to Hawaii has been okay, although dollar spend has not dramatically grown. International tourism remains quite a bit off where it was four to five years ago, which has been the biggest overhang on GDP growth in Hawaii. Overall, it is a sluggish environment. In Alaska, there continues to be significant oil and gas and infrastructure investment around energy. That has been very positive. Our volumes have hung in well. We sometimes have year-over-year differentiation based on competitors’ drydocking and timing of voyages, but overall Alaska continues to be steady with an upward trajectory due to energy investment and more disposable income for residents as a result. On Guam, which is a really important domestic market for us, conditions continue to be steady as well. Tourism is hanging in okay, but again, international is not fully back; government spending in Guam and the Western Pacific region is helping volumes. For Logistics, our outlook for the rest of the year is that we will be approaching last year’s results. The actions we are taking focus on two pieces. Our Span Alaska business is a little over half of Logistics, and there we are focusing on disciplined pricing and delivery for our customers, providing the best transit times and customer service in that market. On the brokerage business—where margins have been compressed and under pressure in highway truckload and intermodal—we are focusing on stickier customer relationships, small and medium customers, pricing discipline, and good execution in what is still a generally soft freight environment. On the buy side for truck procurement, we continue to work with our trucking partners to buy capacity at the right price, while maintaining our pricing and margin discipline. We expect to approach last year’s results for the full year. Operator: Thank you. This does conclude the question-and-answer session of today’s program. I would like to hand the program back to Matthew J. Cox for any further remarks. Matthew J. Cox: Thanks for listening in today. We look forward to catching up with everyone on our second quarter call. Thanks very much. Unknown Speaker: Aloha. Operator: Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.
Operator: Good afternoon, everyone, and thank you for standing by. Welcome to Evolus, Inc. for First Quarter Earnings Conference Call. As a reminder, today's conference is being recorded and webcast live. All participants are in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session. I would now like to turn the conference over to Nareg Sagherian, Vice President, Head of Investor Relations and Corporate Communications. Please go ahead. Thank you, operator. Nareg Sagherian: And welcome to everyone joining us on today's call to review Evolus, Inc.'s first quarter financial results. Our first quarter press release is now on our website at evolus.com. With me today are David Moatazedi, President and Chief Executive Officer; Tatjana Mitchell, Chief Financial Officer; and Rui Avelar, Chief Medical Officer and Head of R&D, who is also with us for the Q&A portion of the call. Today's call will include forward-looking statements. Actual results may differ materially due to risks and uncertainties outlined in our earnings press release and SEC filings. These forward-looking statements are based on current assumptions and we undertake no obligation to update them. Additionally, we will discuss certain non-GAAP financial measures. These measures should be considered in addition to, and not as a substitute for, our GAAP results. A reconciliation of GAAP to non-GAAP measures is included in today's earnings release. As a reminder, our earnings release and SEC filings are available on the SEC's website and on our Investor Relations website. Following the conclusion of today's call, a replay will be available on our website at investors.evolus.com. With that, I will turn the call over to our CEO, David Moatazedi. David Moatazedi: Thank you, Nareg, and good afternoon, everyone. We started 2026 with strong momentum that carried over from the fourth quarter, resulting in our second consecutive quarter of positive adjusted EBITDA. Importantly, we achieved this in what is seasonally our lowest revenue quarter of the year, and against our strongest prior-year comparison. We view this as a clear validation of both the strength of the business and the benefits from the structural improvements we implemented in 2025. At a market level, we are encouraged by what we are seeing across the category, with industry data and commentary signaling a global aesthetics market that remains healthy, with continued growth and strong consumer engagement. We estimate that in the first quarter, the U.S. toxin market grew in the low- to mid-single digits, while the filler market demonstrated continued improvement and was flat to slightly down. Against that backdrop, we maintained our Jeuveau U.S. market share at 14% and delivered share gains with Evolisse, reflecting continued strong performance driven by execution and a differentiated commercial model. This is an important inflection point for Evolus, Inc. Over the past year, we took deliberate actions to align our cost structure with the scale of the business and position the company for sustained profitability. The results we are delivering today reflect that work. We are now demonstrating that we can drive profitable growth while continuing to invest in expanding our portfolio. To start the year, we are tracking ahead of our operating profit assumptions, giving us the optionality to invest in growth-driving initiatives in the back half of the year. As we look ahead, our strategy is consistent and focused on building a scaled, multi-product aesthetics company, supported by a differentiated and increasingly durable business model. Our long-term outlook through 2028 is grounded in executing our playbook each quarter: expanding account coverage, improving field productivity, deepening relationships with practices, and consistently converting demand into repeat purchasing across the portfolio. A key element of our differentiation, which has enabled us to achieve mid-teens market share for Jeuveau, is a competitive moat we have established through our Performance Beauty platform. At the foundation is our cash-pay model and ability to deliver a fully integrated experience for both customers and consumers. Unlike traditional models, our leading digital ecosystem connects the entire platform, from practice engagement and product ordering to consumer acquisition, loyalty, and repeat utilization, creating a level of connectivity and efficiency that is difficult to replicate and that continues to drive repeat usage and momentum across the business. This platform is now powered to drive portfolio bundle benefits, and with international growth on a steady rise, the upcoming launch of Esteem in Europe this quarter, and additional pipeline milestones ahead, we believe this differentiated commercial structure positions us to scale efficiently and execute with greater precision. At the same time, we are increasingly leveraging our digital ecosystem to drive efficiency and scale across the organization. Over the past year, we have embedded AI into core areas of the business, and we are now seeing those actions translate into tangible results. Our unified data platform allows us to connect insights across the commercial organization, enabling more targeted engagement, improved field productivity, and faster decision-making. What makes this particularly powerful is how tightly integrated these capabilities are within our operating model. Our commercial platform, including Evolus, Inc. Rewards, practice engagement tools, and ordering systems, creates a continuous data loop that feeds directly into our AI capabilities. This allows our field organization to operate with greater precision and effectiveness, with real-time insights at their fingertips that support everything from customer targeting to conversion. Turning to the business, underlying demand remains healthy and consistent with the momentum with which we exited 2025. In addition to customer expansion and strong reorder rates, we are seeing increasing traction from our portfolio bundling strategy. We are encouraged by the progress and momentum we are seeing across our accounts as customers adopt a more integrated approach to our portfolio. Given this is a structured six-month program, we look forward to providing a more comprehensive update following the second quarter. Importantly, this is a key driver of both growth and profitability. As a more streamlined organization, these capabilities allow us to scale the business more efficiently, which is a meaningful contributor to the operating leverage and profitability we are now delivering. This is not a trade-off between growth and efficiency; it is a reflection of a more intelligent and scalable model and a clear point of differentiation versus traditional approaches in the category. Looking at our key performance indicators, they reinforce both the quality and demand scalability of our commercial model. We are continuing to broaden our reach across practices. Total purchasing accounts increased by nearly 500 in the first quarter, and since launch, more than 18,000 customers have purchased from Evolus, Inc., including approximately 3,500 for Evolisse. U.S. account penetration is now above 60%, and reorder rates remain approximately 71%. And Evolus, Inc. Rewards continues to expand, approaching 1.5 million members, up 27% year-over-year, with redemptions exceeding 255,000 in the quarter. These metrics reflect strong engagement and support our ability to translate demand into increasingly consistent financial performance. On Jeuveau, we continue to see a brand that is building. In the first quarter, Jeuveau delivered $66.4 million in global revenue, with positive unit growth and pricing stability across both U.S. and international markets. While reported revenue reflects normal seasonality and prior-year timing dynamics, underlying demand remains intact. As we move through 2026, we expect to wrap around those dynamics from early 2025, resulting in high single-digit growth for Jeuveau over that period. Beyond Jeuveau, our next phase of growth is being driven by portfolio expansion and increasing share of wallet within our accounts. In the U.S., Evolisse is increasing our relevance with customers and contributing to an evolving revenue mix as we apply the same playbook that drove Jeuveau's success: education, training, and disciplined scale. Just this past weekend, we hosted 50 customers per training program on our injectable products, and the feedback on Evolisse was incredibly positive. We are seeing accounts repurchasing at higher volumes as they gain confidence in the uniqueness of the product benefits. The excitement is also building around the upcoming FDA milestone for Sculp, which further completes our HA portfolio and puts us in a strengthened competitive position against the market-leading companies. As previously stated, we expect to gain FDA approval for Sculp in the fourth quarter of this year. Internationally, we are extending that strategy with the mid-May launch of Esteem in Europe, expanding our addressable market and building on the commercial foundation we have established with Nuceiva. In Europe, we have the opportunity to introduce a full line of Esteem products, including the flagship Sculp mid-face product, along with the U.S.-approved Smooth and Form product, and the Esteem Lips product, which is currently in U.S. FDA trials. The market learnings from these products in Europe will further support our launch strategy in the U.S. We also continue to take a disciplined approach to expanding our innovation pipeline. We are continuing to actively evaluate and pursue targeted, capital-efficient opportunities that complement our portfolio and leverage our existing commercial infrastructure. This is a natural extension of our strategy and an important component of our long-term growth, and positions us well to continue building a differentiated multi-product platform. Stepping back, our priorities are clear. We are focused on executing our plan, maintaining discipline across our cost structure, and investing in catalysts that will drive our next phase of growth. We are well-capitalized to support existing business growth and invest in pipeline opportunities. Based on our performance in the first quarter, we are reiterating our full-year outlook and remain confident in our ability to deliver double-digit revenue growth and achieve full-year adjusted EBITDA profitability in 2026. With that, I will turn the call over to Tatjana to walk through the first quarter financial results and our outlook. Tatjana Mitchell: Thank you, David. Our first quarter results reflect meaningful progress toward full-year adjusted EBITDA profitability. We are executing against our revenue plan while maintaining the expense discipline we established in 2025, and we are seeing the benefits of that structure flow through and expand our operating leverage over the course of 2026. For Q1, global net revenue was $73.1 million, representing a 7% increase over the prior year. This included $66.4 million of global Jeuveau revenue and $6.7 million from Evolisse. On Jeuveau, units increased in both the U.S. and international markets, reflecting healthy underlying demand. In the U.S., there were one-time revenue deferral dynamics that benefited 2025 and created a headwind in 2026. We expect second quarter U.S. Jeuveau net revenue growth to more than offset the first quarter decline. For 2026, our guidance implies high single-digit year-over-year growth for global Jeuveau revenue, supporting our expectation for total company revenue growth of 10% to 13% for the full year. Turning to gross margin, reported gross margin in the first quarter was 67%, and adjusted gross margin was 68%, which excludes the amortization of intangibles. Regarding tariffs, a recent executive proclamation set a 15% tariff on certain pharmaceutical products in South Korea, including Jeuveau, with an effective date of 09/29/2026. We believe there is a pathway to mitigate or eliminate the impact of this tariff, and we are actively evaluating multiple options. In the near term, we have a plan to secure significant U.S. inventory, supported by the product's three-year shelf life, which provides flexibility as we bridge to longer-term solutions. We plan to provide an update by year end as we gain greater clarity. Importantly, the announced tariffs do not impact or change our confidence in our 2026 outlook or long-term guidance. Moving to operating expenses, GAAP operating expenses for the first quarter were $55.7 million compared to $55.1 million in the fourth quarter. As a reminder, 2025 included a $4.5 million benefit related to the revaluation of the contingent royalty obligation. In Q1 2026, the revaluation impact was immaterial. Non-GAAP operating expenses for the first quarter were $49.1 million compared to $53.0 million in the fourth quarter, reflecting continued discipline and the impact of structural cost actions we implemented last year. As a reminder, non-GAAP operating expenses exclude stock-based compensation, revaluation of the contingent royalty obligation, and depreciation and amortization. Within operating expenses, selling, general and administrative expenses for the first quarter were $52.0 million compared to $54.7 million in the fourth quarter. This included $4.8 million of non-cash stock-based compensation, similar to the prior quarter. From a profitability standpoint, we generated positive adjusted EBITDA of $0.6 million in the first quarter, compared to a loss of $5.5 million in the prior-year period. This improvement reflects both revenue growth and improved cost efficiency as we continue to scale the business while maintaining disciplined expense management. Turning to the balance sheet, we ended the first quarter with $49.8 million in cash and cash equivalents, compared to $53.8 million at the end of the fourth quarter. The primary uses of cash were interest and bonus payments, which were offset by the net proceeds from the line of credit. As a reminder, in addition to the approximately $50 million in cash, we have access to an additional $120 million in capital—$100 million on our long-term debt facility with Pharmakon, and $20 million on the revolving credit facility. Our existing term loan does not mature until mid-2030. Over the past two quarters, cash usage was modest at approximately $3 million in aggregate. Our current cash trajectory supports ongoing operating expenses, while the incremental facilities provide optionality for potential pipeline development opportunities. Overall, we believe this provides sufficient liquidity and flexibility to execute our strategy, invest in growth, and progress toward meaningful free cash flow generation over time. Finally, we have recently terminated our at-the-market equity facility, which was never utilized, reinforcing our confidence in our current capital position. Turning now to guidance, our full-year 2026 outlook remains unchanged. We continue to expect total net revenue of $327 million to $337 million, adjusted gross margin of 65.5% to 67%, non-GAAP operating expenses of $210 million to $216 million, and low- to mid-single-digit adjusted EBITDA margin for the full year. The first quarter results strengthen our confidence in delivering full-year profitability. Importantly, our long-term outlook through 2028 is unchanged, including our expectations for continued double-digit revenue growth, significant margin expansion, and increasing operating leverage as we scale the business. With that, I will turn it back to David for closing remarks. David Moatazedi: Thank you, Tatjana. We are very pleased with our start to 2026. The first quarter reflects exactly where we want to be as a company: delivering revenue growth while generating profitability. Importantly, this performance validates the operating model we have been building. We are scaling the business through performance above market, making investments to further expand our portfolio, while driving improved profitability within a disciplined framework. We are also in a strong financial position. We have the liquidity to execute our strategy and invest in growth. As it relates to tariffs, we are taking a proactive approach. Our goal is to eliminate any long-term impact, and our strategy is straightforward: create flexibility in the near term while we evaluate structural solutions. We will provide updates as we gain greater clarity. Finally, we are reiterating both our 2026 and long-term financial guidance. We look forward to updating you on our progress throughout the year. Operator, you may now begin the Q&A. Operator: Thank you. We will now open the call for questions. Our first question comes from the line of Annabel Samimy with Stifel. Please proceed with your question. Annabel Samimy: Thanks for the details here. I just had some questions on the Evolisse launch. How do you find the headwinds of the filler market impacting the launch? And is bundling helping with increasing volumes? Is any of the bundling taking away from net sales? Can you help us understand the dynamics there a little bit? You have talked about how sentiment seems to be turning, but the market does not seem to be turning positive. So I am just trying to sort of reconcile those two points. Thanks. David Moatazedi: Annabel, this is David. I will take the questions around the category for fillers. I would say, especially coming off this weekend where we had 50 clinicians here, the sentiment is turning more positive. And when I am speaking with clinicians now, I am consistently hearing that the interest in HAs is rising again, that they are seeing their utilization rising. So although we may still be in a market that, on a year-over-year basis, could be down slightly, it is a marked improvement from the category that we were operating in one or two years ago, and that puts Evolisse in a really favorable position. That being said, keep in mind the competitive set has been in the market well established for a number of years—not just in the U.S. Most of these products were launched in Europe over a decade prior to entering this market, so they are well-established brands with a lot of history in terms of how to use the products, and a full line of products that they are supporting clinics with. And so that has been the opportunity for Evolisse. As we are getting in and exposing clinicians to the product, and they are gaining more experience, trialing it, and then getting additional trainings on the product, we are seeing that their confidence is rising and the reorder rates are increasing in terms of the amount that they are purchasing once they get that experience and education. So we feel very good about the trajectory that Evolisse is on. We also recognize that we are not operating in the mid-face segment of the market, which is a sizable part of the category. Sculp will be an important product there, and we have mentioned many times before that we view the Sculp product to be the flagship product in this line that will play an important role. The other part that will play an important role, of course, is the bundling. We piloted in the fourth quarter of last year a growth rebate that performed very well in a small subset of clinics. We rolled that out in January, and it is a six-month program, very similar in timeline to the competitive set. That is an important part of the conversation because clinics that move more of their business over to our portfolio are making trade-offs against the portfolio bundles of the competitive set. We will be in a position to give you more color from a quantitative standpoint coming out of our Q2 earnings call. But I can tell you that we are tracking those customers that have expressed an interest in participating in our portfolio growth rebate, and we are seeing very good uptake around that group of customers. And so we do feel that we are on the right track with the product, and Evolisse is a very important part of that conversation overall. Annabel Samimy: Just a follow-up on the rebate. Is the function of your rebate different from your competitors? And is it more of a direct cash savings than a rebate that goes towards forward sales? Is it an easier rebate for them to wrap their economics around? David Moatazedi: I think the rebate itself operates in a similar fashion in terms of earning that amount back on their account, just like they would with the competitive set. Probably the part that makes it easier to execute is it is purely a function of their growth with Evolus, Inc. We designed it as a partnership rebate for clinics that want to partner more closely with us. That growth rebate gives them an additional incentive to cover the cost of making that conversion—bringing their portfolio business over to us—and in those increments of $75,000 and $150,000 incremental purchasing over what they purchased during that same period the year prior. As it relates to the accounting for it, I will let Tatjana add some color. Tatjana Mitchell: To your question around whether the portfolio rebate is a drag on net sales, it is not. We have designed both the pricing tiers and the portfolio rebate to maintain a healthy margin rate. In terms of net sales, that really is driven by the dynamic of last year. We defer revenue for the consumer rewards program, and then we also recognize revenue upon delivery. In any given quarter, this pretty much washes out and does not impact year-over-year growth rates. It just so happened that last year in Q1 there was a pretty good pickup, and we did not see that this Q1. That is really what you see in the net sales impact this quarter. Annabel Samimy: Got it. Thank you for the clarity. Appreciate it. Operator: Thank you. Our next question comes from the line of Marc Goodman with Leerink. Please proceed with your question. Marc Goodman: David, you gave us a sense that in the U.S. the market seems to be improving a little bit. Can you give us a sense of what is going on OUS, both toxins and fillers—what the dynamic is there, maybe just a country by country? And then secondly, Hugel came into the U.S. market last year as a competitor. Anything that they are doing differently today than they were doing six months ago? Just curious how well they are kind of breaking in. Thanks. David Moatazedi: Great. Marc, I will start with the OUS business. As we talked about in our full-year earnings call from last year, our OUS business continues to perform incredibly well. If you double-click into any of those markets, the revenue is nearly doubling, and our most mature market, being the U.K., was also on a very fast growth clip. We feel that we have a lot of momentum across the markets in Europe. Especially considering the U.K. is the first market to be approaching double digits, those other markets are several years behind the U.K. in terms of the timing that we entered them directly, so we see a lot of growth potential going forward. With that greater scale, we have an increasing presence now in Europe as well, and that infrastructure we are able to leverage to launch Esteem. In two weeks, I will be back in Europe for the launch of Esteem with over 100 of our top customers across Europe who will be coming in to learn about the entire line. We think that is a significant advantage because, one, we will be one of just a handful of companies that have both a neurotoxin and a hyaluronic acid in Europe; and two, they will benefit from having our flagship Sculp product as part of the line. We have been engaged with about 30 or so clinicians throughout Europe in an experience program for the last year, and it is very clear that the Sculp product is highly differentiated from even the mature products that are available in Europe, and that is a far more competitive market. As we go across all the markets, we are seeing really great uptake. There is not a single market where we are not seeing healthy growth. The team in international is very focused, and we have in-market country heads that are seeing a lot of success. We are excited to see what Esteem will do overall for that business over the next several years as we aspire to continue to build that business to approach roughly 15% of our overall revenue. As we look to the U.S., I would say that overall we continue to gain market share in the category. We talked about shares being steady in the first quarter, but even through last year with the entry of a new competitor, we saw a lot of heavy sampling initially and then purchasing that follows from that competitor. Despite that, we continue to gain momentum in the market. We believe that this year will be much of the same. We expect another competitive entrant to enter in the back half of the year—once again, rinse and repeat, meaning heavy sampling and then the need to drive that pull-through into revenue from sample. I do not have a whole lot to add in terms of anything different that I am seeing in the field. I would just say that the shares appear to be relatively stable sequentially from the fourth quarter into the first quarter; we are not seeing any major share-shift dynamics. Operator: Thank you. Our next question comes from the line of Uy Ear with Mizuho Securities. Please proceed with your question. Uy Ear: Hey, guys. Thanks for taking our questions. Maybe just help us understand—you guided to high single digit for the first half of the year for Jeuveau. Is it fair then to think about a rebound or reacceleration sequentially going into Q2? And secondly, if my math is correct, does the high single-digit first-half growth for Jeuveau mean you are kind of blessing the consensus, which is roughly $71 million for the second quarter? Thanks. Tatjana Mitchell: Thank you for the question. Yes, as you probably realize, what we are seeing this year in quarter-over-quarter revenue—Q1 versus Q4 and what you can expect for Q2 versus Q1—is really normal seasonality. What we saw last year was unusual. In Q1, we had the pickup from the revenue deferral; in Q2, we really took a hit for the market slowing down. We were also launching Evolisse. All of these things were happening last year that make for an interesting comparison. But when you take the first half of the year together, what you will see is what we guided to, which is that global Jeuveau will show high single-digit revenue growth year-over-year. Operator: Our next question comes from the line of Navann Ty with BNB Paribas. Please proceed with your question. Navann Ty: Hi, thanks for taking my question. Maybe a follow-up on fillers. Have you seen some further signs of recovery in Europe and in the U.S., and how are fillers doing versus biostimulators? And then on competition, what are your assumptions on competitive launches, maybe after the etranibotulinum FDA CRL? Thank you. David Moatazedi: Thanks for the questions, Navann. The filler market in Europe has been a bit more resilient than what we have seen in the U.S., and that has more to do with the economic backdrop in Europe, which has been a bit stronger. That is reflected in the growth rates—not just for fillers, but the toxin market as well. In our year-end call, we noted that we estimated the market in Europe may have turned positive by year end. It is too early for us to give visibility to how the first quarter played out specifically in Europe, but we believe it is in line with where it ended in Q4, if not potentially improved. Despite the war and potential energy concerns, we have not seen any meaningful change in demand in Europe associated with economic risks there. As it relates to our assumptions, we did open the year saying we expected two new competitive entrants. We all saw the news from AbbVie about the delay to the short-acting BoNT. In fairness, we had not estimated any impact to the existing market from a short-acting product entering the category, so it does not change our assumptions for full-year revenue. And we do continue to expect that Galderma will introduce their new liquid toxin in the back half of the year and, as you know, has a final FDA response date expected sometime in the summer. Thank you. Operator: Thank you. Our next question comes from the line of Douglas Tsao with H.C. Wainwright. Please proceed with your question. Douglas Tsao: Hi, good afternoon. Thanks for taking the time and the questions. David, it sounds like you feel pretty good about the environment in the U.S. market, and obviously, both from your results as well as competitors, things seem strong. When you step back and think about the environment—gas prices are higher and seem unlikely to come down anytime soon—I am curious how we should think about stress testing the macro environment in terms of the broader aesthetics market. David Moatazedi: I think the consumer was really tested last year with all the shifts that took place in the overall environment. What you are seeing now as we wrap around what was a really challenging base in the front half of last year is that, even though there are some puts and takes in the news and consumer sentiment, in the end you are left with a value-conscious consumer who is continuing to come in and seek treatment. I am spending a lot of time both in the market and talking to clinicians, and what I continue to hear is that business continues to be stable and strong on a year-over-year basis, despite what we are reading in the backdrop. We also have visibility into the start of the second quarter, and we feel really good about the trends that we have started out with. They continue to be strong, and we are not seeing any signs that reflect slowing. Perhaps the last part that is important is we have visibility to transactional data through our Evolus, Inc. Rewards program, and that is to the day. We get a daily view of utilization of product at the clinic level. We continue to see strength in overall redemptions in the Evolus, Inc. Rewards program. We feel confident that the market continues to be on a strong road to recovery, as we saw in the fourth quarter and again in the first quarter, and we are seeing it now as we start the second quarter, more than a month into it. Douglas Tsao: That is really helpful, David. As a follow-up on the filler market, one of your lead competitors reported numbers in the first quarter that were down just a little bit. I am trying to understand—there have been a few things going on in fillers: some macro related because it is a higher price point product, and also some product-specific issues in terms of adverse events. Within that, do you have a sense of whether what we are seeing from some of the other players is related to their particular product portfolios versus filler fatigue? How does that inform your own strategy as the Evolisse launches gain momentum? Thank you. David Moatazedi: We have a lot of data points—competitor reporting, third-party data, and conversations with clinics—and they all point to the same thing: the market is in some stage of recovery and rebound. It is not clear yet whether we have turned to positive market growth, but we are getting very close, which is consistent with our views coming into the year. Keep in mind, we are benefiting from a significant tailwind of GLP-1 patients who, once they achieve their desired weight, have an interest in entering aesthetics. There are a few areas in particular they are interested in, and one of those is replacing lost facial volume from weight loss—people call it Ozempic face—and that is a tailwind for the category. We know we are seeing some of those patients starting to come in. It has not yet led to the tailwind that drives the category back to growth, but it is not a question of if, it is a question of when. That gives clinicians optimism—these are new consumers coming into the category, and they will help fuel the market back to positive growth. We feel very good about where this category is going over time. Ultimately, it comes down to continuing to strengthen our position within that category, and that will happen through continued focus on differentiation of Evolisse with training, the launch of the Sculp product, and our focus on bringing these products together through a competitive bundle that is effective against the competitive set. Operator: Thank you. Our next question comes from the line of Sam Eiber with BTIG. Please proceed with your question. Sam Eiber: Hey, good afternoon. Thanks for taking the questions. Maybe I can start on Esteem with the launch coming up in May. Should we expect any initial stocking order similar to what we saw with Evolisse in the U.S. in Q2 of last year? Tatjana Mitchell: Hi, Sam. Good question. We do expect some, but consider the size of that market and Esteem launching in the middle of the quarter. We will see some stocking, but it is not going to be a meaningful impact to our Q2 growth. Sam Eiber: That is helpful. And as a follow-up, any feedback or conversations you are having with the FDA on Sculp? I know you have reiterated timelines for Q4 approval, but curious about your communications with them and what you have been hearing. David Moatazedi: Rui is sitting right next to me, so I will turn it over to him. Rui Avelar: It is a PMA going through the regular PMA process where we get questions along the way and it can also be interactive. We continue to say Q4—we are hoping to have approval by the end of the year. Sometimes it will go faster; hopefully it goes on timelines. As a reminder, for Form and Smooth we were conservative on timelines, but we got lucky there and received approval earlier. Operator: Thank you. Our next question comes from the line of Serge Belanger with Needham and Company. Please proceed with your question. Serge Belanger: Hi, good afternoon. Thanks for taking my questions. David, you talked a little bit about what sounds like an increasing appetite for BD and making additions to your product portfolio. Can you talk about what kind of products you are interested in and maybe how large of a transaction we could see here? Thanks. David Moatazedi: We are very active on the pipeline side. Rui has likely more experience than anyone in the aesthetics space in getting drugs and devices through the FDA. Although we are still an earlier-stage company commercially, we have the luxury of a fully staffed organization in clinical development and regulatory. That capability is well recognized within the industry, which is why we often get a first look at assets, especially those that are more complex to develop. I will let Rui talk a bit about where we spend a lot of our time looking at assets today. Rui Avelar: Biostimulators remain of high interest to us, and there are a number of assets out there. We look at the various ones and assess strengths and weaknesses, just like what we did with our current programs. Skin quality remains something of high interest. In Europe, it is quite popular with a number of offerings. Bringing it into the United States has a higher bar of entry and, as far as we know, there is only one that has been approved thus far. And then areas like hair continue to represent an unmet need. There are a lot of opportunities, and we have seen very successful stories out there right now. Operator: Thank you. This concludes our question-and-answer session as well as today’s teleconference. We thank you for your participation. You may disconnect your lines at this time and have a great rest of your day.
Operator: Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the ThredUp Inc. First Quarter 2026 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. If you would like to ask a question during that time, please press star then the number one on your telephone keypad. I would now like to turn the call over to Lauren Frasch, Investor Relations. Lauren, please go ahead. Lauren Frasch: Good afternoon, and thank you for joining us on today’s conference call to discuss ThredUp Inc.’s financial results. With me are James Reinhart, ThredUp Inc.’s CEO and Co-Founder, and Sean Sobers, CFO. We posted our press release and supplemental financial information on our Investor Relations website at ir.thredup.com. This call is being webcast on our IR website, and a replay of this call will be available on the site shortly. Before we begin, I would like to remind you that we will make forward-looking statements during the course of this call. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our earnings release, the supplemental financial information, and our Forms 10-K and 10-Q for more information on these expectations, assumptions, and related risk factors. We undertake no obligation to update any forward-looking statements. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today’s earnings press release and the supplemental financial information distributed and available to the public through our Investor Relations site at ir.thredup.com. I will now turn the call over to James. James? James Reinhart: Good afternoon, everyone. Thank you for joining our first quarter 2026 earnings call. Today, I will review our Q1 results, discuss what drove performance in the quarter, and share how we are focused for the balance of the year. I will then hand it over to Sean Sobers, our Chief Financial Officer, to walk through the financials in more detail and provide our outlook for Q2 and the full year. As always, we will close with a question-and-answer session. First to the results: In the first quarter, revenue grew 14.6% year over year to $81.7 million, while gross margin was 79.2%, and adjusted EBITDA was 3.4% of revenue. We grew our cash balance by $1.3 million. Active buyers on a trailing twelve-month basis grew 25% year over year, and new buyer acquisition remained strong. March was the best month in our history. All of these metrics exceeded our expectations. However, as we move through Q2, we think it is worth acknowledging that the macro environment remains uncertain. Relative to prior quarters, we do see an incrementally discerning consumer as gas prices remain high and inflation proves to be sticky. We have observed this mainly through average selling prices and conversion rates being slightly lower since early March. Prices are off roughly 3%, and conversion rates for existing customers are lower by about 5%. Nevertheless, overall demand has remained resilient year to date, with continued growth in new buyers and strong sell-through driven by existing buyers. That demand, combined with improved marketing efficiency, supported strong unit economics. It has given us confidence in our growth plan for 2026 and how our business leverages and expands margins over time. As we move through 2026, our priorities are focused in three areas: continuing to grow and retain high-value buyers; developing AI technology that helps customers discover and shop across our vast marketplace; and scaling high-quality supply from a diverse group of sellers. In Q1, we continued to improve how customers discover, shop, and sell across ThredUp Inc. With millions of unique items, helping customers find the right item quickly is critical to conversion and retention. On that note, we are excited to share that we now have our first agentic product experience live for a segment of customers. We start by assigning an agent or a team of agents to each customer. The agents consume event feeds across all platforms—web, mobile web, native—and channels—email, push, SMS—and use reinforcement learning to enable personalized browsing at the individual customer level. No two customer journeys are the same. Ultimately, we are working towards a customer experience that will dynamically change everything you see on ThredUp Inc. based on your clickstream data in real time. This is the true promise of agentic commerce. Second, we are now aggregating exact match items into an improved customer experience, starting with our highest-volume category, dresses. Let me explain. This means the customer who is shopping for a dress might now see options on that product page to buy this dress in a different color, a different size, or a different quality standard—all without having to navigate to another product page. While this is standard in ecommerce, no scaled resale company has been able to replicate this experience across thousands of brands and category SKUs. We think this is a foundational improvement in the resale shopping journey, and ThredUp Inc. is uniquely able to do this given our data and vast catalog of photography. This experience is particularly relevant for newer customers and amplifies our broader acquisition strategy as we bring more and more first-time secondhand shoppers to our site. We plan to slowly roll this out to more customers and more categories in the coming quarters. Third, with the ongoing success of our AI product development cycles and elevated conversion rates, we are unlocking scale in new channels. Our spend on Meta is up 100% year over year in Q1, delivering some of the highest LTV-to-CAC ratios we have seen. Pinterest is similarly up 94%. This has reduced spend on Google, where we tend to see acquisition costs be lower and returns higher. This evolution is consistent with our goal of increasing early customer retention and expanding LTVs over time and exemplifies how ThredUp Inc. benefits from generative AI technology. Turning to supply. Each year, our annual Resale Report has become the industry’s go-to resource for understanding where the secondhand market is headed, and this year’s edition, which we published last month, identified supply as the defining constraint for the next phase of growth. With U.S. online resale already growing more than three times faster than the broader retail environment, we believe the key to unlocking the next phase of market value is not demand—it is aggregating more high-quality supply online. Let me anchor that in what we are actually seeing on the supply side of our own marketplace. Our seven-day sell-through rate, which we view as the best proxy for overall demand, is up more than 15% year over year alongside continued strong growth in listings. The net of these performance indicators is that we need more sellers and more supply to satisfy the growing awareness and demand from buyers on our marketplace. Listings are up 17% year over year in Q1. We are moving swiftly to do so. In Q1, we made a deliberate investment in new seller acquisition. Of our total kit requests in the quarter, 48% came from sellers who were new to ThredUp Inc. New seller kit requests grew 90% year over year. Overall, this was one of the largest surges in new sellers in ThredUp Inc.’s history, driven by TikTok Shop activation, on-site promotion, and targeted seller campaigns. With so many new supplier initiatives in motion, we have renewed our focus on onboarding, seller education, and segmentation, with particular attention to TikTok Shop, where we just recently launched premium bags. In addition, we are increasing inbound processing faster than planned to capitalize on this influx of new sellers and build on the momentum we saw in Q1. The long-term picture is clear: a larger seller base, improved supply quality, and more aggressive processing should create a faster-growing, more liquid, more profitable marketplace. Now let me turn to other areas of opportunity in our business. Our direct listings data remains promising, as we maintain our goal of growing 10% week over week while continuing to launch new features that deliver the highest-quality buyer and seller experience. First, using our vast dataset, we are launching a suite of improved seller pricing tools to help items sell more quickly. Second, leveraging the customer data we have accumulated over the years, we are finalizing the rollout of a relisting tool that allows our core marketplace buyer to resell their previously purchased items with one click or make their entire purchase closet shoppable. This relisting feature is a powerful and unique asset given we have sold over 100 million items that ostensibly could be made available to others with one click. We think about this as “lean-back selling.” It is more consistent with our approach to serving casual sellers first, not professionals looking to run a small business. Finally, we are improving seller verification and training that will reduce potential for fraud, eliminate subpar listings, and build more trust in our marketplace over time. On the Resale-as-a-Service, or RAAS, front, we have landed several new apparel brand partners that will be launching resale experiences with us in the coming quarters. We have also deepened engagement with existing clients. A standout example was Reformation’s in-store trade-in event in New York City, which went viral on TikTok—a playbook we are now replicating across the entire partner base. Earth Month was a particularly strong activation period, with Lands’ End, Madewell, and Abercrombie all running RAAS campaigns that drove meaningful engagement. As we look ahead, we remain focused on executing our growth plan amidst an ever-changing consumer environment. Our priority is building a marketplace that delivers clear value to buyers and compelling monetization and convenience for sellers. We are confident our focus on conversion, retention, and supply quality on top of our strong unit economics will position us to deliver durable, compounding performance over time. With that, I will turn it over to Sean to walk through the financials in more detail and provide our outlook for Q2 and the full year. Sean Sobers: Thanks, James. I will begin with an overview of our results and follow up with guidance for the second quarter and full year of 2026. I will discuss non-GAAP results throughout my remarks. We are extremely proud of our Q1 results, in which we exceeded our internal expectations for revenue, gross margins, and adjusted EBITDA. For Q1 2026, revenue totaled $81.7 million, an increase of 14.6% year over year. Our performance was driven by investments into new buyer acquisition, continued LTV-to-CAC efficiencies, and inbound processing that drove our marketplace flywheel. These drivers resulted in another strong quarter for new buyer acquisition, including a record month in March. We finished the quarter with a record 1.7 million active buyers on a trailing twelve-month basis, up 25% over last year, while we had 1.6 million orders in the first quarter, up 19.3%. For Q1 2026, gross margin was 79.2%, a 10 basis point increase versus the same quarter last year, as a result of higher ASPs. For Q1 2026, GAAP net loss was $6.5 million compared to GAAP net loss of $5.2 million in the same quarter last year. Adjusted EBITDA was $2.7 million, or 3.4% of revenue for Q1 2026, outperforming our internal expectations. Our Q1 result represented a 190 basis point decline over last year. This year, with more confidence in our growth trajectory, we invested in our drivers earlier in the quarter, resulting in better top-line results and more moderate EBITDA this year. From here, we expect to methodically expand EBITDA year over year in 2026. Turning to the balance sheet. We began the quarter with $53.1 million in cash and securities and ended the quarter with $54.4 million. We invested $4.1 million in CapEx and generated $1.3 million in cash in Q1. We continue to expect similar levels of CapEx in 2026 as last year. Now I would like to turn to guidance. As James mentioned earlier, we are seeing indications of a more selective consumer. As a result, we are maintaining our revenue and EBITDA margin expectations for the balance of the year while flowing through our Q1 outperformance. Nevertheless, we remain confident in driving strong performance in the things within our control. In the second quarter, we expect revenue in the range of $89 million to $91 million, representing 16% year-over-year growth at the midpoint; gross margin in the range of 78.5% to 79.5%; adjusted EBITDA of approximately 5.2% of revenue; and basic weighted average shares outstanding of approximately 130 million shares. For the full year 2026, we expect revenue in the range of $351.2 million to $356.2 million, reflecting 14% year-over-year growth at the midpoint; raising our gross margin expectation to the range of 78.5% to 79.5%; adjusted EBITDA of approximately 6.1% of revenue, representing approximately 170 basis points of expansion versus last year; and basic weighted average shares outstanding of approximately 131 million shares. As we emphasized on our last call, we continue to plan to flow any incremental dollars above our guide back into growth-driving opportunities in processing and marketing. This year, we remain confident in the fundamentals of our marketplace flywheel, our operational consistency, and our strategy as we pursue predictable growth, expanding profits, and accelerating cash flow. James and I are now ready for your questions. Operator, please open the line. Operator: At this time, if you would like to ask a question, please press star, then the number one on your telephone keypad. To withdraw your question, press star 1 again. We kindly ask that you limit your questions to one and one follow-up for today’s call. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Ike Boruchow with Wells Fargo. Please go ahead. Irwin Bernard Boruchow: Hey, good afternoon, guys. The first one is, Q1 was very strong—I understand maintaining expectations for Q2 to Q4—but can you elaborate on the consumer being more selective and the demand remaining resilient? There have been a lot of things in the macro—gas prices, inflation. How do you square those two dynamics? How are you thinking about the rest of the year? Maybe when did you start to see the consumer behavior start to change? Did it coincide with geopolitical events or gas prices going up? Just elaborate more on that. James Reinhart: Yeah, sure. Hey, Ike. The business has remained strong. Q1 was a good quarter and exceeded expectations on the top and bottom line. Gross margins expanded. We are feeling very good about the business. April has been good quarter to date, so I think everything generally is going in the right direction. We wanted to give folks the building blocks of what we saw on ASPs and conversion rates, because it does track, in our view, with the war in Iran and elevated oil and gas prices, which we think on the margin is making the consumer a little bit more picky and discerning. We are seeing it in ASPs and conversion rate. Having said that, we have flowed those dynamics through the P&L for the rest of the year, and the business remains strong even with those dynamics at play in April. But there is just enough out there that we want to be thoughtful about what the rest of the year guide looks like. Sean? Sean Sobers: I think it is key to understand that we did flow through the ASP and conversion items that we saw in April through the full guidance outlook. Irwin Bernard Boruchow: And then just to follow up on ASP, you said it is down low single digits. Is that the expectation for the rest of the year—that your ASP or AOV should remain under pressure—or are you expecting a bounce back in the back half? James Reinhart: Right now, it is off about 3%, consistent with March, when we started to see this. That is in the guide for the rest of the year, but depending on how things materialize with oil prices and inflation, I could see a scenario where it bounces back. Timing is a little unclear. I still think the unit margins, contribution margins, top line, and EBITDA are all strong even with ASPs being off a little bit, and our assumption is there is not a recovery in the guidance numbers. Operator: Your next question comes from the line of Matt Koranda with ROTH Capital. Please go ahead. Matt Koranda: Hey, guys. Following up on that line of questioning—can you unpack the trend you are seeing in the business in April and how you built the guide for the second quarter? You said reduced conversion and ASP pressure in April, but the guide for second quarter sales is an acceleration relative to the first quarter. Can you square those for us? James Reinhart: Yeah, Matt. April has been strong, and the guide reflects 16% growth in Q2. We flowed through the Q1 beat, with the full year at 14%. The business remains strong and resilient, but we have to acknowledge that ASPs are a little lower than we anticipated. Had ASPs not come down a bit and conversion not come down a bit—again, we attribute this to the macro—my guess is numbers would be coming up for both the quarter and the year. At this point, it is better to be a little more cautious and see how the quarter unfolds. Both dynamics are at play: a slightly more discerning consumer and us really operating and executing the business at a high level. Both things can be true. Matt Koranda: On the supply front, it sounds like the macro disruption might even be driving more supply to your marketplace. Can you talk about the incremental supply that you are seeing turn on, and maybe in the context of the third-party initiative you have going on? James Reinhart: We saw a huge surge in new sellers coming onto the platform in Q1—almost a 1 thousand basis point improvement year over year on new sellers. It was a conscious effort to invest in getting the supply engine going, and we are seeing success. Any time you are onboarding that many new people, it adds more work for the team around messaging, education, and onboarding. We are spending more time on that than ninety days ago. It speaks to the strength of the marketplace model in any economic climate, and we feel very good about how these suppliers, from a cohort basis, become repeat suppliers over time and really fuel the business back in 2026 and into 2027. Operator: Your next question comes from the line of Dylan Carden with William Blair. Please go ahead. Dylan Douglas Carden: Appreciate it. Is this the first time that you spent to acquire sellers? James Reinhart: Yeah, Dylan. We are spending some dollars testing the methods and the way that we acquire sellers. The work we did on TikTok, as an example—we are working with some creators and influencers on an affiliate basis. Yes, we are kicking off a real, methodical approach there. What we have learned is that there is room to really grow sellers through some basic paid marketing, and we are embarking on that journey now. The effects are not only expanding the seller base, but those sellers you acquire convert at pretty good rates into buyers, and the quality of the sellers’ goods helps drive improvements in buyer conversion rates and buyer LTVs. There is a nice recipe to spend money acquiring sellers that makes both sides of the marketplace spin faster. For the last couple of years, I have said when we start turning attention to acquiring sellers, we have effective ways to do that—evolving messaging across platforms and changing the incentive mix. Everything I have said over the last few years around how we would do this is exactly what we are doing today. It is playing out as we thought—there are compelling ways to acquire sellers beyond our organic reach, and those methods can be very accretive to the business by expanding the overall seller base and converting those sellers into buyers. We see it as an acceleration of the flywheel. Operator: Your next question comes from the line of Dana Telsey with Telsey Advisory Group. Please go ahead. Dana Lauren Telsey: Hi. Good afternoon, everyone. As you think about prices being lower and conversion a bit lower, was it consistent throughout the quarter, or was that just the end of the quarter in March? And with the uptick in new customers, what are their demographics—is there any regional, age, or income trend you are seeing? James Reinhart: Hey, Dana. The pricing piece and some conversion headwind started in March, which is consistent with the war in Iran. It is hard to say it is perfectly correlated, but we did start to see it then. It has since normalized; we have been operating in that environment for the past sixty days. We have been able to adjust where necessary around the types of goods we put on promotion, how we think about sell-through, marketing, and curation. We have digested pricing and conversion changes and changed how we are operating the business to meet the customer where they are. It does point to some correlation with elevated oil prices and consumer sentiment. On the buyer mix, we are spending more on Meta and Pinterest and fewer dollars on Google, primarily because of the mix of customers we acquire. The Meta and Pinterest customers have better LTVs—their CACs are slightly elevated, but the LTVs more than offset them. As more new-customer flow comes from those channels, we see predictive LTVs be higher, which speaks to compounding cohorts over time. We feel good about the acquisition mix and strategy, and we feel good about digesting the pricing and conversion we have seen since March. Dana Lauren Telsey: Got it. And just one last thing. You talked about inbound processing being faster than planned. How much faster was it and where do you go from here? James Reinhart: With all of the growth in buyers—active buyers up, new buyer acquisition strong—our data suggests that buyers could buy more and absorb more supply. Our approach now is to turn on the afterburners to process as much as possible. Given the cohort sizes and purchase behavior, it is a wonderful moment where if we process more goods, the business flywheel should go faster, given the pent-up demand from this large buyer cohort. We are able to acquire customers efficiently, LTVs are good, and we just need more supply online—and that is what we are doing. Operator: Thank you. Your next question comes from the line of Bobby Brooks with Northland Capital Markets. Please go ahead. Robert Brooks: Hey. You started to see headwinds in pricing and conversion in March, but at the same time had the best month in your history of buyer acquisition. That seems really impressive. I would love to hear more on that dynamic and what you did to drive that great performance. James Reinhart: Hey, Bobby. Both things can be true. It shows the underlying strength of the business: even where conversion rates might be a little softer, the fundamental conversion rate remains strong. Go back to last year—we spent multiple quarters driving conversion rates up. Right now, we are seeing a little pullback because of the macro, but they are still very strong. That conversion is translating into new buyer growth. For example, new buyers in Q1 were up 27% year over year, and CACs were down more than a double-digit percentage. We are executing at a high level, and had we not had the ASP and conversion headwinds, I am guessing numbers would be going up. We just wanted to acknowledge the headwinds are real, but we are navigating through them. Robert Brooks: Thanks. And an update on the supply channel through TikTok Shop—you mentioned 100 thousand bags in one month previously. Was that high-quality supply, and is this a channel you will tap more going forward? James Reinhart: On TikTok, the TikTok Shop bags we have processed so far look similar to other new suppliers—that is, new suppliers are always a little worse than existing suppliers because they need to get up the learning curve on ThredUp Inc. It is a huge opportunity to lean into TikTok to scale. We need to improve onboarding and education to get these sellers to perform like our large cohort of existing sellers. We feel great about the channel. We just launched our premium kits for sale on TikTok in the last couple of weeks, which is a new opportunity to scale premium bags further. We feel great about the channel, and we will keep educating new sellers as they come on the platform. This cohort looks promising. Robert Brooks: Lastly, on buyer acquisition—what incentives or levers are driving that really good acquisition? Is it the better marketing channels—leaning into Meta and Pinterest and away from Google—or tailwinds from last year’s rebrand? James Reinhart: The channel mix is a big piece. We kicked off work to improve how we advertise on Pinterest in a material way about a year ago and have been methodically growing those channels. We are seeing historically low CACs on Meta, so we can put more dollars to work there. The combination of a better product experience on the site and better targeting and efficiency has created a good recipe. We are leaning more into Pinterest and Meta going forward. If we can continue to scale spend and move dollars away from Google PMAX, you will see those cohorts get even better than they are today. Operator: Next question comes from the line of Oliver Chen with TD Cowen. Please go ahead. Oliver Chen: Hi, James and Sean. As we look ahead, what should we know about order frequency relative to the momentum in active buyers? Second, regarding ASP and conversion rates, do you expect those to be noisy or get worse, and what is incorporated in your guidance? Third, on reinforcement learning, many models are based on action-reward—what is happening in terms of the agent versus the reward, how does that optimize to be adaptive, and what should we pay attention to as you continue to invest there? James Reinhart: On reinforcement learning, this is an exciting time for us to have our first product experience in market with an agentic engine. Every time the agent—or team of agents—engages, we get better data on how the customer is browsing, what they are adding to cart, removing from cart, what they are clicking, and time spent on items. The model takes that data and predicts the path most likely to lead to conversion, changing what the customer sees as they navigate the site in real time. Traditionally, models have a lag—you push learnings into email or push marketing. Here, it is changing the on-site experience live. For a traditional retailer, this is easier with limited catalog depth. In secondhand, with hundreds of thousands of new items coming online each week, you need a more robust, dynamic engine. The team has built something special. We are seeing strong conversion rates and will roll it out to more customers and categories over time. We started with dresses, our biggest category, but there is lots more to do. Sean Sobers: On ASPs and conversion from a planning or guidance perspective, we looked at what we were seeing starting in March through April, as James mentioned, and baked that into the guidance as we go forward. You see that in the Q2 and full-year 2026 outlook. On frequency, we are seeing incremental frequency. On the last call, we discussed product decisions around the free shipping threshold and focusing on frequency over average order value. On a trailing twelve-month basis, you can see revenue per order being slightly lower, but orders per buyer are going up. You will continue to see that trend through the rest of 2026. If you roll that forward into 2027, order frequency is a much bigger driver of revenue growth than revenue per order, given how much customers are shopping on ThredUp Inc. These dynamics are positive, and the team has done a great job calibrating revenue per order and frequency. Oliver Chen: Supply has always been important, but it feels like your machinery has heightened that importance given your success with buyers. What is different now? And on mix, premiumization has been a factor—how does that interplay with reinforcement learning and customer experience? James Reinhart: On supply, historically we believed the supply we were getting could satisfy demand on the marketplace. Over the last fifteen months—through the launch of our premium service and recently direct selling—we are seeing that incremental innovation in supply channels can drive outsized growth among both sellers and buyers. There are pockets of sellers and the market we were not addressing. Premium and above-premium were areas ThredUp Inc. was not really known for, but we are becoming more relevant to customers with that premium mix. Similarly, with direct selling, customers who wanted to sell their own items and recover more did not have an option—now that is changing. Our point of view is that seller innovation can expand the addressable market and make the business grow faster, which is why we are innovating. As for reinforcement learning with respect to supply, it is TBD. We are not using agents yet to do much on the supply side, so there is no RL to comment on there right now. Oliver Chen: On the virtuous circle and TAM expansion, do you anticipate needing different capabilities or supply chain, or will you test as you go? Does it change how you handle or authenticate longer term? James Reinhart: I do not see any material change in how we handle supply. What we have done so far is build real defensibility and unique assets to process and price at scale—items that are $25, $26, $27—and we are leveraging that entire supply chain and innovation to do more. Our thesis all along was that we could build competitive advantage in supply chain, data, and our marketplace, and then incrementally expand how we serve buyers and sellers. We are showing we can do that—drive growth among our core everyday sellers and attract different segments, whether through premium or direct selling. It speaks to the power of the business model to compound year after year. Operator: Next question comes from the line of Bernie McTernan with Needham and Company. Please go ahead. Bernard Jerome McTernan: Great, thanks for taking the question. On supplier KPIs—James, what metrics do you track internally to make sure you have enough supply, and where are those metrics now versus where you want them to be? And I have a follow-up. James Reinhart: We track a few things. One is items per buyer—broad selection and availability as we look at the distribution of buyers and items. That metric flipped in Q1 and said we have so much incremental buyer demand that we do not have quite as many items per buyer as needed. That speaks to improvements in and the amount of buyer growth—our “warning light” went on that we could benefit from more supply to meet demand. Second, we look at the quality of items—we think about it internally as a HangerScore, the quality score of items per buyer. We saw that we could still drive more high-quality HangerScore items, primarily through the mix of premium, to delight that segment of buyers. That led to launching premium bags on TikTok, as an example. Both indicators suggest the relationship between supply and buyers is healthy, but the marketplace today is slightly underserved relative to six months ago. That is why we are more aggressively investing and ramping supply. Bernard Jerome McTernan: And on the ASP headwind, is this consumers trading down or any specific action you are taking on pricing that is causing this headwind? James Reinhart: That is the question. From what we see, the consumer is being a bit more discerning. Over the next sixty to ninety days, we will evaluate if there is something we can do to have that flip back more quickly—how we promote, curate, or merchandise. Today, we think it is mostly the consumer being a bit more discerning, which is why we flowed it through the rest of the year. If ASPs were back up 3% to 3.5%, my guess is numbers would be higher for Q2 and for the year. We will digest this and keep operating at a high level, and I think we will be in great shape. Operator: That concludes our question-and-answer session. I will now turn the call back over to James Reinhart for closing remarks. James Reinhart: Thank you all for joining us today. I am especially grateful to the ThredUp Inc. team for your continued hard work and relentless pursuit of solutions to make the lives of all of our buyers and all of our sellers better. Thank you all. We look forward to seeing you on our next call. Cheers. Operator: Ladies and gentlemen, this concludes today’s call. Thank you all for joining. You may now disconnect.
Operator: Good day, and welcome to the Vertex Pharmaceuticals Incorporated first quarter 2026 earnings call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Susie Lisa. Please go ahead. Susie Lisa: Good evening, all. My name is Susie Lisa, and as the senior vice president of investor relations, it is my pleasure to welcome you to our first quarter 2026 financial results conference call. On tonight's call, making prepared remarks, are Reshma Kewalramani, Vertex's CEO and president, Charles Wagner, chief operating officer and chief financial officer, and Duncan J. McKechnie, chief commercial officer. We recommend that you access the webcast slides as you listen to this call. The call is being recorded, and a replay will be available on our website. We will make forward-looking statements on this call that are subject to the risks and uncertainties discussed in detail in today's press release and in our filings with the Securities and Exchange Commission. These statements, including, without limitation, those regarding Vertex Pharmaceuticals Incorporated's marketed medicines for cystic fibrosis, sickle cell disease, beta thalassemia, and moderate to severe acute pain, our pipeline, and Vertex Pharmaceuticals Incorporated's future financial performance, are based on management's current assumptions; actual outcomes and events could differ materially. I would also note that select financial results and guidance that we will review on the call this evening are presented on a non-GAAP basis. I will now turn the call over to Reshma. Reshma Kewalramani: Thanks, Susie. Good evening all, and thank you for joining us on the call today. Vertex Pharmaceuticals Incorporated is off to a terrific start in 2026, which we see as a year defined by execution. Q1 revenue growth was strong across the portfolio as we reach more patients with more products and delivered total product revenue of $2.99 billion, reflecting 8% growth year over year. Importantly, we achieved key commercial milestones for each of the newer products since launch through end of Q1. AlifTrack exceeded $1 billion in cumulative revenue. More than 500 people have initiated their Kasjevi treatment journey. And over 1 million prescriptions have been written for Jernabix. Another highlight in Q1 was that products from the new disease areas, namely KASJEVY and GERNAVICS, drove approximately 25% of total product revenue growth. Execution in R&D was equally strong with multiple regulatory submissions recently completed and more anticipated, combined with rapid progress across clinical trials and important advancement in research. Let me spotlight a few accomplishments. First, on POBI, the interim analysis results from the Phase III RAINIER study in IgAN on efficacy and safety from top to bottom were sparkling and further fueled our enthusiasm for Povi as a potentially best-in-class BAFF/APRIL inhibitor. I was exceptionally pleased with the rapidity and quality of the recently submitted BLA filing for POBI in IgAN. Indeed, at 27 days from database lock to regulatory submission, this was the fastest submission in Vertex history. Equally notable is the urgency with which the Povi primary membranous nephropathy and the Povi myasthenia gravis programs are advancing. In membranous, the Phase II study has been fully enrolled and the Phase III program has already initiated. In addition, the Phase II proof-of-concept myasthenia gravis trial is underway. Second, on KASJEVY, I am also very pleased with the rapidity and quality of this sBLA submission for KASJEVY in 5–11-year-olds with sickle cell disease or beta thalassemia. The KASJEVY filing has been granted a Commissioner's National Priority Voucher, reflecting the importance of treating this younger age group before some of the most serious complications of the disease can begin. Overall, Vertex Pharmaceuticals Incorporated continues to extend its leadership in CF, drive growth with new product launches, while building out our disease area franchise in nephrology, accelerate programs in mid and late stage development, and advance the earlier-stage R&D pipeline. Tonight, I will limit my R&D comments to CF as well as the pipeline programs with the most significant new information to share, certain renal programs, Povi, myasthenia gravis, and zamylosel in type 1 diabetes. Starting with CF, four quick R&D updates for this quarter. We recently reached a significant milestone in the U.S. with label expansions for both AlifTrack and TRIKAFTA. With this expansion, patients with a clinical diagnosis of CF who have at least one variant in the CFTR gene that is responsive based on clinical and/or in vitro data are now covered by the AlifTrack and TRIKAFTA labels, reinforcing the impact of these medicines regardless of the location of the variant in the CFTR protein. This is a significant expansion of eligibility that reflects decades of investment, effort, and a relentless pursuit of the science. It is also a great example of innovation, using results from clinical trials complemented by in vitro data to expand the benefit of Vertex CFTR modulators to about 95% of people with CF, including those with rare and even N-of-1 genotypes. As we expand the AlifTrack and TRIKAFTA labels to additional mutations, we are also expanding the labels to younger patients. We will soon submit for approval for AlifTrack in patients 2–5 years of age, where you may recall our pivotal trial demonstrated a remarkable 65% of children reaching normal levels of CFTR function. We also plan to submit for TRIKAFTA in children 1–2 years of age in the near term. In addition, we continue to advance our next-generation 3.0 CFTR including VX-828, which is currently in a study of patients with CF. We are on track to complete the study and share results in the second half of this year. Following closely behind VX-828 in the family of next-gen 3.0 are VX-581 and VX-2272, both of which are currently in the clinic in Phase I healthy volunteer studies. As we have consistently said, if it is possible to do better in CF, we are committed to being the ones who do so. And finally, on VX-522, the mRNA therapy we have been developing for people who produce no CFTR protein and therefore cannot benefit from our modulators. We previously disclosed tolerability issues in this program. Despite actions we have taken in the trial to overcome these issues, we have not been able to do so, and as such, we have chosen to discontinue the program. Given this early termination, we will not be able to assess the efficacy or full safety of VX-522. We will be working with sites to close out the study in the coming weeks. Moving on to our renal franchise, which continues to make quick progress and is rapidly establishing itself as Vertex Pharmaceuticals Incorporated's fourth franchise along CF, heme, and pain. In total, we have four programs in mid and late-stage development in renal: Povi in IgAN, Povi in primary membranous nephropathy, enaxaplin in AMKD, and VX407 in ADPKD. Tonight, I will cover the first three programs, starting with Povi in IgAN. Recall Povi's differentiated, potentially best-in-class profile stems from its specific design as an engineered TACI fusion protein with binding affinity, potency, and PK properties that deliver optimal dual BAFF/APRIL inhibition. The dual inhibition and engineering advantage is evident in both the interim analysis data of the RAINIER study, where we saw rapid, deep, and sustained improvement in proteinuria, a favorable safety profile, and consistency across all subgroups, as well as in three key patient dosing benefits: once-monthly dosing, small volume, and subcutaneous administration via an auto-injector. Overall, the Phase III interim analysis data represent a home run in terms of study design, execution, and results, with Povi achieving statistically significant and clinically meaningful results across all primary and secondary endpoints. Patients in this trial received excellent standard of care, with high rates of background medicines including the highest rates of SGLT2s seen in any IgAN study. Baseline characteristics were well matched to real-world IgAN patients in terms of age, renal function, and degree of proteinuria. In addition, as a measure of study quality, it is important to look at discontinuations. In this study, treatment discontinuations were low, and trial discontinuations were even lower at a rate of 1.5% in the placebo group and 0.8% in the Povi group. To replay the top-line primary and secondary efficacy results: for the primary endpoint, Povi achieved a 52% reduction from baseline in proteinuria as measured by 24-hour UPCR. That is a 49.8% reduction versus placebo. For the first secondary endpoint, Povi treatment led to a 77.4% reduction from baseline in serum GdIgA1 levels. That is a 79.3% reduction versus placebo. For the second secondary endpoint, of those patients with hematuria at baseline, 85.1% of Povi-treated patients achieved hematuria resolution, which is a 61.7% reduction versus placebo. In addition, 42.2% of patients reached the exploratory endpoint of 24-hour UPCR of less than 0.5 g/g, an important clinical threshold. These are remarkable results, and particularly noteworthy considering that at the time of the interim analysis, patients had received just 36 weeks of Povi treatment. On safety, Povi was generally safe and well tolerated. The majority of adverse events were mild to moderate, and there were no serious adverse events related to Povi. Importantly, in terms of infections, most were mild to moderate. The rate of SAEs of infection was low at 0.5%, observed in both the placebo and Povi groups. There were no opportunistic infections and no discontinuations related to Povi overall, including no discontinuations due to infections. Lastly, on anti-drug antibodies or ADAs, ADAs were observed as expected with biologics but had no impact on Povi's efficacy or risk profile. We look forward to sharing more details of the interim analysis results and anticipate doing so at upcoming medical meetings this fall. Shifting to Povi in primary membranous nephropathy, I am pleased to share we have completed enrollment of the Phase II portion of the OLYMPUS Phase II/III study and have already initiated the Phase III portion, ahead of our previously announced mid-2026 goal. And finally, on Povi as part of its pipeline and product potential for B cell–mediated diseases beyond renal, I am also pleased to share that the Phase II proof-of-concept study of Povi in generalized myasthenia gravis is underway. This is a 30-patient study of people with gMG, evaluating both the 80 mg and 240 mg dose for 12 weeks with the primary endpoints of safety and the percent change from baseline in IgG at week 12. The rationale for studying Povi in myasthenia is compelling. It is a serious B cell–mediated disease with high morbidity affecting approximately 175 thousand people in the U.S. and Europe. There is high unmet need as current therapies have meaningful limitations, which means there is room for improved efficacy, a better benefit-risk profile, and more patient-friendly dosing and administration, which we have discussed in the context of IgAN as being critically important when considering a chronic biologics market. We believe Povi's mechanism of action, striking at the heart of autoantibody production with an engineered protein format, provides best-in-class promise in myasthenia; we are excited to develop this opportunity. Shifting back to renal to finish up with enaxaplin in APOL1-mediated kidney disease or AMKD. First, on AMPLITUDE, the pivotal Phase III study of primary AMKD, that is to say patients with two APOL1 variants, PND, and no other renal-related comorbidities, we are on track to conduct the interim analysis, which occurs after 48 weeks of treatment, and to share data from this cohort in early 2027. If positive, we will be poised to file for potential accelerated approval in the U.S. thereafter. Second, on AMPLIFIED, our Phase 2b study of enaxaplin in separate populations—patients with two APOL1 variants, modest proteinuria, and no other kidney disease, and patients with two APOL1 variants, moderate to severe proteinuria, and a second disease, type 2 diabetes, that could impact the kidney—these two populations are not being studied in AMPLITUDE. We recently completed enrollment in the AMPLIFIED study, which is a study of 13 weeks in duration. Given the clear differences in these populations, we made the decision early on to study them in separate trials. Emerging data in the field confirmed the wisdom of this decision. We are excited to learn from the AMPLIFIED study and look forward to sharing results in the second half of this year. Finally, on type 1 diabetes, a reminder that zamylosel has very strong clinical results to date, as detailed in last year's New England Journal of Medicine. Among patients who received a full dose and had at least one year of follow-up, 10 out of 12 patients were insulin free. These results are unprecedented and are particularly noteworthy given that these patients are those with 20-plus years of type 1 diabetes, undetectable endogenous insulin production at baseline, taking 40-plus units of exogenous insulin per day, and with two or more severe hypoglycemic events per year despite best available care. You may recall that in the second half of last year we paused dosing of the Phase I/II/III study in order to conduct a manufacturing analysis, which we have now completed. I am pleased to report that dosing in the study has resumed and multiple patients have been dosed. With dosing now restarted, we will update you in the coming months on the revised timelines, study completion, and regulatory filings. With that, I will turn the call over to Duncan for a commercial update. Duncan J. McKechnie: Thanks very much, Reshma. I will start with 6% globally, balanced nicely between U.S. growth of 5% and international growth of 8% in Q1. Global growth reflects continued AlifTrack uptake as its once-daily dosing and improved sweat chloride profile continue to resonate with the clinical and patient communities. As mentioned, AlifTrack has now surpassed $1 billion in cumulative global revenue since its approval in the U.S. in late December 2024 and Europe in July 2025. Outside the U.S., we have signed reimbursement agreements in 11 countries for AlifTrack in Q1 alone, building on the access generated in the second half of last year. The tremendous scientific and regulatory achievements represented by the label expansions for AlifTrack and TRIKAFTA also represent a meaningful incremental commercial opportunity of 800 people in CF who are newly eligible in the U.S. This broad labeling is one of several key CF growth drivers for the remainder of 2026, along with the global rollout of AlifTrack, treating younger patients, and expanding into additional geographies. We have worked closely with the CF population for two decades and remain focused on continuing to serve the CF community and expand our leadership across all genotypes, age groups, and geographies. Shifting to heme, the rollout of Kasjevi continues to gather momentum across all three regions, and I am pleased to highlight another significant commercial milestone since launch. Over 500 patients have now initiated the KASJEVY treatment journey. Hundreds have had their first cell collection, and many patients have had their cells edited and are ready for infusion. During the first quarter, we delivered $43 million in KASJEVY revenue. Importantly, we worked on securing a pricing agreement for KASJEVY in Germany in Q1 and are currently working through the implementation steps. This is a historic moment, and we are excited that German patients with sickle cell disease and TDT may soon be benefiting from long-term access to KASJEVY at a sustainable price. Overall, we are very encouraged by the robust flow of patients in the U.S., in Europe, and the Middle East moving from referral to cell collection and infusion. First-quarter revenue reflects expected variability quarter to quarter as patients choose the timing for their infusion that suits them best. For the full year 2026, the Kasjevi outlook is very promising, as we have built our ATC network, secured reimbursements, and now have many patients at all stages of the treatment journey. We therefore have very strong visibility to revenue for the rest of 2026, for KASJEVY to contribute meaningfully to our $500 million-plus revenue goal for non-CF products this year and towards KASJEVY's ultimate multibillion-dollar potential. For Gernavix in moderate to severe acute pain, prescriptions, prescribers, and awareness all continue to build. More than 350 thousand prescriptions were filled in the quarter, compared to approximately 550 thousand in all of 2025, which was in line with our expectations. We also surpassed the milestone of over 1 million Gernavix prescriptions written since launch. Prescriptions this quarter were once again split roughly 50/50 between the hospital and retail channels and generated $29 million in revenue, also in line with our expectations. Overall, prescription growth remains strong, although Q1 revenue reflects some normal inventory destocking. We remain on track to more than triple the 550 thousand prescriptions from 2025, and for revenue growth to significantly exceed prescription growth. I will now outline some of the key drivers of our continued growth and expected success for Gernavix in 2026. Firstly, physician and patient clinical experiences on Gernavix continue to be excellent, which provides a great foundation for continued growth. We also continue to see outstanding breadth of physician uptake, as well as Gernavix additions to hospital and IDN formularies, protocols, and order sets. Secondly, we continue to make good progress in the payer space: 240 million lives now covered. In addition to the big three commercial PBMs, I am delighted to announce that we have reached an agreement with the first of the big four Medicare Part D plans to start covering Gernavix effective as of May 1. Given the multiple and well-documented challenges that opioids present seniors, this is welcome news, and we are in discussions with the remaining Medicare Part D plans as well as the smaller regional plans. Thirdly, we have completed doubling the size of our field force to 300 representatives, slightly ahead of plan. As we have communicated before, Gernavix is highly promotionally responsive, and we are excited about the impact of this new field team on Gernavix growth. Lastly, we also continue to execute multiple initiatives to drive awareness, growth, and provide new mechanisms for patient access, including the launch of Vertex Pharmaceuticals Incorporated's first direct-to-patient telehealth-informed pain care. This platform is accessible from genavix.com and provides appropriate and independent telehealth evaluations for nonsurgical acute pain patients, if eligible. We are also pleased that Gernavix was recently added to the list of non-opioid medicines eligible for separate payments under the NO PAIN Act, effective retroactively to January 2023. In summary, with the increased size of our field organization, our continued progress in securing payer and hospital coverage, as well as strong gains in formulary status, we remain confident we will triple prescriptions for Gernavix in 2026. In addition, our strong reimbursement progress continues to position us to taper our patient support program over the course of 2026 and enter 2027 with a normalized gross-to-net. We continue to expect Gernavix to contribute meaningfully to the $500 million-plus we expect in revenue outside CF this year. I will conclude with an update on the commercial initiatives for our emerging renal business. We are investing in the nephrology community for the long term, and povitacicept is the first in a series of potentially transformative medicines that tackle the underlying cause of four serious renal diseases—namely IgA, PMN, AMKD, and ADPKD. We were thrilled with the interim analysis results of the RAINIER Phase III study, with excellent results across the board in efficacy, safety across all subgroups, and in the areas of greatest interest to nephrologists and patients. The results create a superb foundation for the commercial launch of a potentially best-in-class medicine. Our goal for povitacicept is to be physicians' first choice for their IgAN patients, given Povi's compelling trifecta of differentiated efficacy results, well-tolerated profile, and patient-centric administration characteristics due to its low volume, monthly dosing via subcutaneous auto-injector. Based on our market research and discussions with nephrologists, plus feedback from our field team engagements, we know nephrologists are looking for treatments in IgAN that meaningfully and rapidly reduce proteinuria in the patients they treat, as they see proteinuria as the key indicator of where the patient is headed. Nephrologists also seek a favorable tolerability profile, and both physicians and patients communicate to us the need for a seamless treatment experience, which includes everything from access to patient support to monthly dosing, size of dose, and administration in an auto-injector. We believe that, uniquely, Povi has the clinical profile, and that Vertex Pharmaceuticals Incorporated has the capabilities to meet all of these needs. Our renal field force will be specialty-sized and large enough to cover nephrologists who see approximately 80% of U.S. IgAN patients. We will target key facilities that represent a combination of renal centers, glomerular disease clinics, and key high-volume private practices. Our payer conversations are proceeding well. In a U.S. market, approximately 70% of patients have commercial coverage. We have a proven track record in securing broad and rapid access for our medicines and plan to establish the same for Povi in IgAN. And lastly, we know that the quality of the patient support provided is critical in the biologics space. With that in mind, Vertex Pharmaceuticals Incorporated programs to support Povi patients will enable speed to therapy and personalized support through the treatment journey, delivering a seamless experience of onboarding for patients and physicians alike. Povi in IgAN is the first component of our emerging renal franchise. We are excited to bring it to nephrologists and their patients. Based upon our work with them, we know they are excited to try it as well. We believe Povi delivers exactly what nephrologists are looking for in IgAN, and just as we have done for over a decade in CF, Povi's success will be driven by a field force delivering a high-science sell, fueled by a potentially best-in-class product, broad reimbursement, and robust and high-quality patient programs. We are very excited to begin building our fourth commercial pillar and creating another multibillion-dollar franchise at Vertex Pharmaceuticals Incorporated. I will now turn the call over to Charlie to review the financials. Charles Wagner: Thanks, Duncan. As Reshma noted, Vertex Pharmaceuticals Incorporated's Q1 2026 results demonstrate our consistent strong performance and attractive growth profile. First-quarter 2026 total revenue increased 8% year over year to $2.99 billion. CF revenue grew 6% year over year, and new disease areas also contributed, with KASJEVY delivering $43 million and GERNAVICS $29 million in Q1 sales, representing about 25% of total year-over-year growth for the quarter. By region, U.S. revenue growth of 7% year over year was driven by continued steady performance in CF and growing contributions from KASJEVY and GERNAVICS. International revenue grew 9% year over year, driven by continued CF expansion and increasing contribution from KASJEVY and, as anticipated, a benefit from year-over-year changes in foreign exchange. First-quarter 2026 combined non-GAAP R&D, acquired IPR&D, and SG&A expenses were $1.29 billion, an increase of 5% compared to $1.23 billion in 2025. Within total OpEx, non-GAAP R&D expenses were down 2% year over year, partly driven by the timing and mix of certain clinical trial expenses. In addition, certain Povi manufacturing expenses were included in R&D in 2025 and are now recorded in cost of sales following the positive interim analysis data. Non-GAAP SG&A expenses increased 30% year over year, driven primarily by commercial investments—roughly 40% attributable to GERNAVICS in pain and approximately one third to renal launch programs. We also recorded $1 million in IPR&D expense in the quarter, compared to $20 million in 2025. First-quarter 2026 non-GAAP operating income was $1.31 billion compared to $1.18 billion in non-GAAP operating income in 2025. First-quarter 2026 non-GAAP effective tax rate was 19.6%. First-quarter 2026 non-GAAP net income was $1.1 billion, an increase of $93 million compared to 2025, primarily due to increased product revenue, partially offset by increased operating and income tax expenses in 2026. First-quarter 2026 non-GAAP earnings per share were $4.47 compared to $4.06 in 2025, reflecting our strong revenue growth and disciplined expense management. We ended the quarter with $13 billion in cash and investments after deploying approximately $344 million to repurchase more than 741 thousand shares in the first quarter. This activity reflects our ongoing commitment to returning value to shareholders while maintaining the flexibility to act on strategic growth opportunities. Overall, our priorities for cash deployment remain unchanged, with a primary focus on investing in innovation. Now switching to guidance. We are reiterating our 2026 total revenue guidance of $12.95 billion to $13.10 billion, representing growth of 8% to 9%. This outlook reflects continued solid performance from the CF franchise driven by the AlifTrack launch, expansion into younger patient groups, incremental patients from the label expansion, and geographic expansion. We continue to have high confidence in our outlook for revenue of $500 million or more from non-CF products, driven by growing KASJEVY infusions—we have good line of sight given the length of the patient journey—and a meaningful ramp in GERNAVICS prescriptions and revenue as gross-to-net normalizes through the second half of the year. Lastly, our revenue outlook continues to include an expected impact from foreign exchange, net of our hedging program. Our outlook for full-year gross margin remains at just under 86%, reflecting the growing non-CF product mix impact and ongoing investments in manufacturing network and process development for various products. We are also reiterating our combined non-GAAP operating expense guidance of $5.65 billion to $5.75 billion, reflecting continued investment in our late-stage clinical pipeline, commercial infrastructure, and activities for new launches and revenue diversification. We also continue to expect our non-GAAP effective tax rate to be in the range of 19.5%–20.5% for the full year 2026. On the subject of tariffs, we do not expect any material impact to the income statement in 2026. We continue to evaluate the details of recent announcements and the potential applicability to Vertex Pharmaceuticals Incorporated. In summary, Q1 2026 was a very strong start to the year. Financial results are on track, commercial launches and diversification are gaining momentum, and we continue with targeted investment both in innovation and commercialization as the pipeline is advancing across our multiple disease areas. Our increasingly diversified commercial portfolio, now spanning three disease areas and soon to be four—the establishment of the renal franchise—is driving new revenue streams and adding to our near- and long-term growth profile. Vertex Pharmaceuticals Incorporated is well positioned to continue expanding its impact for patients, investors, and all stakeholders. These and other anticipated milestones of continued progress in multiple disease areas are detailed on slide 17. We look forward to updating you on our progress on future calls. I will now ask Susie to begin the Q&A period. Susie Lisa: We will now open the call for questions. To ask a question, you may press star then 1 on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. Our first question for today will come from Jessica Fye with JPMorgan. Please go ahead. Jessica Fye: Hey, guys. Good afternoon. Thanks for taking my question. So you have talked about renal one day rivaling the cystic fibrosis business in size. Can you speak to what needs to play out from here to realize that vision? And among your renal assets, which you see having the greatest long-term revenue potential? Thank you. Reshma Kewalramani: Jess, this is Reshma. I guess, as the nephrologist at the company, maybe I can take this, and, Duncan, please feel free to add. So, Jess, what we are talking about in our emerging renal franchise is four assets—Povi for four diseases—three assets: Povi for IgAN, Povi for membranous, enaxaplin for AMKD, and what we call VXS-407 in ADPKD. The reason I think that this has the potential to be as big if not larger than CF is that the diseases that these medicines treat are rare diseases, but they are common rare diseases. And when you add them all up together, they are well into the hundreds of thousands of patients. For example, we talk about 150 thousand or so patients with IgAN in North America and Europe, 100 thousand patients with membranous in the same geographies. For AMKD, that is another 150 thousand or so patients with the AMPLITUDE population, not including the AMPLIFIED population, which adds another 100 thousand, and ADPKD is about 300 thousand patients. Of course, the first medicine that we are studying, VX-407, can treat about 10% of that 300 thousand. So, one, while each one is a rare disease, they are common rare diseases, and when you add it together, we are hundreds of thousands of patients in just the Western world. The second is that in renal medicine, unfortunately, the natural history of these diseases is a relentless decline in renal function, and a movement then to death, dialysis, and transplantation. Obviously, those are enormous burdens for society. I do not need to say much more about death, but dialysis in particular is exceptionally expensive. And while it allows you to live, it is a very, very difficult life, and life expectancy is like very serious cancers like pancreatic cancer. And then last of that block, when we look at the emerging results for Povi, for example, in IgAN and membranous, you can look at the Phase II, and for IgAN, you can certainly look at the Phase III interim analysis results. As I said in the call, they are sparkling. From top to bottom, safety, efficacy—these are the kind of medicines that can bring transformative value. When I think about AMKD, same thing. You look at the Phase II results that we published in the New England Journal—47.6% reduction in proteinuria is a very big deal. And when we think about ADPKD, no human results yet, but when you look at the mechanism of action—this is to say to properly fold the misfolded PC1—and what we see preclinically, another one where we think transformative effect. That is why we believe this is another vertical that can rival, if not crest, CF. Best renal asset—that is a tough one, Jess. I am going to focus my attention for the here and now on Povi. It just looks sparkling. You can call it near-term bias because we just looked at the Phase III results. Jessica Fye: Thank you. Operator: The next question will come from Salveen Richter with Goldman Sachs. Please go ahead. Salveen Richter: Good afternoon. Could you discuss the read-through from MACE's recent data to the enaxaplin program? And also, could you just speak for that program, whether there were enrollment considerations to enrich for patients with larger APOL1 contribution to CKD, especially in the non-FSGS patients? Thank you. Reshma Kewalramani: Yes. Hey, good afternoon, Salveen. On the MACE data, you know we do not like commenting on other companies' assets and results, but I will simply say the top line: the Vertex results were 47.6% reduction in proteinuria, as published in the New England. And my recollection is the MACE data is 35.6% at the top line. Going below that is difficult because we are talking about groups of two and three patients with or without diabetes and such, and I just do not think you can make very much when you are down to two or three patients. What I will say is I am very happy about the decision we made early on to not mix a heterogeneous group, and to focus our program on those with heavy proteinuria, two APOL1 alleles, and reduced kidney function, and not study those who have a comorbid condition like diabetes. Instead, what we did is study those people in a separate trial called AMPLIFIED along with a group of patients with lower proteinuria. That trial is done enrollment; I do expect to have results in the second half of this year. Operator: The next question will come from Brian Abrahams with RBC Capital Markets. Please go ahead. Brian Abrahams: Hey, guys. Thanks so much for taking my question. With the Povi launch not too far off, what do you think you will need to convey to KOLs and community physicians to convince them of povitacicept differentiation and overcome first mover advantage by competitors? Thanks. Reshma Kewalramani: You bet, Brian. Let me ask Duncan to take that. He has been spending a lot of time with nephrologists both in academic institutions and centers of excellence, as well as in the community. Duncan? Duncan J. McKechnie: Brian, good afternoon. So, one comment before we dive into your answer. I just made the point that, obviously, this is a huge market opportunity with about 160 thousand patients in the U.S. It is five times bigger than CF, for example. And the vast majority—about 75%—of those patients are nowhere near the KDIGO guideline goal in terms of proteinuria. So the opportunity is significant. We have been engaging through market research and other mechanisms with many nephrologists, and essentially they tell us they are looking for a product that significantly impacts proteinuria—we will come back to that—is well tolerated, and is easy for patients to use. And we believe that povitacicept uniquely meets those needs. We think it has the sort of winning trifecta of incredible clinical effects—as you heard in the prepared remarks, things like the rapid, deep, and sustained reduction in proteinuria, as well as GdIgA1 and hematuria—it has a supremely favorable tolerability profile and very attractive dosing and administration. So, as you know, it is once a month, it is a small-volume dose, it is delivered by an auto-injector. So we think we have an incredible product, as we saw in the clinical data. We also know from our market research that those nephrologists that distinguish between BAFF/APRIL and APRIL alone, the vast majority of them preferred dual inhibition with BAFF and APRIL. And in our patient market research, the vast majority of patients prefer monthly dosing over weekly dosing. In fact, eight times more patients prefer monthly dosing to weekly dosing. So, in terms of the profile of the product matched against the need of the physicians and patients, we think we have a best-in-class asset on our hands. And I would also add on the commercial capability side, we know how to execute a high-science sell, we know how to secure rapid, deep, and broad reimbursement, and we know how to build patient support programs, which are incredibly important in the biologic space as we have done for the last 12–13 years or so in cystic fibrosis. So we are feeling really good about the profile of povitacicept. We are getting ready for launch, and we are going to be ready to go the day the FDA gives us regulatory approval. Operator: The next question will come from Geoffrey Meacham with Citi. Please go ahead. Geoffrey Meacham: Afternoon, guys. Thanks so much for the question. I have two quick ones. So on pain and on 993 in particular, as you guys have got commercial experience with Gernavix, are there settings where an IV modality is perhaps a better fit in the clinical practice? I imagine that is maybe the hospital setting in the acute. I wanted to get your perspective. And then on Povi, congrats on the quick filing in IgAN, but looking beyond PMN and gMG, is it worth it to do a basket study? Are there other autoimmune indications where you could have the most differentiation for Povi and then maybe have the highest probability of success? Reshma Kewalramani: Hey, Geoff. This is Reshma. On the pain portfolio and whether or not an IV medicine would be helpful: I think it would be helpful to have an IV medicine, and what we are really looking to do here—and the reason we have not only suzetragene or Gernavix, but 993 and additional Nav1.8, but, very importantly, Nav1.7—is to make sure that we have the best medicine, whether it is PO or IV, and that formulatability into IV is one of the features that we are looking at and are interested in. Switching then to Povi and where we see things go, IgAN is already done in terms of the interim analysis and filing. Membranous Phase III is already underway. Myasthenia Phase II is underway. There are some additional B cell–mediated diseases that we are thinking about, and I do think a basket study is a very efficient way of evaluating those conditions through Phase II development. I will not say much more about exactly which conditions, but suffice it to say, there are some B cell–mediated conditions where autoantibodies are important, where we think Povi would fit nicely. And I do think that going about this by way of basket studies and efficient Phase II/IIIs are the right way to go. You will be hearing us talk more about Povi, our immunology portfolio, in the coming months and in the coming times. But I like your idea. Operator: The next question will come from Cory Kasimov with Evercore ISI. Please go ahead. Cory Kasimov: Hey. Good afternoon, guys. Thanks for taking my question. I wanted to follow up on Salveen's question on enaxaplin. When you think about the pending data from AMPLIFIED looking at AMKD patients with moderate proteinuria or diabetes, what is needed in this population for a clinically meaningful benefit to justify advancement in this patient segment? Thank you. Reshma Kewalramani: I would say that, generally speaking, in renal, we have been thinking about double-digit improvements as being valuable. By that, I do not mean 10% or 11%. I would say if we can show a 30% improvement—some number between 20% and 40%, 25% and 50%—some solid double-digit improvement in proteinuria on top of standard of care, of course—so, on top of ACEs, ARBs, SGLT2s, etc.—that would be meaningful. And we will be able to see how we fare shortly. The enrollment is done. It is a 12-week study. We will be able to tell you the results in the near term. Cory Kasimov: That is very helpful. Thank you, Reshma. Reshma Kewalramani: You bet. Operator: The next question will come from Michael Yee with UBS. Please go ahead. Michael Yee: Hey. This is Mike Yee from UBS. On Povi, do you believe that on the efficacy standpoint your differentiation on eGFR will be able to come through over 9 or 12 or 24 months versus, say, Otsuka, which I think is presenting their eGFR 9-month data next month and then their 2-year data coming up? And then I just wanted to think about where you would start to see differentiation for yours and a read-through to their data that they are going to present. And then on the safety component for Povi, Reshma, can you talk a little bit about the hypogammaglobulinemia? I think there are some questions around whether 150 or 300 matters, and then noise within the assay and the timing of the measurement, and why you do not think that would be any issue here for Povi? Thanks. Reshma Kewalramani: Yes. I will start with safety on hypogammaglobulinemia, and then we will go to efficacy. On safety, the results are really terrific because Povi—and any medicine that works on APRIL or BAFF/APRIL, in essence, is modulating B cells—you do need to think about the safety profile, and in the safety profile, the domain to think about is infection. So specifically, what we focused on and what I was very pleased to see is we can get this level of efficacy on proteinuria, on hematuria, on GdIgA1, on getting down to these very low levels—less than 0.5 g/g, which is the important clinical threshold—we can get down to those levels with a very favorable safety profile. So, on infection: most of the infections are mild to moderate—think upper respiratory infection. There are no opportunistic infections, no uncommon infections. The SAEs of infection are low and balanced; it is exactly 0.5% in the placebo group and the same exact number in the Povi-treated group. So that looks really nice. With regard to the actual immunoglobulin levels—and let us focus on IgG—the IgG thresholds of less than 300 or 200; some people use 400. These thresholds are important because that is how people set up their trials, and that is how the trials may have certain actions taken. You are correct: each trial defines a different threshold; you measure it a different number of times. Some people measure it monthly like us; other people measure it quarterly. Some people require multiple measurements to call it less than that threshold; others require a simple one level. So it is not very easy at all to cross-compare. The important thing, though, Michael, is if you are asking me, “Hey, is there anything there that gives you concern?” None at all. The important thing to look at is the infections, and the infections look very balanced between these groups. On efficacy, you ask about eGFR, which is the regulatory-enabling endpoint, right? So the regulators have said proteinuria is acceptable at nine months for accelerated approval, but they are looking for two-year eGFR for full approval. Note, however, eGFR is actually not the hard endpoint in renal medicine. The hard endpoint is death, dialysis, or transplantation. That is what we are really trying to avoid. It is just that that endpoint takes a long time, and so the acceptable regulatory-enabling endpoint for full approval is eGFR. The reason I think that the proteinuria is so important is when you think about that hard endpoint of death, dialysis, and transplantation, which takes years to develop, the thing that most proximally reflects that is proteinuria. And what I would do is think about proteinuria—okay, if I got one point of proteinuria improvement more than any other medicine, two points, five points, 10 points—compound that over years, and you start to see why proteinuria is so very important. The agency has said very clearly that we are not allowed to share eGFR, but they have equally said that they need to see eGFR to provide accelerated approval. So what I would say is any medicine in IgAN that gets accelerated approval has the proteinuria that we have already shared and has an eGFR that the agency finds comforting. Michael Yee: Yep. Thank you. Operator: The next question will come from Tazeen Ahmad with Bank of America. Please go ahead. Tazeen Ahmad: Hi, good afternoon. I wanted to ask what your thoughts are on the read-through from this positive IgAN study that you provided top line for recently onto the PMN study that you are currently running for Povi? And then secondly, on the CF pipeline, I just wanted to get a sense of what data you plan on showing in the second half of the year for 828, and what would be considered good data there? Thanks. Reshma Kewalramani: Let us do IgAN first. Tazeen, I see some data from the IgAN as very important and positive for membranous because now we have studied hundreds of patients over a nine-month period, which is additive information to the Phase II results. So things like PK, PD, the reduction in proteinuria—I see all of that in terms of efficacy as important. Clearly, the autoantibody of interest is different. One is PLA2R—that is what we are looking for in membranous—versus GdIgA1. So that has to play itself out. But in terms of those other parameters, I see that as really positive. The other variable that I see as very positive is on safety. The fact that there is such a favorable safety profile, I see as a positive. Of course, the IgAN study was at 80 mg, and in the membranous study, we are studying both 80 mg and 240 mg to pick one. Last, I feel very good about the way the study is being conducted. That is to say, low discontinuations in terms of study discontinuations and treatment discontinuations. I also feel really good about the background therapy. It is very important to look at as you think about doing these studies in contemporary practice. On CF, the 828 results are a CF cohort after we have completed the healthy volunteer study, and so what you should see is data from the single dose that has gone into the patient cohort, and you should expect to see sweat chloride results and safety results as well. It is a small cohort, so you should not expect anything on ppFEV1. But the readout—the efficacy readout—that we are looking for is sweat chloride. So you should expect us to share that. Operator: The next question will come from Evan Seigerman with BMO. Please go ahead. Evan Seigerman: Hi, thank you so much for taking my question. I want to expand a little bit on the discontinuation of VX-522. Anything else you can share on the tolerability issues? And then, looking ahead, do you plan to utilize another technology to help these patients that are not currently treatable with your current portfolio? Thank you. Reshma Kewalramani: Good afternoon, Evan. On VX-522, what I can tell you is that the tolerability issue that we have been monitoring and sharing with you, now that the study is being discontinued, has to do with lung inflammation—an inflammatory response, probably in response to the LNP that is being used to deliver it. And I say that because this is not unusual in that regard. So, with regard to what are we going to do for our patients, I want to be clear about the fact that our commitment to CF is absolute and steadfast. If there is any more that we can do for our patients in the 95% group, we are going to be the ones who do it. And for our last 5,000 or so patients, we are going to work on that as well. I expect that the challenge is going to continue to be delivery. And in terms of modalities, we are going to have to go back to the drawing board on modalities. These last 5,000 are going to require some nucleic acid therapy, right? Because they simply do not make any protein. And so the big question is not necessarily what the nucleic acid therapy is—I have some big ideas, and they are, I think, obvious—but how do you deliver it without having this lung irritation? And that is what we are going to be working on. Evan Seigerman: Great. Thank you. Operator: The next question will come from David Risinger with Leerink Partners. Please go ahead. David Risinger: Thanks very much and thanks for all the updates. So my questions are on GERNAVICS. Could you maybe help reconcile the $29 million in revenue in the first quarter with the volume of either prescriptions or pills? And then, given that GERNAVICS has PBM coverage for 240 million lives now, which is over two thirds of the population, does GERNAVICS need to achieve more employer opt-ins and more Tier 2 formulary positions for the gross-to-net to normalize? Thanks so much. Reshma Kewalramani: Duncan, do you want to take that one? Duncan J. McKechnie: Sure. Good afternoon, David. So in terms of the first part of your question, I would say overall, by the way, we are extremely pleased with the progress on GERNAVICS. We are fully on track in terms of our prescription numbers and our revenue numbers. In terms of reconciling Q1 and volume, as I mentioned in the prepared remarks, we did see a small but relatively normal channel inventory destocking in Q1 between Q4 2025 and Q1 2026. It is also true that in that quarter, of course, Medicare Part D plans are resetting, which can lead to higher co-pays and more abandonment. And then also, we saw the traditional reduction in the number of elective surgeries in January, which were a little bit harder impacted this year because of the fairly strong flu season. So overall, I would say that the Q1 performance was in line with our expectations. We are absolutely on track to more than triple the number of prescriptions that we delivered in 2025. And to answer the second part of your question, we have just achieved our 240 million lives covered. As you know, we are very happy with that. And actually, in an update since we finalized the script—you know that we have been working on four Part D plans, and in the script, we communicated that we had secured coverage at one of those four plans—we have actually secured coverage at two of those four plans and are very close to securing coverage at a third of those plans. That coverage starts from between May 1 to July 1. So I do not think we need to be focused on downstream plans and employer plans. As we have said all along, as we secure the final pillars of access, the patient support program will taper down, our gross-to-net will normalize by the end of the year, and you will see revenue significantly accelerate and accelerate faster than prescription growth as we go through the balance of the year. David Risinger: Thank you. Operator: The next question will come from Terence Flynn with Morgan Stanley. Please go ahead. Terence Flynn: Great. Just two questions for me. I was just wondering if you can tell us if there is a defined percentage of FSGS patients in the AMPLITUDE Phase III trial for enaxaplin—if there is a cutoff, or if you are just pretty much all comers and that mix will be dictated by who is enrolled. And then for AlifTrack, just curious to know if you are seeing anything different in terms of patient mix this quarter versus prior quarters in terms of the three different buckets that you guys have focused on? Thank you. Reshma Kewalramani: Terence, I will take your FSGS question for Phase III enaxaplin, and I will turn it over to Duncan. I will not be able to share what the baseline characteristics look like because we have not looked at those data, and we do not know those data. But what I will tell you is that what is common in AMKD is because they tend to be heavily proteinuric—so we are talking about people who are coming in with proteinuria 0.7 g or more—they often tend to have a biopsy because a lot of proteinuria and people are trying to figure out whether there is an underlying identified cause. So it would not surprise me at all if many—maybe even the majority—of patients in the AMKD Phase III AMPLITUDE trial actually were known FSGS patients because a lot of these patients do get a biopsy. Not all of them, but it is not an uncommon act. So that would be my guess, but I do not have a formal answer for you. Fortunately, the IA enrollment is complete, the full study enrollment will complete this year, and we fully expect to have results from the IA in early 2027. So we will know the answer real soon. Duncan? AlifTrack characteristics—transition? Duncan J. McKechnie: Yep. Terence, thank you for the question. So I am assuming the three categories you are talking to are the naïve patients, the discontinued patients, and the transition patients. I would say that we see continued strong progress in all of those. Once we have both regulatory approval and reimbursement, we see the naïve patients coming on first, then we see discontinuation patients coming on, and then finally the transition patients moving on to AlifTrack, indeed exactly as we desire. So at this point, essentially, I would tell you that all new patients are going on to AlifTrack—no one is going on to TRIKAFTA—all going on to AlifTrack. We see the discontinued patients largely moving on to AlifTrack, and the vast majority, of course, of our patients now are transitions from TRIKAFTA to AlifTrack, exactly as we would expect. So the three drivers really of AlifTrack growth this year are continued uptake in the U.S., more European countries securing reimbursements, and the expanded labels—for example, the additional 800 patients that were recently included in the most recent labeling updates. So hopefully that answers your question, but we are seeing essentially similar profile to that which we saw before, and super happy that we are well over $1 billion on AlifTrack at this point. Jessica Fye: One more question, please, Chuck. Operator: The next question will come from Analyst with Barclays. Please go ahead. Analyst: Just on 828, just to follow up on the earlier question. I guess, what are you seeing as a bar for what you would want to see to bring this forward from an efficacy or safety perspective? And then, just as you think about the cystic fibrosis landscape overall, how are you thinking about the bar set by AlifTrack versus where you see room for incremental improvement? Thanks. Reshma Kewalramani: When we had TRIKAFTA and were working to see what the unmet need was, honestly, AlifTrack was a little bit easier to see. As amazing as TRIKAFTA is, we could see that a once-daily medicine would be better for patients. And we could see that getting more CFTR protein function—that is to say more sweat chloride improvement, more patients below the diagnostic threshold of 60 and the normal level of 30—would be advantageous. Now, fast forward to where we are today with AlifTrack, and, genuinely, there is very little unmet need. And so it is going to take something special for us to advance, and that is why we are looking at VX-828, VX-581, and VX-2272, because we want to really interrogate to see if there is more that we can bring to the table. And what I am really saying, if the event is unclear, is this: today, 90% of people—if you start at a young age, which AlifTrack is now approved down to 6 years old, and we are filing for 2–5 years old—90% are less than 60. Two thirds of our patients are in sweat chloride that is below normal. And this is with a once-a-day medicine. And now, when you think about it, everyone—as Duncan described—all our new patients, all our young patients, are coming onto AlifTrack. There is very little room for improvement here. So if it is possible, we are going to be the ones who do it, but it is getting really, really tough because we are already down to once a day, good-looking DDIs, excellent sweat chloride function with two thirds normal. It is tough. So if we see it, we will certainly let you know, but that is why we are being so particular in bringing these number of medicines forward to see if anything can be better than AlifTrack. Susie Lisa: This will conclude our question and answer session, as well as our conference call for today. A replay of today's event will be available shortly after the call concludes by dialing +1 (877) 344-7529 or +1 (412) 317-0088 using replay access code 10208180. Thank you for your participation. You may now disconnect.
Operator: Thank you for standing by. My name is Angela, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sonos, Inc. second quarter fiscal 2026 conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Mr. James Baglanis, head of corporate finance. You may begin. James Baglanis: Good afternoon, and welcome to Sonos, Inc.'s second quarter fiscal 2026 earnings conference call. I am James Baglanis, and with me today are Sonos, Inc.'s CEO, Tom Conrad, CFO, Saori Casey, and chief legal officer, Eddie Lazarus. Before I hand it over to Tom, I would like to remind everyone that today's discussion will include forward-looking statements regarding future events and our future financial performance. These statements reflect our views as of today only and should not be considered as our views of any subsequent date. These statements are also subject to material risks and uncertainties that could cause actual results to differ materially from the expectations in the forward-looking statements. A discussion of these risk factors is fully detailed under the caption Risk Factors in our filings with the SEC. During this call, we will also refer to certain non-GAAP financial measures. For information regarding our non-GAAP financials, and a reconciliation of GAAP to non-GAAP measures, please refer to today's press release regarding our second quarter fiscal 2026 results posted to the investor relations portion of our website, investors.sonos.com. After the call concludes, we will upload our revised supplemental earnings presentation, including our guidance, as well as the conference call transcript to the IR website. I will now turn the call over to Tom. Tom Conrad: Good afternoon, everyone, and thanks for joining us. At the start of fiscal 2026, we said we expected to return Sonos, Inc. to growth this year. Through the first half, that is exactly what we have done. We delivered $282 million of revenue in Q2, up about 8% year over year and near the top end of our guidance range. Gross profit dollars grew double digits on a GAAP basis and adjusted EBITDA came in above the midpoint of our range. Saori will take you through the details in a moment. These are strong quarterly results; what matters more is the broader picture. Across the first half and now looking into the second, we have changed the trajectory of the business. After a challenging period, Sonos, Inc. is beginning to grow again, and we are seeing our progress show up across the company. First half revenue was up 2% and adjusted EBITDA improved meaningfully year over year. At the center of that progress is a simple idea: The Sonos, Inc. system is the product. Each device we add and each improvement we make increases the value of the whole system, compounding over time as customers expand across rooms and use cases. That system-level value and the way it builds over time is what differentiates us in the category. On our Q1 call, I outlined five dimensions we are focused on to drive durable growth: product innovation, customer advocacy, more intentional marketing, geo expansion, and tapping emerging demand trends. Together, these form the engine that drives both new household growth and expansion within our installed base. We are starting to see the results of that work in the business. The product pipeline is delivering, growth markets are performing well, and the system is more reliable than it has been in years. This is helping restore customer advocacy. Taken together, this has new customers entering and existing customers expanding into the system. I want to spend a moment on our newest product, Sonos Play. It launched just as the quarter closed, so its contribution to Q2 was de minimis. But the early reviews tell us something important about where we are as a company. Gizmodo called it a comeback. The Wall Street Journal described it as the Goldilocks speaker. The Verge called it a great way into the Sonos, Inc. world. Bloomberg said, back on track. Reviewers around the world agree: crisp and beautiful sound, unmatched versatility, beautiful craftsmanship. In short, Sonos, Inc. doing what Sonos, Inc. does best. These glowing reviews were written independently across a host of markets and geographies as the launch embargo lifted. This remarkable consistency reflects both the quality of the product and the clarity of the story around it. Over the past year, the product team has rebuilt the foundation and now Colleen and our marketing teams are sharpening how we show up as a system. And you can see that work landing here. If you step back, Play illustrates three of our five growth dimensions working in concert. First, product innovation. This is differentiated hardware and software designed not as a standalone object but as an entry point into the system and a reason to expand it. Second, marketing. The consistency of the global press narrative reflects a clearer and more coherent system story. And third, customer advocacy. When reviewers start using words like comeback and back on track, that shift in tone is consistent with improving customer sentiment and the progress we have been making. Aero 100 SL, which launched alongside Play, nicely complements the work Play is doing for us. With a simplified design and a $189 price point, it lowers the barrier to entry for the Sonos, Inc. system. We have already seen that pricing changes on Era 100 have driven new customer growth over multiple quarters and Era 100 SL should build directly on that momentum. We have more than 53 million connected devices across more than 17 million homes. As we have described before, the opportunity within that base is substantial; moving from roughly 4.5 devices per multiproduct household to 6 represents about $5 billion in incremental revenue before even considering new household growth. Converting single product households adds another $7 billion. We continue to see behaviors that underpin our model. Customers are entering through accessible products and expanding across rooms and use cases over time, and now we have two new ways to enter the Sonos, Inc. system and more reasons for existing customers to expand inside and outside their homes. Turning to our operations, I want to take a moment to introduce a meaningful addition to our leadership team. Frank Barbieri is joining Sonos, Inc. as Chief Operating Officer. Frank brings over 25 years of experience building and scaling consumer businesses, most recently leading Walmart's omnichannel consumer content, media, and gaming operations across both stores and ecommerce—one of the largest entertainment portfolios in U.S. retail. I have known Frank for nearly 20 years, and his combination of commercial depth, operational discipline, and genuine passion for consumer products makes him exactly the right person to join our team. As COO, Frank will take responsibility for partnerships, direct consumer relationships across DTC, CRM, and customer experience, as well as revenue systems and IT. This is a meaningful concentration of operational capability under an experienced leader, and I expect it to show up in how we execute against the growth agenda I have been describing. All in all, we are carrying real momentum into the second half. Play has launched to strong early reception. Aero 100 SL looks to be the right product for a moment when many potential customers are focused on value. We have AMP Multi coming this fall as a much-anticipated product for our professional installer channel. More broadly, our pipeline remains healthy across not just hardware, but also software, with a continued focus on deepening the system experience. In our growth markets, which I noted as a fourth important lever for our business, we have now seen multiple consecutive quarters of strong performance. Sonos, Inc. Play's warm reception by international press reinforces the vast opportunity in front of us. We continue to see our expansion markets as important contributors to our growth that will pay off more and more for us over time. On our last earnings call, I suggested that we would grow more in the second half of the year than in the first. I am pleased to say that we performed somewhat better than expected in the first half, and my view that the second half will be stronger yet remains unchanged. Amid this optimism, I want to highlight one challenge. Looking to the second half and beyond, we are managing the headwind of higher memory costs that are putting downward pressure on our gross margin. As you know, the semiconductor industry is in the middle of a transition from DDR4 to DDR5 and high bandwidth memory, driven by AI and data center demand. That is tightening supply for the DDR4 chips we use and increasing costs across consumer electronics. Our global operations team has been focused since early 2025 on securing sufficient supply to support our manufacturing demands. This means pursuing supply through multiple channels. We are also leveraging our engineering expertise to optimize memory requirements across current and future designs, all without compromising product performance or customer experience. With regard to the effect of higher memory prices, we have a variety of levers to mitigate the impact. Our focus is on managing the headwind thoughtfully without losing sight of the larger opportunity to drive top-line growth alongside increased profitability. On the topic of tariffs, we will be filing for a refund of prior duties paid under IEEPA now that the U.S. Customs and Border Protection has launched phase one of CAPE. While the timing is uncertain, the benefit could be as large as $40 million, which would be another meaningful offset to the higher memory costs. So while memory headwinds are real, we are managing them from a position of preparation and expertise. Let me close with this. We have moved through a phase of stabilization. What comes next is building durable growth. We are at an important point, and the signals are showing up across product, markets, and customer behavior. The product pipeline is active again. Growth markets are showing strong performance. The system is stronger, more reliable, and easier to understand. Our progress on the dimensions we discussed today—new products, more effective marketing, geo expansion, and a return to customer advocacy—is beginning to deliver growth. But the opportunity to grow into emerging adjacencies is what I find most compelling. AI is already transforming how we operate internally, from the way we build software to how we execute marketing to how I run the company. The external opportunity is vast: 17 million households and 53 million connected devices, voice-enabled and present room by room. This is an installed base with significant value. And as more people look for experiences that do not depend on pulling out their phone, that value only grows. We are building towards something larger here, and while I am not ready to lay out the full picture today, there is considerably more to this story, and I look forward to sharing it with you in time. With that, I will turn it over to Saori. Saori Casey: Thank you, Tom. Hi, everyone. We closed out 2026 on a high note with revenue growth of 2% thanks to our strong Q2 results. This return to growth was accompanied by disciplined execution, with 7% and 6% growth in GAAP and non-GAAP gross profit dollars, respectively. GAAP operating expenses decreased by 16%, and non-GAAP operating expenses decreased by 10%. The combination of gross profit dollar growth and operating expense reduction resulted in adjusted EBITDA growing 48%, representing margin improvement of 510 basis points. Q2 results overall came in strong against our expectations, marking our seventh consecutive quarter of executing against our commitments. Revenue grew 8% year over year to $282 million, near the high end of our guidance range, driven by APAC and EMEA growing 25% and 21%, respectively, while Americas grew 2% year over year. Our growth markets delivered double-digit growth, further validating our view that this will be a key driver of our growth in the years to come. Foreign exchange contributed 4 points to our year-over-year growth. On a constant currency basis, APAC grew 18%, EMEA grew 9%, and Americas grew 1%. On a product basis, we saw continued strength in the demand for AR10100, as well as strong performance of ArcUltra. As a reminder, both Play and Era 100 SL had negligible contribution to Q2 revenue given the timing of their launch. GAAP gross profit of $125 million grew 10% year over year while non-GAAP gross profit of $130 million grew 6%. The growth was driven by higher revenue and FX favorability, partially offset by higher memory costs. GAAP gross margin was 44.3% and non-GAAP gross margin was 46%. Higher memory costs were approximately a 200 basis point headwind to gross margin, whereas tariffs, like last quarter, were offset by our mitigation. Q2 GAAP operating expenses of $150 million decreased 11% year over year, primarily due to the significant restructuring costs associated with last year's reduction in force, while non-GAAP operating expenses of $137 million were mostly flat to prior year and a bit below the midpoint of our guidance range. Stock-based compensation was $14.9 million, down 36% year over year. Adjusted EBITDA was positive $2 million, above the midpoint of our guidance range, increasing $3 million from negative $1 million last year. This is an important milestone, as this was our first Q2 with positive adjusted EBITDA in the past four years. Non-GAAP earnings per share of negative $0.02 was up from negative $0.18 last year. We spent $40 million on share repurchases in Q2 to buy back 2.5 million shares, reducing our share count by 2.1%, which leaves us with $65 million remaining on our current share repurchase authorization. Our balance sheet remains strong, as our net cash balance ended the quarter at $249 million, which includes $40 million of marketable securities. Our period-end inventory balance of $161 million was up 16% year over year, driven by new product launches and tariff costs, partially offset by workdown of component inventory. Inventory consists of $144 million of finished goods and $17 million of components. Q2 free cash flow was negative $70 million, consistent with typical Q2 seasonality. CapEx was $5 million, down from $6 million last year. Turning to our guidance, the Q3 outlook we are providing today reflects the trends that we have observed quarter to date and are our best estimates. We expect Q3 revenue to be in the range of $355 million to $375 million, representing growth of 3% to 9% year over year, up 6% at the midpoint. Our guidance represents modest year-over-year acceleration from Q2 on a constant currency basis, as we expect FX to have a negligible contribution to growth in Q3. Please note that there will be no revenue contribution from AMP Multi in Q3, which is slated to launch in the fall. We see continued momentum into Q4, delivering full-year growth consistent with what we have communicated over the past two quarters. We expect Q3 GAAP gross margin to be in the range of 42% to 44.5%, with non-GAAP gross margin approximately 150 basis points higher than GAAP. Both are roughly flat year over year at the midpoint. Our guidance implies mid-single-digit growth in gross profit dollars at the midpoint, in line with the revenue growth. Please note our gross margin guidance range embeds an approximately 400 basis point year-over-year headwind from higher memory costs in Q3. We also do not expect to receive any tariff refunds during Q3, roughly 200 basis points more headwind than Q2. We are not guiding beyond Q3 at this time. But to provide some color, we currently expect memory cost inflation to rise from Q3, which is likely to pressure gross margin in Q4. As a result, we currently expect both GAAP and non-GAAP gross margin for 2026 to be somewhat lower than 2025, which was 43.5% on a GAAP basis and 44.9% on a non-GAAP basis. As Tom mentioned, we are actively working on a variety of mitigation actions to navigate this industry headwind. We are focused on managing this challenge thoughtfully and without losing sight of the larger opportunity to drive top-line growth and increase profitability. While any tariff refunds received in the future would likely be a benefit to gross margin, that second-half commentary I just outlined does not incorporate any such benefit given uncertainty around timing. We expect Q3 GAAP operating expenses to be in the range of $150 million to $160 million. We expect non-GAAP operating expenses to be lower than GAAP by approximately $18 million, implying non-GAAP operating expenses stay roughly flat to Q2 at the midpoint. Looking beyond Q3, please note that our quarter-to-quarter results may vary in part due to timing of our product launches. Bringing it all together, we expect Q3 adjusted EBITDA to be in the range of $20 million to $48 million, representing a margin of 5.6% to 12.7%. Our performance in the first half proves that we have built momentum. This was our third consecutive semiannual period of revenue growth improvement, and we expect to sustain this momentum into the second half of this year, making fiscal 2026 the year that Sonos, Inc. returned to top-line growth. Looking beyond fiscal 2026, our focus remains on delivering durable top-line growth, while balancing continued profitability improvements and disciplined reinvestment. To that end, through the adoption of AI, we are starting to see significant improvements in our team's productivity across a variety of functions, including software engineering, IT, accounting, customer support, and many more. We believe we are just beginning to scratch the surface of harnessing the potential of AI to continue to improve our efficiency and accelerate our business. After the call, we will update our earnings slides to reflect our Q3 guidance and the second-half commentary. With that, I would like to turn the call over for questions. Operator: We will now open the call for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening by a loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first question comes from the line of Steve Frankel with Wilson Black. Your line is now open. Steve Frankel: Good afternoon, and thank you. Tom, I know you are reticent to talk about this AI monetization strategy, but maybe just at a high level, give us some thoughts on is this a plot to try to create a recurring revenue business or is this a bounty-led, advertising-driven business like Roku started with? How should we think about monetization from AI services for third parties? Tom Conrad: Hi, Steve. Thank you for joining the call. You know, just to frame this out at the highest level, as I said on the call, there are sort of two different pieces of how AI is intersecting the business, of course. It is just profoundly transforming how we operate inside the company—how we build software, how we market, how I personally run the business. But Sonos, Inc. is really, I think, uniquely positioned with respect to how we can integrate AI technology into consumers' lives. A lot of other companies are asking how do we move AI off of phones and computers, bringing these experiences into people's lives in new and seamless ways. And at Sonos, Inc., we already have that path: 17 million households, 53 million connected devices that are voice-enabled, present as you navigate through your life room by room. That is really a head start that nobody else can buy. And as much as I would like to get into the specifics of the product roadmap and the business models that will underpin our expansion into those adjacencies, I think it is premature to get into those details today. Steve Frankel: Okay. No. I cannot blame you for trying. So on the memory issue, clearly understand the rising cost pressure. But where are you in ensuring that you have adequate supply given the new product ramp in the back half of the year? Are you comfortable that you have enough product at your disposal? Tom Conrad: Yes. We are feeling really good about supply. Our global operations team started doing the hard work of securing sufficient supply through multiple channels going back as early as the beginning of 2025. And so, as you see us guiding to 6% growth at the midpoint for Q3, we are obviously confident that we are going to have sufficient supply to meet the growing demand for Sonos, Inc.'s products. So while these macro headwinds that get thrown at you are always an interesting challenge, I really do feel like we are operating from a place of both preparation and strength. James Baglanis: Okay. Steve Frankel: And then lastly, congratulations on the 100 SL. Do you see this as an attempt to get to an even lower price point to grow the installed base, or is this a device without a voice agent? Is that something that either appeals to a different class of customers or makes sense in a multiunit house where you do not need every Sonos, Inc. product to have a voice agent inside of it? What is the theory there? Tom Conrad: Yes. I mean, Aero 100 SL is a really exciting product, I think, because it is so well matched to the moment when consumers are really shopping for value while at the same time Sonos, Inc. is looking to accelerate the acquisition of new households. And so having a product that, at its MSRP, can sell at only $189, I think, is just a really great addition to the line. I think the thing to note about what we have done with Aero 100 SL is that this is a sort of no-compromises, cost-optimized product from top to bottom. So not just removing the microphones and the speech capabilities. We have done all kinds of interesting work to bring our cost down on this product. Just to give you an example, most of our products are painted, and on Aero 100 SL we have been able to use color injection molding so we do not have the extra expense of paint, with no noticeable change to the product's fit and finish. The global operations team at Sonos, Inc. continues to do an incredible job of finding ways to deliver the same premium experience we have at lower and lower price points. And you certainly touched on all of the dimensions that are at play when you think about a product without microphones. Of course, there are consumers who prefer to not have microphones as part of the offering. Of course, there are customers who are highly price sensitive who prefer to save the money. And there are rooms and use cases—from surround satellites to secondary rooms in the home—where you might not want to have a microphone. So, really exciting product for us. It is kind of the quiet sibling to Sonos Play, which has received such glowing reviews from the press, but we are really excited about what it will do in terms of our strategy to bring Sonos, Inc. to more and more households. Steve Frankel: Great. Thank you. I will jump back into the queue. Operator: Your next question comes from the line of Eric Woodring with Morgan Stanley. Analyst: Hi. This is Ralph Earl on behalf of Eric. Good evening, and thank you very much for taking my question. Could you just walk us through some of the scenarios or the moving parts that get you to the high end and the low end of your Q3 gross margin guidance range? And then I will just have one follow-up after that. Thank you. Saori Casey: Yes. Thank you for your question. We can walk through the Q3 guidance. We guided to 42% to 44.5%, a range comprised of, certainly, the memory cost headwind. Let me start sequentially. Sequentially, we have the memory headwind that we talked about—an additional 200 basis points—on top of the 200 basis points that we experienced in Q2. Offsetting that, we do grow our revenues sequentially, so we have leverage that is going in our favor. And then, on a sequential basis, we will have tariffs at the new lower rate of 10%, so tariffs will also be a tailwind for us, helping offset some of the memory impact. Then there are other moving parts, as you say, of mix of our products and the timing at which we sell our products and at what promotion during the course of the quarter, and those are some moving parts that will get us to different parts of the range we just gave out. On a year-over-year basis, memory is a 400 basis point headwind versus last year. And then we have tariffs that we were experiencing, but due to the mitigation actions that we had taken, we will end up being net slightly positive, given the reduction to the tariff rate. Then our ongoing cost-saving efforts, as well as leverage, will be a partial offset to this 400 basis points of memory headwind that we are experiencing. Analyst: Okay. Great. Thank you for that. And my second question here would be, I know you target consumers interested in your premium experiences among other categories, so I was just wondering if you could share with us whether you are seeing any changes in demand, particularly considering ongoing geopolitical conflicts today that might have impacts on how consumers are thinking about where they are putting their dollars? Thank you. Tom Conrad: I would just say that we are really excited about the demand picture for Sonos, Inc. in the market. Certainly that is what is driving our growth as we go into the second half. We are also really proud of the way that we have expanded the portfolio to take advantage of the value-conscious customer with launches like Aero 100 SL and even Sonos Play, which has such a flexible set of use cases that it can solve for. You just get a tremendous amount of value in that product as a single product. So obviously, we continue to keep an eye on the macro, but I am feeling good about where demand is for Sonos, Inc. Analyst: Great. Thank you so much. Really helpful. Operator: Your next question comes from the line of Brent Thill with Jefferies. Your line is now open. Brent Thill: Thanks. Tom, just on the “second half gets stronger” thesis, maybe if you can underscore what you are most excited about—what are the stepping stones for that continued improvement? Tom Conrad: Well, we are certainly excited to have Sonos Play and Aero 100 SL in the market. And I think we are really starting to see the growth dimensions that I have been talking about on the call start to stack together. So, product innovation through our new product offerings, more intentional marketing telling the system story of Sonos, Inc., thanks to the great work that our new CMO, Colleen DeCourcy, is doing. We are many quarters into strong performance for our geo expansion investments. And then finally, we are, I think, starting to see the tailwind of a return of customer advocacy after a period of repair and stabilization. The best way to see that externally is the way the press is talking about our new generation of products—really talking about it being a kind of comeback moment for Sonos, Inc. Brent Thill: And I know you have made some changes in the marketing group. I am curious—maybe it is too early to see so far from our side—but what steps, in terms of the improvement in awareness build, are you starting to take, or are you hearing that is starting to resonate even stronger now? Tom Conrad: Yes. So, Colleen has been with us for about six months now, and she is putting together a marketing organization that is really aligned with our system strategy, and building the muscle of being able to tell a full-funnel brand story—from base awareness through consideration and purchase—and it is just really exciting to see her both build that team and the early work that is coming from that momentum. Brent Thill: Thanks. Operator: Star 1 on your telephone keypad. Thank you. There are no further questions. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Thank you for joining us for the V2X, Inc. First Quarter 2026 Earnings Conference Call and Webcast. Today's call is being recorded. My name is Gary, and I will be the operator for today's call. At this time, all participants have been placed in a listen-only mode. Following management's presentation, we will open the call for a Q&A session. To withdraw your question, please press star then 2 on your telephone keypad. I will now pass the call over to your host, Michael J. Smith, Vice President of Treasury, Investor Relations, and Corporate Development at V2X, Inc. Please go ahead. Michael J. Smith: Thank you. Good afternoon, everyone. Welcome to the V2X, Inc. First Quarter 2026 Earnings Conference Call. Joining us today are Jeremy C. Wensinger, President and Chief Executive Officer, and Shawn M. Mural, Senior Vice President and Chief Financial Officer. Slides for today's presentation are available on the Investor Relations section of our website at gov2x.com. Please turn to slide two. During today's presentation, management will be making forward-looking statements pursuant to the safe harbor provisions of the federal securities laws. Please review our safe harbor statements in our press release and presentation materials for a description of some of the factors that may cause actual results to differ materially from the results contemplated by these forward-looking statements. The company assumes no obligation to update its forward-looking statements. In addition, in today's remarks, we will refer to certain non-GAAP financial measures because management believes such measures are useful to investors. You can find a reconciliation of these measures to the most comparable measure calculated and presented in accordance with GAAP on our slide presentation and in our earnings release filed with the SEC, both of which are available on the Investor Relations section of our website. At this time, I would like to turn the call over to Jeremy. Jeremy C. Wensinger: Thank you, Mike, and good afternoon, everyone. We appreciate you all joining us today. Please turn to slide three. Today, we will be providing a recap of our first quarter 2026 results and sharing more on our outlook for the year. First, I want to acknowledge the talent of our team at V2X, Inc. for their continued hard work and dedication to our company and our customers' mission success. With double-digit growth in revenue and earnings, we demonstrated how consistent strategic execution paired with close alignment with national security priorities results in enhanced financial performance. The strength of our awards is further proof of the momentum underway and the continued demand for the capabilities we provide. With robust bookings of $4.1 billion in the quarter across all business areas, we achieved a record backlog of $13.8 billion. We continue to make progress on our Go Towards Tomorrow strategy, innovating across the enterprise. This strengthens our global operations and delivers differentiated outcomes for customers operating in increasingly complex environments. As we advance this innovation-forward strategy, we do so with the benefit of a healthy balance sheet and the flexibility to invest for growth. Looking forward, we are confident in our position in the market and are increasing our guidance for 2026. We now expect revenue and adjusted EBITDA to increase 9% year over year at the midpoint, and adjusted diluted EPS to increase approximately 14% at the midpoint. This is a testament to our ability to deliver enhanced value for both customers and shareholders in the year ahead. With that, let us move to slide four, which summarizes the quarter's financial and operational highlights. In the first quarter, we achieved robust top-line growth and delivered strong operational results across the organization. Revenue increased 23% year over year to $1.25 billion, marking a record year-over-year organic growth rate for V2X, Inc. Adjusted net income for the quarter was $48.1 million, representing an increase of 53% year over year. Adjusted EBITDA was $85.6 million, with margins of 6.8%. Adjusted diluted EPS was $1.53, representing a significant increase of 55% compared to the same period last year. We believe our financial performance underscores our position as a leading provider of mission capabilities. I also want to recognize some of the key contract wins and highlights we delivered in the first quarter. We secured approximately 50 contract awards representing approximately $4.1 billion in total awards, spread across all business areas. We were awarded work to modernize critical components of the F-18, as well as integrate advanced infrared countermeasures for the KC-130J. These programs showcase our role in supporting long-term platform readiness. In global training, we captured multiple awards supporting customers across North America and Europe, reflecting both the reach of our training footprint and the demand for our capabilities. In aerospace, we achieved full operational execution for T-6, which highlights our ability to transition large national priority programs. Additionally, we supported the Artemis II mission, providing training, simulation, and recovery operations—another example of how technical expertise supports complex, high-visibility national initiatives. In mission readiness, we continue to support essential logistical requirements for national security customers across multiple geographic locations. These awards demonstrate the breadth and diversity of our opportunities and our ability to execute across capabilities to support our customers' most critical missions. Moving to slide five, our recent contract success is yielding record backlog, strengthening the foundation from which we are executing. We delivered bookings in the quarter of approximately $4.1 billion, reflecting the strength of our portfolio and the demand for our diversified solutions. This drove a quarterly book-to-bill ratio of 3.2x and a trailing twelve months book-to-bill ratio of 1.5x. As a result of increased awards, total backlog for the quarter was $13.8 billion, up from $11.1 billion at the end of the fourth quarter, providing strong visibility into future revenue. With a healthy pipeline, we remain on track to achieve a 30% year-over-year increase in bid velocity in 2026. Overall, the expansion in backlog, robust pipeline, and opportunities underscore the demand for our capabilities and reinforce our confidence in the long-term growth outlook for the business. Turning now to slide six, last quarter we introduced our efforts to invest in advanced capabilities and pursue best-in-class partnerships to drive innovation across the enterprise. In the first quarter, we made solid progress executing this strategy. In the last six months, we have introduced three artificial intelligence platforms operating on our enterprise IT infrastructure, and we are seeing a promising pace of adoption across our employee base. We are also seeing significant expansion in AI-enabled productivity, which is enhancing operational efficiency in our support functions across the organization and will drive lower costs over time. At the customer level, the targeted investments we are making in innovation are creating new offerings that expand how we execute customer missions and enhance our customer value proposition. One example is aviation operations. With our early prototype AI-enabled aerospace sustainment platform, we are building this platform with Google, Tactile, and NVIDIA products. Our goal is to capture unstructured data and turn it into predictive insights and automated decision support. We expect this to improve aircraft availability, reduce delays, and streamline sustainment operations. I look forward to keeping you updated as we continue to invest in innovation to meet customers' evolving and complex requirements. With that, I will turn the call over to Shawn for a more detailed review of the financials. Shawn M. Mural: Thank you, Jeremy. Good afternoon, everyone. Please turn to slide seven. As you heard, we reported strong first quarter financial performance across all major metrics. Revenue in the first quarter increased 23% to $1.254 billion. As Jeremy mentioned, this was a record organic growth rate for the company, driven primarily by the ramp-up of training, foreign military sales, rapid prototyping, and engineering programs, as well as some discrete activities to support a national security customer. This growth also reflects continued diversification of capabilities across our business, which is visible in our customer mix, with approximately 21% of revenue in the first quarter coming from customers outside of the U.S. Army, Navy, and Air Force. This percentage is up from approximately 13% in the prior year period, reflecting expansion with national security customers. Adjusted EBITDA in the quarter was $85.6 million, increasing 28% from the same period in the prior year. Adjusted EBITDA margin was 6.8%, improving approximately 20 basis points year over year. The increase was driven by volume and mix changes. Interest expense in the first quarter was $18.1 million. Cash interest expense was $16.5 million. Net income for the quarter was $18.9 million. Adjusted net income was $48.1 million, up 53% year over year. First quarter diluted EPS was $0.60 based on 31.5 million weighted average shares. Adjusted diluted EPS in the quarter increased approximately 55% year over year to $1.53. Adjusted operating cash flow improved significantly year over year and was a $22.1 million use in the quarter, reflecting solid cash collections and our focus on enhancing quarterly cadence. Based on our progress to date, we expect our cash flow performance in 2026 to track more favorably relative to our historical profile. Please turn to slide eight. From a liquidity perspective, we are operating from a position of strength, with approximately $200 million of cash on the balance sheet and a $500 million revolver that had a zero balance at the end of the quarter. Additionally, we expect another year of solid operating cash flow generation, which we anticipate will drive our net leverage ratio to less than 2x by the end of 2026. Our ongoing progress is providing substantial flexibility and optionality to deploy capital for value creation. We have established clear criteria as we actively evaluate deploying capital to invest for growth, whether organically or through M&A. This includes investments that accelerate our innovation strategy, expand our capabilities, provide access to incremental growth, and enhance our overall margin profile. We will continue to be disciplined, focusing on growth opportunities that drive enhanced value for our customers and shareholders. Please turn to slide nine. Overall, our strategy is yielding positive results as demonstrated by our strong financial performance this quarter. We believe the combination of our global reach, proximity to mission and national security priorities, and diverse capabilities positions us well for the future. Given our momentum in the first quarter and current trends, we are increasing our guidance ranges for 2026. Revenue is now expected to be between $4.825 billion and $4.975 billion. Adjusted EBITDA is expected to be between $345 million and $360 million. Adjusted diluted earnings per share are expected to be between $5.75 and $6.15. Adjusted net cash from operations is expected to be between $160 million and $180 million. Overall, we are pleased with our performance across the business this quarter, as our team continues to bring the best of V2X, Inc. to meet our customers' critical mission requirements. Looking ahead, we believe this sets us up well for the rest of 2026. With that, I would like to turn the call back to Jeremy for some closing remarks. Jeremy C. Wensinger: Thanks, Shawn. As summarized on slide ten, our fiscal year 2026 is off to a really strong start. We continue to accelerate our position as a leading mission capability provider. Before we begin the Q&A, I would like to recognize our more than 16 thousand employees around the globe for their unwavering commitment to our company, each other, and the customers we serve. They come to work day in and day out focused on the success of our customers, and it does not go unnoticed. It is because of them that we are prepared for today and to take on the missions of tomorrow. We will now open the call for questions. Operator: We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question today is from Andre Madrid with BTIG. Please go ahead. Andre Madrid: Jeremy, Shawn, Mike, thanks for taking my question. Looking across the scope of your business, the recent announcement of troops out of Germany—5 thousand troops there—and I saw something in the queue about potential work scope change in Kuwait. What are the puts and takes that we should be looking out for across the regions right now? Jeremy C. Wensinger: It is a really good question. In Europe, the missions we support are not necessarily at risk because of the programs we operate. When I look at Europe, I look at COBRA DANE, Ascension Island, and Thule, Greenland. We are well positioned with the missions we support. Regarding Kuwait, that is going to be TBD, but I do not see us changing our posture in the Middle East—at least that is not what we are hearing. I see us in a very good position in the Middle East. When I look at the macro side, it looks like we are well positioned because of the contracts we have, the work we do, and the support we provide. Overall, we are in a really good position both in Europe and in the Middle East to support our customer long term. Shawn M. Mural: Andre, I will amplify because you mentioned we had a disclosure subsequent to the quarter relative to our Kuwait task order. On Kuwait, we have about $500 million in backlog. Our guide assumes that we continue at the levels that we performed at in the first quarter. We are continuing to see demand signals. We are working with our customer consistently on what that looks like, but we expect to be in the region and executing. Our guide and everything we are hearing assumes that we will be continuing to support our customers' missions. Andre Madrid: That is really helpful. Is the guide increase all on the back of the new work, or is that a mix of some programs that had previously been awarded and are just accelerating ahead of expectations? Jeremy C. Wensinger: It is a little bit of both. We are getting T-6 stood up, and that will contribute, and we had some announcements around jobs in the Middle East that will accelerate as well. I am proud of the team's ability to capture wins and support our customer. The back half of the year will accelerate based on those contract wins. Andre Madrid: If I could double click on T-6, is the $140 million to $160 million range still appropriate, or should we be closer to $160 million now given the raised guide? Jeremy C. Wensinger: Think a little bit higher than $160 million. The team did a wonderful job transitioning that in the first quarter, and we are assuming a slightly higher ops tempo as we work through everything. We said there would be an inherent lag to get to a full run rate. That is going. The team went IOC in Q1. We are closer to the $175 million to $180 million type of number for the year on that program. I could not be prouder of the team. Andre Madrid: That is great to hear. I appreciate all the context. Operator: The next question is from Analyst with Noble Capital. Please go ahead. Analyst: Good afternoon. Congrats on the quarter. From the Middle East to INDOPACOM—Asia revenues were pretty flat year over year. What are you expecting there for the rest of the year? Are you seeing any interest, maybe exercises—normally they are odd year—but a little more color on what is going on in the INDOPACOM region? Jeremy C. Wensinger: With the budget we are seeing, the work our team has done in INDOPACOM to help our customer understand where they might want help is paying off. Presence is everything. The fact that we have presence, understand the mission requirements, and are working shoulder to shoulder with the customer to align with their priorities is paying off. I am excited about the INDOPACOM region. Our team being there means everything. Analyst: On the back half, you said it should accelerate. Last quarter you said this year should be more of a 50/50 first half versus second half. Are you changing that, or was that something different? Shawn M. Mural: You are exactly right. We are going to be about 50/50 first half/second half from a revenue standpoint. You saw some of that play out with the strength in Q1. We are standing by what we said previously—same type of profile this year—which, as you point out, is a little different than what we have seen historically. Analyst: SG&A expenses were a little higher than expected. Is there anything unusual in there? Shawn M. Mural: We had some nonrecurring costs related to potential growth opportunities that the business undertook in the first quarter. That is why you saw a spike in SG&A. Operator: The next question is from Peter J. Arment with Baird. Please go ahead. Peter J. Arment: Good afternoon, Jeremy, Shawn, Mike. Nice results. When we see an operational tempo increase by the U.S. military, how quickly does that impact your operations? Is there much of a historical lag effect? Jeremy C. Wensinger: It is a good question. Our mission support team does a really good job reacting and responding in near real time. There is a bit of a lag, but not as much as you might think. For example, supporting the Air Force in Israel was days, not weeks or months. In INDOPACOM, the ability to get assets on the ground and deliver capability was weeks. We are very responsive and scrappy, capable of responding quickly to requirements. Peter J. Arment: A quick one for Shawn: time and materials as the contract mix was up quite a bit this quarter—is this a one-off, or will we see more of this going forward? Shawn M. Mural: In the prepared remarks, I mentioned a discrete national security customer we are supporting. That activity set is time and materials. That is what drove the change. Peter J. Arment: Will it repeat? Shawn M. Mural: Yes. As part of the increase in our guide, this activity set will continue throughout the year. Of the $150 million raise at the midpoint, about $70 million to $80 million is associated with this activity. Important to note, some of it was contemplated in our prior guide, and there has been an extension and continuation. What we have reflected in the guide is what we are under contract to perform. Jeremy C. Wensinger: Being on the right contract vehicles and having proximity is everything. You are seeing execution of the strategy we put in place. Operator: The next question is from Tobey O'Brien Sommer with Truist. Please go ahead. Tobey O'Brien Sommer: From a broad perspective, what is the duration of your book-to-bill in terms of number of years? Shawn M. Mural: Typically, our backlog converts over five to seven years. In the quarter, we booked a large award in T-6 that will run for ten years, which is longer than average, but generally it is five to seven years. Tobey O'Brien Sommer: The uptick in the quarter—how would you describe the sources of the remaining portion beyond the national security customer? Shawn M. Mural: Bridging from the prior midpoint: there is between $40 million and $50 million for additional support in the Middle East, about $80 million associated with the national security activities, and T-6 contributes another $20 million to $25 million. Those three activities bridge you to the midpoint of the new guide. Tobey O'Brien Sommer: How big were the professional fees in Q1, and do those continue into Q2? Shawn M. Mural: About $12 million in the first quarter. There will be a little bit in Q2. Tobey O'Brien Sommer: Are those growth opportunities still out there? Shawn M. Mural: We continue to evaluate both organic and inorganic investments. We are focused on growth and delivering returns and value for shareholders. We will update everyone as things progress. Tobey O'Brien Sommer: The “other” customer category was up 105% year over year. Is that primarily driven by the national security customer? Shawn M. Mural: It is mostly that national security customer. Operator: The next question is from Analyst with RBC Capital. Please go ahead. Analyst: Really nice growth in the quarter. Can you discuss how much of an award the T-6 contributed to bookings, and what the book-to-bill would have been without that award? Shawn M. Mural: T-6 contributed $3.3 billion in the quarter. Analyst: In terms of revenue visibility for the full year, you previously talked about 85% for 2026. With the strong bookings, is there upside? Shawn M. Mural: Revenue under contract we have visibility into is about 94% for 2026, reflecting the notable uptick from where we began the year. Jeremy C. Wensinger: Bookings in a quarter are interesting, but TTM is where you earn your calories. Given the episodic nature of awards, we look to sustain a 1.4x to 1.5x TTM book-to-bill for the year, which is outstanding. Analyst: On margins, with many contract startups, how should we think about long-term margin opportunity as we get out to, say, 2027? Shawn M. Mural: It is early in 2026. We will talk more in the back half of the year. Many contracts are in early startup stages; margins tend to mature over time, particularly in our aero and modernization sustainment businesses. We feel very good about being positioned to deliver margin expansion in the future. Operator: The next question is from Trevor Walsh with Citizens. Please go ahead. Trevor Walsh: Jeremy, you talked about AI opportunities with an aviation operations use case and great partnerships. Do you have line of sight on specific opportunities with customers for these AI-related efforts, and can they be duplicated? How does the pipeline look? Jeremy C. Wensinger: We partner with some of the best in the industry, and those partners are core to bids we have on the street and to what we are doing internally. Adoption of AI tools internally is delivering outstanding efficiencies. I was in Orlando for almost two months bidding a job, and the team put our relationships with Google, Amazon, and NVIDIA into that bid to create a differentiated solution for our customer. The customer will benefit. These are enduring relationships, and this is not beta work. We are delivering capability, and I believe this will be the new norm for V2X, Inc. Trevor Walsh: You called out COBRA DANE earlier. There was commentary from Space Force about including that into an RFI for modernization of ground-based radar. Does that create any risk, or will you be in that party regardless? Jeremy C. Wensinger: We are part of the Golden Dome. Being on location and supporting the customer positions us to help the government modernize. I see it as an opportunity, not a risk. Operator: The next question is from Analyst with Citi. Please go ahead. Analyst: We recently got a request for a $1.5 trillion budget. What opportunities do you see from this, and what are you most excited for? Does this outlook change with a possible blue wave? Jeremy C. Wensinger: I cannot comment on the political scenario. On the budget, we have looked at it carefully and are helping the customer understand where we can support modernization and mission needs. We are on the ground with them every day. If we modernize systems like COBRA DANE or COBRA KING, we have provided insights on where we can help. We are well positioned because modernization and sustainment are exactly what we do. Analyst: Outlook on possible M&A activity, considering your clear line of sight on leverage? Jeremy C. Wensinger: We are very disciplined in how we deploy capital, with a focus on shareholder value. We have optionality, and creating shareholder value is top of mind. We will be very disciplined going forward. Operator: The next question is from Analyst with Morgan Stanley. Please go ahead. Analyst: The administration put out an executive order on maximizing fixed-price contracts. Can you talk about the puts and takes for you? Do you see contracts being converted? Jeremy C. Wensinger: We welcome the opportunity to do fixed-price work. This market should welcome it. We can create a lot of value for our customer and save them money. We have been discussing this with the government for several years. The executive order is a great fit for the sustainment and modernization market. We will see how it manifests. Analyst: The U.S. business was up 40% year over year to over $800 million in revenue. How much of that was work on Operation Epic Fury? Shawn M. Mural: I would be guessing on the Epic Fury slice. The strength you saw was U.S.-based and largely supporting our national security customer. Year over year, we also had ramp in F-16 avionics lifecycle (ALOT) work and in Warfighter Training Readiness Support, which contributed to the strength—pretty much consistent with what we expected when we started the year. Operator: The next question is from Sebastian Rivera on for Stifel. Please go ahead. Sebastian Rivera: Congrats on the strong quarter. Can you flag some of your rapid prototyping capabilities you are most excited about, and how you envision your recent tech partnerships augmenting those capabilities on the ATSP-5? Jeremy C. Wensinger: We take concept to delivery in a very short time frame. These are programs of need, not programs of record. Our engineers turn concepts into fielded systems quickly, delivering outcomes daily. We are a very scrappy company, and I am proud of what the team delivers. If you ever want to visit Indy, it is remarkable to watch. Sebastian Rivera: On the budget request, specifically around CUAS—early days, but can you speak to your outlook for Tempest over the next one to three years? Shawn M. Mural: It would be speculation to quantify, but we think of this as a family of systems delivering unique capability, moving from concept to fielded systems very quickly. We have seen excellent growth in that part of the portfolio. We think these are franchise-type programs and capabilities we will deliver to multiple customers across theaters. We will take it one step at a time. Operator: This concludes our question and answer session. I would like to turn the conference back over to Jeremy C. Wensinger for any closing remarks. Jeremy C. Wensinger: Thank you so much for joining us. Great first quarter. We appreciate your interest in V2X, Inc. Thank you for the questions, and more importantly, thank you to all of our 16 thousand employees who care for each other every day. Operator, back to you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the GeneDx Holdings Corp. First Quarter 2026 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question at that time, you need to press star 11 on your telephone keypad. Please be reminded that this conference call is being recorded. At this time, I would like to introduce your host for today's presentation, Sabrina Dunbar of Investor Relations. Ma'am, please begin. Sabrina Dunbar: Thank you, operator, and thank you to everyone for joining us today. On the call, we have Katherine Stueland, President and Chief Executive Officer, and Kevin Feeley, Chief Financial Officer. Earlier today, GeneDx Holdings Corp. released financial results for the first quarter ended March 31, 2026. Before we begin, please take note of our cautionary statement. We may make forward-looking statements on today's call, including about our business plans, guidance, and outlook. Forward-looking statements inherently involve risks and uncertainties and only reflect our view as of today, May 4, and we are under no obligation to update. When discussing our results, we refer to non-GAAP measures that exclude certain items from reported results. Please refer to our first quarter 2026 earnings release and slides available at ir.gendx.com for definitions and reconciliations of non-GAAP measures and additional information regarding our results, including a discussion of factors that could cause actual results to materially differ from forward-looking statements. With that, I will now turn the call over to Katherine. Katherine Stueland: Thanks, Sabrina, and good afternoon, everyone. In the first quarter, GeneDx Holdings Corp. continued our mission of enabling everyone to live their healthiest life through genomics, leading the shift from diagnosing genetic conditions using multi-gene panels to the most comprehensive genetic tests available: exome and genome. In Q1, test result volume grew 34% year-over-year, demonstrating robust demand in our foundational markets and indicating positive early momentum in our expansion markets. Our competitive advantage continues to set us apart from others in the market. The combined strength of our large, diverse data set, GeneDx Infinity, our team of genetics experts, and our advanced technology underpins products that cement our leadership position, as evidenced by a loyal and growing customer base that drove the 34% volume growth in Q1. While volume growth outpaced our expectations, total revenue was $12 million lower than expected. We conducted a thorough, channel-by-channel business review to diagnose what happened, and we learned it was driven by two factors. First, approximately $5.5 million was due to a lower-than-expected blended average reimbursement rate for exome and genome. Second, approximately $6.5 million was due to softer-than-expected performance from our non-core business lines. As a result, we are updating our outlook for the year and now expect total revenues to be in the range of $475 million to $490 million, with strong continued exome and genome volume growth of at least 30% and gross margins of approximately 70%. We are also committed to returning to profitability on an adjusted basis for the full year and expect profitability to grow significantly into 2027 and beyond as we continue to lead and shape this large and ever-expanding market. Now I want to walk you through the Q1 revenue dynamics in more detail. Starting with the blended average reimbursement rate, ARR was primarily impacted by product mix with no structural changes in pricing. Through our business review, we identified clear opportunities to improve reimbursement dynamics spanning commercial execution and revenue cycle management, and our team has already taken action. Moving to our non-core business lines, which include Fabric and our biopharma business, it has been one year since we closed the Fabric Genomics acquisition, and it has become increasingly clear that the interpretation-as-a-service product is best suited for international markets. We are fully integrating the Fabric team, technology, and services into the GeneDx Holdings Corp. brand, and we are focusing our resources to support international growth and key domestic drivers. We are lowering our expectations for revenue contribution in 2026 accordingly. On the biopharma and data business, we saw positive underlying momentum but fell short of delivering Q1 revenue due to a longer-than-anticipated sales cycle. As we continue to build demand for our data asset and engage with biopharma companies large and small, our conviction around this business continues to strengthen. These partnerships can offer meaningful long-term value creation for patients and for GeneDx Holdings Corp., and the value proposition will grow alongside our clinical testing business. With more than 2.5 million patients, more than 1 million exomes and genomes, and more than 8 million matched phenotypic profiles, our contactable database stands apart. We have right-sized revenue contribution to the 2026 guide based on high-probability deals in our pipeline, positioning this business as upside as it continues to ramp. With our guidance now reflecting these shifts, and with the strong performance thus far in Q2, we are confident in the path forward with a massive focus on our core diagnostic business as the primary driver. Let us walk through each of the customer segments to give you more color. Starting with geneticists, as we continue to lead the market transition from multi-gene panels to exome and genome, geneticists are leaning into genome. This is an exciting development. We chose the ticker symbol WGS because we have always believed that the market would move to genome over time, but the speed of this transition in Q1 outpaced our expectations. We made the strategic decision to begin capturing share. Importantly, the experts are the clinicians who are interested in genomes. Most patients in the outpatient setting remain best served by exome testing, given that it covers approximately 85% of known disease-causing mutations. GeneDx Holdings Corp. is best positioned to lead the genome future by leveraging our scale, brand, clinician relationships, first-mover advantage, and vast dataset, GeneDx Infinity. Infinity enables us to interpret both coding and noncoding regions of the genome with speed and precision. As genome coverage matures, access improves, and volumes scale, the flywheel effect of this additional data will compound our competitive advantage across our portfolio. Informed by early data, we launched a Reflex offering in February to balance clinical demand with a relatively higher gross margin product. Customer feedback has been positive, and early adoption has reinforced that we can actively manage this market transition. Looking at pediatric specialists, we continue to deliver steady growth supported by exome utilization, high clinician retention, and robust same-store sales in the quarter. However, the blended exome ARR came in lower than expected based on the mix of tests submitted with parental comparator samples, a shift that we have already mobilized to correct with customer experience features, sales messaging, and incentives. We expect a return to longstanding exome reimbursement norms in the near future. In the NICU, we are seeing good progress driven by rapid and ultra-rapid genomes. It has been just over a year since the first study data was published demonstrating how a programmatic approach to testing can ensure that every NICU baby who needs a genome receives one. Genome ARR and gross margins are desirable in the inpatient setting, and with a robust set of institutions already ordering from us, our focus remains on increasing utilization as accounts mature. We have expanded the sales team to accelerate this ramp and plan to leverage our dominant market position to fuel continued growth. General pediatrics is our largest long-term opportunity and our earliest-stage market. We are beginning to see encouraging signals with early exome orders coming in as our sales reps get accounts up and running. It typically takes several touchpoints and meetings before the first order is placed, and we are seeing that progression play out. While volumes are still modest, our experience is reinforcing that education, awareness, and service are all critical in this market. Our tailored customer experience for non-expert clinicians remains on track, and upcoming workflow enhancements, including streamlined bundled ordering and improved post-test guidance, are all designed to reduce friction and accelerate uptake in the second half of the year. And finally, prenatal. Demand has been building steadily in the new market, and we are seeing good traction with maternal-fetal medicine physicians. Importantly, genome adoption appears additive to our small but existing exome volume in this channel. Stepping back, our core testing business is well positioned to translate demand momentum into profitable growth. We have line of sight to at least 30% volume growth at approximately 70% gross margins on the exome and genome portfolio, and we are committed to a return to profitability on the balance of the year. We have taken the decisive step of cutting $25 million of OpEx for the year, and we are putting our capital and team to work on the three biggest levers for the business: number one, growing utilization of exome and genome; number two, optimizing unit economics through both ARR and COGS; and number three, delivering the leading products at unmatched scale. Aligned around these three goals, we are moving forward with more clarity and operating rigor than ever before. With that, I will pass it over to Kevin. Thanks. Kevin Feeley: In the first quarter, we delivered $102.3 million of total revenue, including $90.6 million of exome and genome revenue, up 27%, and test result volume of 27,488 tests, up 34%. The blended average reimbursement rate was approximately $3,300. Adjusted gross margin was 69%, and we reported an adjusted net loss of $8.2 million. As Katherine outlined, two factors drove the quarter: mix dynamics resulting in a lower-than-expected blended average reimbursement rate and softer non-core business line performance. First, the blended ARR came in approximately $200 below expectations. I want to be very clear: on a like-for-like basis, ARR by product is relatively unchanged. There have been no meaningful contracted price changes, nor any material variation in coverage or collection rates across each respective channel. Instead, the lower ARR is primarily a result of product mix shifts within the exome and genome portfolio. The impact of mix is important, so let me walk you through it. Starting with payers, roughly 85% of volume is insurance-based outpatient services, and 15% is institutional pay. Specific to outpatient, genome was approximately 40% of volume in the first quarter, which is roughly double from a year ago. We expect that mix shift to continue, but at a far more moderate pace as we manage the transition. Both exome and genome are good for patients and our business, but in terms of ARR in outpatient, exome is closer to a blended average of $4,000 per test after all denials, and we are reimbursed more for cases with parental comparators than cases without them. In contrast, an outpatient genome blended ARR today is about half that of exome due to the relative maturity of payer coverage. Each has a very wide array of medical necessity criteria across payers. Policies are not all created equal, and policy coverage does not always equal broad access nor guarantee payment. Over time, a strengthening coverage landscape will help close the gap between products. Continued investment in automation and AI creates meaningful opportunity to improve collection rates across both as we scale. Our team continues to make the case for expanded coverage with payers, leveraging clinical and health economic evidence like the recent SAVE Kids study to open access for both exome and genome testing, which found that GeneDx Holdings Corp. exome and genome leads to cost savings of up to $80,000 in the first year after testing for children with neurodevelopmental disorders. That tells us testing should be covered much more broadly than it is today to deliver cost efficiencies to the U.S. healthcare system. We are in the early days of making the case, and across state Medicaid programs, there are now 38 states covering either test. Go back just a few years, there were none. Additions have been coming almost quarterly; it would be reasonable to expect momentum to continue. But it will take time. In the meantime, we will continue to accept samples in states without coverage, which is an intentional margin investment in market share and the evidence necessary to influence policymakers. If more states adopt coverage, orders that are zeros today in our blended ARR will become something more. Our strategy remains intentionally driving each market first from lower-margin panels to exome, and eventually towards genome for all. While genome reimbursement is currently constrained by coverage, we expect rates to strengthen over time as clinician demand grows, clinical and economic evidence builds, advocacy efforts advance, and the need for biopharma to identify patients drives payer modernization. Genome COGS are also higher than exome’s, specifically due to higher reagent input costs. Unprecedented? We can assume the cost curve here will continue to come down as utilization and scale grow. Not to be overlooked, approximately half of all tests we resulted in the first quarter were single-gene and multi-gene panels. Conversion has always been a cornerstone of our strategy. It remains both a big growth opportunity ahead and evidence that our market-leading exome will be durable for years to come. We have also taken steps to more actively manage the longer-term transition to genome, in particular with our Reflex product enabling more patient access to this innovative testing while maintaining higher unit economics. Parental sample mix also impacted the blended ARR this quarter by 200 basis points across the combined portfolio. We view this as a function of an opportunity for stronger field force training and execution, as well as new clinician education rather than any structural shift, and we are addressing it directly. Moving forward, we expect the blended ARR to stabilize and improve modestly over the balance of the year. To reiterate, there have been no changes to pricing, and a balanced payer coverage policy has expanded and is expected to continue to expand over the coming quarters. The lower realized rate in the first quarter was driven by product mix shifts within the portfolio, many of which are transitory and should have been better anticipated. We have invested significantly over the past several weeks to enhance forecasting precision, including bringing in external perspective to rigorously stress test our updated market assumptions and bottoms-up plan. This work reinforced our conviction in the long-term opportunity while sharpening our near-term expectations. With that added rigor and better visibility into each channel, the business is more predictable today than it was at the start of the year. Moving to non-core business lines where revenue fell $6.5 million short: in Fabric, the $2.5 million miss reflected legacy positioning in its go-to-market approach. The GAAP financials include a non-cash impairment charge of approximately $31.3 million to write down goodwill and certain intangible assets. In biopharma and data, a $2 million miss was timing-related, reflecting longer sales cycles. We are treating this business as line of sight for the purposes of guidance rather than relying on it. In multi-gene panels, a $2 million miss was caused by overestimating the timing of organic CMA uptake in the pediatric market prior to our sales force efforts ramping. This reflects a forecasting correction and should not be read as a demand signal. So we are taking four actions to get the year back on track. First, improving blended ARR through tighter channel management. Second, accelerating market access and revenue cycle investments. Third, optimizing cost per test for genome as we scale. And fourth, enhancing forecasting precision. Finally, we have already reduced and reallocated approximately $25 million in planned spend to align investments with current performance and remain committed to full-year 2026 adjusted profitability. This is not a cut out of our current run-rate spend, but rather a reduction in future planned increases to match our updated revenue timing. The reductions are primarily a recalibration of our hiring and marketing timing, essentially slowing out-year non-direct expenses while protecting investments in our proven channels and more line-of-sight expansion markets. Now on to guidance. We are reducing full-year revenue guidance by 12%, or $65 million, at the midpoint. The bridge on that is $36 million from the effects of blended ARR, $11 million from lower volume contribution across new expansion markets, and $18 million from non-core business lines split evenly between Fabric, biopharma, and other testing. With that, we expect full-year 2026 total revenues of $475 million to $490 million, exome and genome volume growth of at least 30%, translating to approximately 126,400 tests, exome and genome revenue growth of at least 20%, adjusted gross margin of approximately 70%, and profitability on an adjusted basis. In the second quarter of 2026, we expect total revenues of $110 million to $112 million, exome and genome volume of approximately 30,000 tests, exome and genome revenue of approximately $100 million, adjusted gross margin of approximately 70%, and an adjusted net loss of approximately $5 million in the second quarter as we move back to profitable in the third quarter. This is a framework we can execute with confidence. Katherine? Back to you. Katherine Stueland: Thank you, Kevin. Just twenty years ago, it cost millions of dollars and multiple weeks to sequence and interpret a genome. Today, GeneDx Holdings Corp. has scaled the promise of this technology like no one else in our space, with turnarounds in as little as 48 hours. And we continue to innovate. Three hundred million people are living with a rare disease globally, and we have never been more confident about our ability to drive profitable growth in service of these patients and shareholders. I recognize that resetting expectations is difficult, but it also gives us all great clarity and conviction in our ability to deliver on our commitment. We are grateful to our shareholders for the support and patience as we continue to deliver on a bold mission. Leading a generational shift in medicine is no small undertaking. It requires taking some big swings, learning quickly, and moving forward with urgency to satisfy the growing number of patients who need our services. You have my assurance that we have recalibrated our assumptions, taken decisive action, and positioned the company for long-term sustainable and profitable growth. Thank you. We will now open the call for questions. Operator: Thank you. Ladies and gentlemen, if you have a question or comment at this time, please press 11 on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press 11 again. In an effort to facilitate as many participants as possible, we ask that you please limit yourself to two questions. If you have additional questions, you may reenter the queue again by pressing 11. Please stand by while we compile the Q&A roster. Our first question or comment comes from the line of Mark Massaro from BTIG. Your line is open. Mark Massaro: Hey, guys. Thank you. There is a lot to digest here. I guess the first question I want to ask is on the Q2 guidance, because clearly, when I look at it, it does not look like that is fully de-risked either. Can you give me a sense for why you are guiding to approximately 30,000 in Q2? And can you give us a sense for what type of traction you are picking up in the NICU? Because I know that is an area where I think you noted that you missed in 2025, and I just wanted to get a sense for how you are doing here in 2026. Katherine Stueland: Yes, I will start. First of all, what we are seeing in the business today is strong momentum. As we arrived at a Q2 guide, it is coming from a knowing place reflective of the momentum that we are seeing in terms of volumes coming in for the quarter and overall the business behaving in line with the way that we want it to. I would say we are operating from a place of strength and clarity for that Q2 guide. On NICU, we have continued to see, with our expanded sales force, really good continued traction there. We had a lot of ambition last year, and I would say we right-sized that in the guide. We are feeling really good about line of sight in terms of momentum in the NICU. Mark Massaro: Okay. Can you give us a sense for if any part of your guidance has been a function of the end markets being, in any of the submarkets, a little different than you had expected? I also wanted to ask about competitive dynamics. Are you seeing any changes in the field? You did a good job, I think, on volumes in Q1, but you are lowering your volume uptake. I am wondering to what extent that might have an impact from competition. Katherine Stueland: Sure. First, as we look at the channels that we are in, this is the first time that we have four sales teams going after different clinicians, and there is a different product for each of those. So we are learning a lot. I think, reassuringly, we learned we are in the right channels. We have a good business model. As we really dug into our business review, we are not pivoting out of any of those channels because we have the right overall strategy. The tweaks that we need to make—we talked a bit about the genome dynamic for the expert geneticist; we talked about the pediatric neurologist and how we get them ordering more parental comparators—are areas that we have already actioned through sales messaging and incentives. We have great confidence that is something within our control. Similar goes for the general pediatrics segment. We are pleased to be in that channel. We are learning that it takes multiple touchpoints and meetings to get an account activated and to start seeing orders come through, but we are seeing early signs of exome. I would say this is more reassuring in terms of being in the right market with the right products. We are tweaking our sales strategy and commercial strategy to make sure we are really optimizing the way that we are showing up in the markets. I believe that we have in hand the right course correction to make sure that we can realize the guide and continue to execute on a really clear and achievable plan—we want to go out there and crush it as the leader. Operator: Our next question or comment comes from the line of David Westenberg from Piper Sandler. Your line is now open. David Westenberg: I just wanted to talk about some of the commercial footprint here and maybe some of the potential productivity per rep that we would expect to see in the back half of the year. Can you talk about adding those additional reps, how we should think about productivity, and then whether doubling or tripling the sales force had any issues impacting other parts of the business, like small panels or Fabric? Katherine Stueland: As we look at the sales force, a couple of things. There are four sales teams, so we have 75 people selling to specialists—about 25 of them new and added—and we are just starting to see them move out of their early stage and starting to get into greater productivity. In general pediatrics, there are 50 reps; they are still in their early days. That is a new channel where we do not yet have a sense of exactly what full productivity is going to look like—whether it will mirror what we see in the specialist sector or be a little bit different. We are seeing that it takes several meetings to get accounts activated, so more to come as we spend more time in the field with new reps there. There are 10 reps in the NICU and 10 reps in the prenatal space, and they are all still in the early days. One of the important factors that we are going to keep an eye on is sales force productivity and how that is changing week to week, month to month, quarter to quarter. We are in the early stages with a lot of these reps, and that should give us a lot of confidence in terms of our ability to continue to generate more volume and more healthy volume across these different sales channels. Kevin Feeley: And, Dave, that was the grounding philosophy of the guide, which is to build it from the core business with tighter assumptions and less reliance on areas where visibility is limited, including what those new reps in new channels might translate to in the back half of the year. It is a more disciplined framework than the one with which we started the year. At this point, it comes down to execution, and we will learn and iterate as we move forward. David Westenberg: Got it. And I will just ask one follow-up on the genome mix. I appreciate the color around 40% and the ASP being around $2,000. Is there any possibility of seeing a big coverage decision in that area? Is there blocking and tackling that you can do in the near term to get that ASP up? As we look out a couple years from now, can that ASP become around the same ASP as exome? Kevin Feeley: Yes, we think it can get towards parity with exome. There are a number of factors there, including improving commercial coverage, which today is far more expansive for exome than genome. There is also, as you alluded to, a lot of blocking and tackling with respect to ensuring that as we submit claims, they adhere to what is a wide array of medical necessity and documentation requirements. We can use better process, technology, and automation to tighten up the revenue cycle, reduce denials, and improve collection rates, all while expanding policy coverage for genome. We have run this playbook before; we are just years behind exome in driving commercial payers and Medicaid towards improving coverage similar to exome. We have seen it be done; we are confident we can get it done. But there is a lot of work to do to march genome ARR up towards parity with exome. It is going to take a number of quarters, and we have built that level of expectation into the blended ARR and the guide. Katherine Stueland: I would just add: control what you can control, and the COGS side of the house is an area where we think AI and automation give us an important ability to continue to reduce our cost of goods on the genome product. That will be a huge factor for us internally, because we have done that masterfully on the exome side of things, and we will rinse and repeat that on the genome side. Operator: Our next question or comment comes from the line of Daniel Brennan from TD Cowen. Mr. Brennan, your line is open. Daniel Brennan: Great, thank you. Maybe just the first one on the $11 million cut on the growth expansion market and the cut to volumes on exome/genome to 30%. Walk through the thinking there. Is that just de-risking versus your original expectations? Kevin Feeley: Yes, Dan. We have gone through an extensive exercise through the core business—really channel by channel, bottoms-up by assumptions—and tightened a number of product mix assumptions, not just exome versus genome, but how much to expect with respect to parent comparators. We recently introduced a Reflex product, which will play an important part in the geneticist channel. The outlook is representative of a lot of work to tear down and rebuild assumptions at a more granular level by channel. In doing so, the overarching philosophy was to rely on things that are far more line of sight rather than having to pull out any heroics in improving any of those metrics or over-reliance in the expansion markets. For those new markets, namely prenatal and general pediatricians, I have taken those down some, with the balance coming from the core foundational markets, to ensure we get back to an old habit of setting expectations that we can deliver upon. Daniel Brennan: Thank you for that. And then one more back to price. As this transition occurs, is the goal just to get the genome price back to parity with the exome—taking a fully reimbursed exome and now swapping in this lower-priced genome trying to get back up there? Or is there a future benefit long term for the genome? And then, Kevin, any way you can give us color as we think about the back half of the year pricing—what is baked in and any high-level math on the genome/exome split we can think about? Katherine Stueland: I will kick it off, Dan. We have good gross margins on the genome product, and the transition and the demand for genome are really good things. We are excited about the opportunity to continue to improve the unit economics on the genome product. We have introduced this Reflex test that enables us to satisfy the need of a geneticist for more content while also having the benefit of better unit economics for us. On top of that, the whole-genome opportunity continues to help us generate more and more data, which continues to build our competitive moat, which is proving to be effective. The demand is part of the way that we are measuring our effectiveness in terms of the competitive lead. We do want to see a future where we are running genomes for everyone. But the reality is, for a lot of clinicians like general pediatricians and many pediatric neurologists, exome is going to do the job because it will satisfy information for about 85% of the diseases that we can diagnose off of the genome. So it is a yes-and: we want to usher in this era we have been thinking about for a long time, we have to continue to improve the unit economics, and we have a portfolio of products that help ensure we can provide the right clinical information and insight for the right patient and the right customer channel at the right time. Operator: Thank you. Our next question or comment comes from the line of William Bonello from Craig-Hallum. Mr. Bonello, your line is now open. William Bonello: Thanks a lot. I want to push a little bit more on some of these pricing or ASP dynamics. On the geneticist side, I want to confirm that geneticists were just ordering a straight-up genome, not the Reflex product. I think maybe you just introduced that. Going forward, are you going to offer standalone genome, or do you have to order the Reflex? If Reflex is ordered, can you bill for an exome with payers where you are not reimbursed for a genome? That would be helpful to know. And then explain more about this shift in the parental mix and why you would be seeing suddenly fewer trios and how that is happening. Katherine Stueland: On the parental comparator side of things, which is mainly in the pediatric neurology space, the good news is it is not a structural problem. It is an execution problem, and we have already implemented changes in the sales force, messaging, and incentives to address it. When you go from one sales force to four sales forces, you are going to get some things right and some wrong. We were thrilled to diagnose this quickly and implement course correction immediately. On what we are selling to geneticists: if a geneticist wants a genome, we are selling them a genome, full stop. We are also offering them the additional Reflex product. Because our turnaround times are so fast on exome and genome, we can turn around both tests quickly. To the super-savvy geneticist who knows for most patients an exome will do it, if they want to Reflex to a genome, then they can. Kevin Feeley: Think of the Reflex as a tool to manage the transition in the geneticist office only. From a margin perspective, do not get confused: genome is still a good margin test for our business, and it is a great test for patients. Exome has a higher gross margin than genome, and the Reflex product slots in between in terms of its gross margin profile. William Bonello: Sure. Okay. But if I understand your answer, while there is less coverage for genome than for exome, you are going to have to live through a phase as the market continues to shift to genome where you are getting more zero pays. Is that basically what I am hearing? Kevin Feeley: There is more coverage for exome today than genome. Exome has a higher average reimbursement rate today. Now we have to work on ensuring that access for genome expands in commercial policy and that we tighten the revenue cycle to get the reimbursement rate between the two closer to parity. The Reflex test will have a reimbursement rate closer to exome. Operator: Our next question or comment comes from the line of Tycho Peterson from Jefferies. Mr. Peterson, your line is now open. Tycho Peterson: Thanks. Kevin, I wanted to understand the linearity here. There is a bit of déjà vu from a year ago—different issues—but you guided in late February, you were out in March on the conference circuit. When did you see the impact from the genome mix shift in the quarter? Maybe start with that. And then get us more comfortable that you have better visibility going forward. Kevin Feeley: We were glad to see volume come in above expectations. It came in slightly ahead of expectations this first quarter; a quarter ago it was 100 tests less versus the consensus number. The demand and volume number ended up exactly where we expected. That demand strength informed most of the quarter. As the quarter wrapped up, trends and mix in particular began to crystallize at the end of March. That triggered extensive work to go back into each and every channel and reset assumptions. Those reset assumptions are baked into the Q2 guide and full-year guide we just put out. The volume flows for incoming orders were strong and continued strong through the end of April. But the mix dynamic, we were slow to pick up on in our models, and forecasting did not anticipate those as well as it should have. Tycho Peterson: And the 30% volume guide—can you clarify specific assumptions now for foundational growth versus new market growth? What is the key driver behind the lower foundational guide? Kevin Feeley: Effectively, the core foundational markets plus the NICU make up the overwhelming portion of the guide, leaving very little with respect to the expansion markets beyond that. We want to see those markets begin to develop before we bake them into forward-looking projections. Tycho Peterson: And the $25 million on OpEx—get us comfortable that does not have a revenue impact. And why are you no longer breaking out SG&A versus R&D? We are getting a little bit less visibility here as you are leaning into OpEx. Kevin Feeley: SG&A is broken out from R&D. What we did was combine the G&A and Sales & Marketing lines into SG&A—we think that is in line with our peers. The $25 million in cuts, as we said on the call, are more a calibration of longer-term investments we were making—slowing some anticipated hiring plans and longer-term R&D initiatives, indirect marketing spend, and some G&A build in anticipation of future growth. We are confident that the core areas of investment remain untouched and we are recalibrating some dollars to ensure that we are opening up more access, improving reimbursement rates, and driving volume and growth. Investing in commercial expansion, AI, and automation to reduce COGS—we are confident that despite the trimmed outlook in future expenditures, there is enough OpEx and capex to fund the growth plan we have outlined. Katherine Stueland: I would just add, we have tracked every dollar and every effort to one of three areas of focus: one, utilization of exome and genome; two, improving unit economics; and three, making sure we have the industry’s leading products and services. Everything we continue to invest in is tied to one of those three levers. We are confident we are not cutting into our growth strategy; we are trimming where we can to get the team fully focused on the biggest levers for the business. Operator: Our next question or comment comes from the line of Keith Hinton from Freedom Capital Markets. Mr. Hinton, your line is now open. Keith Hinton: Thank you. I want to push on the volume side of things a little bit, since ASP has been pretty well covered. Volume came in a little bit above expectations for the first quarter, and yet you took the volume guide down. Help us better understand the drivers there. And related to this, there was a large genomics player that recently announced they are launching into non-oncology rare diseases with a long-read option. Any comment on the competitive dynamics there—was that a driver of the downgraded guidance at all? And where are you in getting a long-read or medium-read option into the marketplace? Katherine Stueland: Thanks, Keith. On the competitive dynamics, we have not seen any change from our point of view—nothing new happening out there. As we think about continuing to lead the way with whole-genome sequencing, long-read for WGS is without a doubt an important element we are working on. It will enable us to continue to drive our dataset to be even more enriched on the genome side. We have been able to offer it to clients in a research setting, and we will have it available at some point in a commercially available product as well. Kevin Feeley: We set the initial guide and it proved to be too aggressive, primarily with respect to mix shift, and we want to make sure we do not get that wrong moving forward, in particular with contribution from the new markets. We believe we corrected that. We understand we need to rebuild credibility, and the way we expect to do that is by setting a guide we believe we can execute on and deliver against. This guide today is underwritten with more line of sight, relying only on those more mature foundational markets, leaving volume contribution from the new channels as upside as they come. Keith Hinton: Great. And a quick clarification on the ASP side. The reason why the average genome is lower is purely because of higher denial rates, right? There is not a situation where genome, when paid, is meaningfully lower than exome. Correct? Kevin Feeley: I would refer back to the clinical lab fee schedule, which is usually the basis for every contract negotiation. Without sharing proprietary contracted rates, exome has a higher contracted rate today than genome, and exome is in more commercial policy coverage than genome today. So it is both price and coverage, and then the overall denial rate also plays in. We have room to improve both the contracted status as well as overall collections and denial rates to get those two ARRs over time, we think, towards parity. Operator: Our next question or comment comes from the line of Kyle Mikson from Canaccord Genuity. Your line is now open. Kyle Mikson: Hey, guys. Thanks for the questions. I want to go to the non-core revenue—it was a $4.5 million headwind on the non-core excluding other tests, so Fabric and biopharma. On the Fabric side, I think the deal milestone was $12 million in revenue for this year. You are clearly going to be well below that. You have the impairment too, which is disappointing. What does the refocus on international really mean for that business, as well as powering some of these domestic competitive tests that we know about? Then on biopharma, there is momentum but longer-than-anticipated sales cycles—that would imply you will get that revenue back one day. How should we think about the health of that segment? Katherine Stueland: Starting with Fabric, the technology is valuable. What changed for us was the durability of the domestic commercial opportunity. As we have been building out—and as we always intended—Fabric’s interpretation-as-a-service is a really attractive way for us to cost-effectively drive international volumes. We have been integrating the team and the technology to support that. We wanted to right-size our expectations for this year and make sure we get it right. On the biopharma side, it remains an important opportunity, not just from a patient perspective, but it fundamentally brings us more testing and gives us the requisite next steps that every diagnosed patient needs to figure out the healthiest course of action. The selling cycle is longer. We are also taking a deeper look—the data is even more robust than what we originally thought. We talked about the Komodo deal earlier this year; that is giving us really good insight into the longitudinal nature of the view that is interesting to biopharma. With new products like that out there, we are learning a lot about the selling cycle. Yes, it takes longer, but some of the deals that we were counting on at the end of Q1 we hope we will realize later this year; if not, we are really ramping up the pipeline with a sales team that we continue to expand. Kyle Mikson: Thanks, Katherine. On pricing, it seems in the guidance we can get to maybe mid-$3,000 ARR by the end of this year. Could you get to maybe the high $3,000 by 2027? And I also want to confirm that the 2026 guidance now includes Medi-Cal. Kevin Feeley: The guide is at 20% exome/genome revenue growth and 30% volume growth; you can back into what that ARR is, and it is just a very slight step up above Q1’s approximately $3,300. We want to make sure we do not get too far ahead of our skis there, so I am not going to go above the guide. For 2027, that is theoretical. We certainly believe there is room to improve blocking and tackling on the revenue cycle to get paid more often. It will become harder and harder for payers to ignore the clinical and economic evidence in support of opening up policy for genome. Those things, along with greater clinician demand, should lead to an improved ARR structure for whole genome in 2027 and beyond. Operator: Next question or comment comes from the line of Subhalaxmi Nambi from Guggenheim. Your line is now open. Subhalaxmi Nambi: Hey, guys. Thank you for taking my question. Given the granular details, what are you assuming whole-genome versus whole-exome mix is going to be this year in the current guide? It used to be 70/30, right? Kevin Feeley: In the prepared remarks, we said genome is 40% of the outpatient volume. When you load in the NICU, genome is about 45% of all exome/genome volume in the first quarter. We do not anticipate giving that split for the guide, but I would point you to the volume and inferred ARR in that guide. What underpins that is different assumptions channel by channel. Subhalaxmi Nambi: Thank you for that, Kevin. Regarding your current market penetration, you include a slide where you have penetration by market. There is a bit of investor confusion about this analysis. For example, if a patient sees a pediatric specialist and a geneticist after being referred, that is still one patient and only one test. Does your analysis count this as one test in each specialty area, meaning in both pediatrics and geneticist market, or only once based on the clinician that actually orders the one test? Katherine Stueland: As we zoom out, remember, the diagnostic odyssey typically entails a patient seeing several different clinicians over a five-year period. They start with the general pediatrician, move to a specialist, and then get to a geneticist. As we think about penetration, we are zeroing in on where the patients are landing and getting diagnosed. We are focusing on the diagnosis day as the anchoring factor. Operator: Next question or comment comes from the line of Brandon Couillard from Wells Fargo. Mr. Couillard, your line is open. Brandon Couillard: Thanks. Kevin, a few clarifications. Did you say that the spike in the genome/exome mix was not evident until late in the quarter? And are you assuming that mix is stable in future periods or comes down? I want to understand directionally what is embedded in the guide. Kevin Feeley: The bottom line is the signals we had internally were not showing in real time the extent of those shifts and the economic impact. Those did not really become clear until late in the quarter, and then more so after we dug in channel by channel through a fairly extensive review. The go-forward expectation is now reset clinician by clinician and channel by channel, informed by experience at the end of the quarter as well as through April. We think we have proper expectations now at that granular level by channel and enough of a trend on which to make a call. Brandon Couillard: I believe you said the $25 million of OpEx savings was not in the current run rate, so we should not necessarily expect it to decline sequentially in Q2 or Q3. Is that correct? Kevin Feeley: Yes, that is correct. I think Q1 is fairly representative, on an annualized basis, of where we might end up. There will be some puts and takes and some refocusing to ensure we are spending every dollar on those with a shorter payback and the most impactful ROI. The $25 million effectively came out of what was planned expenditures for the full year. Operator: Showing no additional questions in the queue at this time. Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day. Speakers, standby.
Operator: Hello, and welcome to Travere Therapeutics, Inc.’s first quarter 2026 financial results conference call. Today’s call is being recorded. At this time, I would like to turn the conference call over to Nivi Nehra, Vice President, Corporate Communications and Investor Relations. Please go ahead, Nivi. Nivi Nehra: Thank you, Operator. Good afternoon, and welcome to Travere Therapeutics, Inc.’s first quarter 2026 financial results and corporate update call. Thank you all for joining. Today’s call will be led by Eric M. Dube, our President and Chief Executive Officer. Eric will be joined in the prepared remarks by Jula Inrig, our Chief Medical Officer, Peter Heerma, our Chief Commercial Officer, and Christopher Cline, our Chief Financial Officer. William E. Rote, our Chief Research Officer, will join us for the Q&A. Before we begin, I would like to remind everyone that statements made during this call regarding matters that are not historical facts are forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of performance. They involve known and unknown risks, uncertainties, and assumptions that may cause actual results, performance, and achievements to differ materially from those expressed or implied by the statements. Please see the forward-looking statement disclaimer on the company’s press release issued earlier today, as well as the Risk Factors section in our Forms 10-Q and 10-K filed with the SEC. In addition, any forward-looking statements represent our views only as of the date such statements are made, May 4, 2026, and Travere Therapeutics, Inc. specifically disclaims any obligation to update such statements to reflect future information, events, or circumstances. With that, let me now turn the call over to Eric. Eric? Eric M. Dube: Thank you, Nivi. Good afternoon, and thank you for joining us. This has been a tremendous start to the year for Travere Therapeutics, Inc. We have made significant progress across our three strategic priorities. We achieved the first FDA approval in FSGS, we reported a new high in demand for FILSPARI in IgA nephropathy, and we dosed the first new patient in the Phase III HARMONY study of pegtibatinase following restart of enrollment. April 13 marked a pivotal point for the FSGS community and Travere Therapeutics, Inc. Achieving the first full FDA approval for FILSPARI in FSGS established it as the first and only approved medicine for this rare and devastating kidney condition. With the potential to help more than 30,000 people living with FSGS without nephrotic syndrome, this approval is a significant indication expansion for FILSPARI and meaningfully increases the opportunity ahead for us. The first quarter also marked another period of exceptional commercial performance in IgA nephropathy. We delivered another quarter of record new patient start forms. As we look ahead, we are already building upon our experience gained from the successful launch of FILSPARI in IgA nephropathy and are executing a strong launch in FSGS. Across IgA nephropathy and FSGS, we are now estimating that more than 100,000 patients in the U.S. could be eligible for FILSPARI. Together, we believe this represents a $3 billion potential peak sales opportunity for FILSPARI, reinforcing a compelling long-term growth trajectory for the company. We are also advancing our pipeline to support further sustainable growth. We recently dosed the first new patient in our pivotal Phase III HARMONY study evaluating pegtibatinase in classical homocystinuria following the restart of enrollment. Importantly, achieving this milestone puts us on track to deliver top-line results in 2027. Based on the data we have generated to date, we believe this program has the potential to become the first disease-modifying therapy for the HCU community. We expect there are approximately 7,000 to 10,000 people living with HCU globally who would be addressable for pegtibatinase. I am incredibly proud of our team’s accomplishments and look forward to accelerating Travere Therapeutics, Inc.’s growth as we expand our reach and serve more patients across the rare disease community. With that, I will turn it over to Jula for a medical update. Jula? Jula Inrig: Thank you, Eric. I am very excited to have the first ever approved medicine for the FSGS community now available for patients. As a reminder, FILSPARI was approved to reduce proteinuria in adults and children eight years and older with FSGS without nephrotic syndrome. I would like to take a moment to highlight how nephrotic syndrome is defined in clinical practice and what it means in the context of which patients may be eligible for FILSPARI. Nephrotic syndrome is a clinical diagnosis and is typically defined by the presence of all three of the following criteria: high levels of proteinuria greater than 3.5 grams per day, low serum albumin levels of less than 3.0 grams per deciliter, and the presence of edema. If a patient is missing any one of these criteria, they are not considered to have active nephrotic syndrome. This is different than nephrotic-range proteinuria, which is typically greater than 3.5 grams per day. For example, a patient with 4 grams of proteinuria and low serum albumin, but no edema, will be eligible for FILSPARI. Importantly, nephrotic syndrome is not a chronic state. If a patient with FSGS presents without nephrotic syndrome, which represents the majority of the FSGS population spanning all types of FSGS, they are immediately eligible for FILSPARI. For those who initially present with nephrotic syndrome, physicians will typically use immunosuppression induction to try to control the patient’s proteinuria and stabilize them, after which these patients may also become eligible for FILSPARI. In addition, based on the data from DUPLEX, patients treated with FILSPARI demonstrated sustained reductions in proteinuria over time, with proteinuria levels reaching approximately 1.5 grams per gram or less on average at study end. At these proteinuria levels, patients would be expected to have a much lower risk of relapsing to nephrotic syndrome. Based on our discussions with key opinion leaders following the approval, there is wide enthusiasm for using FILSPARI across the types of FSGS, including among secondary and genetic FSGS. This is supported by our recent publication in CJASN demonstrating consistent efficacy and safety in patients with genetic FSGS, a population often considered the most difficult to treat. Physicians consistently highlight the need for effective, non-immunosuppressive options for long-term disease management. Now let me talk about IgA nephropathy. We recently published data in CJASN from the PROTECT study showing that patients with IgA nephropathy who achieved complete remission of proteinuria to less than 0.3 grams per gram experienced a rate of eGFR decline of less than 1 milliliter per minute per year, a rate which is similar to healthy aging. The KDIGO guidelines recommend a treatment approach for IgA nephropathy that addresses both kidney injury and upstream immune drivers, and include FILSPARI as a first-line option for patients at risk of progression. The data published this month reinforced FILSPARI’s role as a foundational medicine in IgA nephropathy, demonstrating that it helps more patients reach complete remission, which is associated with improved preservation of kidney function over time. Turning briefly to our pipeline, we are pleased to have reinitiated enrollment in our Phase III HARMONY study of pegtibatinase, with the first new patient now dosed. HARMONY is a randomized, double-blind study designed to evaluate the efficacy and safety of pegtibatinase compared to placebo, with a primary endpoint focused on reduction in plasma total homocysteine, a key driver of disease in classical HCU. The primary endpoint for HARMONY is assessed at 12 weeks, consistent with the primary endpoint timing from our Phase I/II COMPOSE study. Patients who complete the HARMONY study are eligible to enroll in the ENCOMPOSE extension study. This open-label extension will allow us to evaluate long-term outcomes, including sustained homocysteine control, as well as meaningful aspects for patients such as the potential for greater dietary flexibility and self-administration. This program is supported by data from our Phase I/II COMPOSE study, where pegtibatinase demonstrated rapid, sustained, and dose-dependent reductions in total homocysteine levels. At the 2.5 mg/kg dose twice a week, pegtibatinase delivered a 67.1% mean relative reduction in total homocysteine from baseline to 12 weeks, as well as maintenance of mean total homocysteine below the clinically meaningful threshold of 100 micromoles, and was generally well tolerated. Pegtibatinase has the potential to become the first disease-modifying therapy for patients living with classical HCU, and as Eric mentioned earlier, we expect top-line data from the HARMONY study in 2027. Finally, we continue to generate and share new data across IgA nephropathy, FSGS, and HCU, and we look forward to upcoming medical meetings. At NKF this week and ERA next month, we will present additional analyses in both IgA nephropathy and FSGS. I will now turn it over to Peter for a commercial update. Peter? Peter Heerma: Thank you, Jula. I am pleased to share that we started the year strongly and set new records with our FILSPARI performance. The first quarter marked the highest demand to date as we received 993 new patient start forms, reflecting continued expansion among new prescribers and deepening utilization across established accounts. Importantly, we continue to see an increasing number of practices treating multiple IgA nephropathy patients with FILSPARI, with PPU as a meaningful indicator of physicians’ confidence with the medicine’s foundational and nephroprotective positioning. As new treatment options become available for this indication, FILSPARI remains the most commonly prescribed medicine approved for IgA nephropathy in the U.S. This broad utilization supports our confidence in FILSPARI’s continued growth potential in IgA nephropathy, and we are seeing strong demand at the start of the second quarter. For the first quarter of 2026, we reported approximately $105 million in FILSPARI sales, despite the typical beginning-of-year insurance resets and gross-to-net dynamics, as well as recognizing fewer revenue shipping weeks. The strength of our performance in IgA nephropathy and the momentum we have with FILSPARI is directly relevant as we enter the FSGS launch. There is significant overlap in the prescriber base between these two indications, and many nephrologists already have experience with FILSPARI in their IgA nephropathy patients. This will support early adoption in FSGS patients, and we anticipate a faster uptake compared to the initial IgA nephropathy launch. In fact, early feedback from the FSGS community has been overwhelmingly positive. We received our first patient start forms on the first day following approval. We are encouraged by the enthusiasm and engagement we are experiencing. Having spent time in the field over the past two weeks, I have seen that enthusiasm firsthand in discussions with nephrologists in their offices. It reinforces our belief that the FSGS opportunity is expected to be even bigger than IgA nephropathy. Established payer access in IgA nephropathy is helping to position FILSPARI for a supportive access environment in FSGS. In fact, we saw our first FSGS reimbursement approvals in the first week. Payers often manage access at the product and indication level, and our team is focused on expanding payer plans and formularies to include FILSPARI for FSGS. While education on the FSGS indication will be important, we are starting from a position of strength with an experienced commercial team and established infrastructure. We believe there are more than 30,000 patients in the U.S. with FSGS who are currently eligible for FILSPARI, and we expect that number to grow. In summary, the start of 2026 reflects exceptional commercial execution with record demand and revenue growth. With our continuing performance in IgA nephropathy and FILSPARI’s recent FSGS approval, I am confident in our ability to continue delivering strong, sustained growth and long-term leadership across these rare kidney disease indications. I am incredibly proud of our team and the impact they continue to have on patients and physicians. I am excited for what lies ahead for us in 2026. I will now turn the call over to Chris for the financial update. Chris? Christopher Cline: Thank you, Peter. As you have heard from the team, we delivered another strong quarter of execution across the business, and recently we achieved an important milestone with FILSPARI’s approval in FSGS that further strengthens our outlook for continued growth. In the first quarter, we generated $124.5 million in total U.S. net product sales, reflecting strong year-over-year growth. Importantly, U.S. net product sales of FILSPARI grew approximately 88% year over year to $105.2 million, despite typical beginning-of-year gross-to-net impact and fewer revenue recognition days. As Peter noted, for FILSPARI, we recognize revenue when product is delivered to our specialty pharmacies, which typically occurs a couple of days after shipment from our logistics partner. Due to the quarter-end timing and typical early-week ordering patterns, the first quarter had one fewer shipping week than usual. As a result, some FILSPARI shipments made in the first quarter will be recognized in the second quarter. Adjusting for this dynamic, and supported by record demand during the first quarter, we believe FILSPARI is on a strong trajectory in IgA nephropathy for the balance of the year. Elsewhere, Thiola and Thiola EC contributed $19.3 million in U.S. net product sales during the first quarter, and we recognized $2.7 million in licensing and collaboration revenue, resulting in $127.2 million in total revenue for the first quarter. Moving to operating expenses, our research and development expenses for the first quarter of 2026 were $57.1 million, compared to $46.9 million for the same period in 2025. On a non-GAAP adjusted basis, R&D expenses were $51.5 million compared to $42.2 million for the same period in 2025. The increase is primarily driven by the restart of enrollment in the Phase III HARMONY study of pegtibatinase during the quarter. Selling, general, and administrative expenses for the first quarter of 2026 were $80.3 million, compared to $60.4 million for the same period in 2025. On a non-GAAP adjusted basis, SG&A expenses were $69.3 million compared to $53.3 million for the same period in 2025. The increase is primarily attributable to investments in preparation for FILSPARI’s launch in FSGS, including an expanded field team, as well as investments in IgA nephropathy. Beginning in the first quarter, we revised the presentation of our amortization expense associated with royalty and milestone payments to a separate royalty expense line item in order to provide greater transparency to underlying operating expenses. In the quarter, we recognized $24.8 million in royalty expense compared to $12.4 million for the same period in 2025. The increase is primarily a result of the Thiola intangible asset reaching the end of its accounting useful life, resulting in amortization of the full amount of the royalty payments accrued this quarter, as well as an increase in capitalized FILSPARI royalties. Under accounting policy, Thiola royalties will now be expensed to royalty expense in the same quarter as the corresponding net sales. Contractual milestones and royalty payments related to FILSPARI will continue to be capitalized to intangible assets and amortized on a straight-line basis over its useful life, with only amortized expense recognized within royalty expense. Total other income, net, for the first quarter of 2026 was less than $1 million, compared to $1.5 million for the same period in 2025. Net loss for the first quarter of 2026 was $37.1 million, or $0.40 per basic share, compared to a net loss of $41.2 million, or $0.47 per basic share, for the same period in 2025. On a non-GAAP adjusted basis, net income for the first quarter was $4.1 million, or $0.05 per basic share, compared to a net loss of $16.9 million, or $0.19 per basic share, for the same period of 2025. As of March 31, 2026, we had cash, cash equivalents, marketable securities, and receivables of approximately $352 million. Receivables include the $25 million sales-based milestone payment from Mirum Pharmaceuticals, which was recognized in 2025 and received in April. This is not yet reflected in our cash balance of approximately $264.7 million as of March 31. Looking ahead, we are well positioned to fund our operations with existing resources, investing with discipline across our key priorities, including the commercialization of FILSPARI in IgA nephropathy and FSGS, ongoing evidence generation, advancement of the pivotal HARMONY study of pegtibatinase in HCU, alongside building further pegtibatinase supply. We expect continued strong demand in IgA nephropathy to drive sustained revenue growth, with FSGS further contributing to our top-line trajectory. Overall, we believe our balance sheet, expected top-line expansion, and disciplined approach to investing in our priorities position us to execute with confidence and deliver durable long-term growth. I will now turn the call over to Eric for his closing remarks. Eric? Eric M. Dube: Thank you, Chris. As we look ahead, our priorities are clear: continue to drive growth by reaching more patients with IgA nephropathy, execute a strong launch in FSGS, and enroll our HARMONY study of pegtibatinase. With FILSPARI now approved in IgA nephropathy and FSGS, and a pipeline progressing into late-stage development, we believe we are well positioned to deliver meaningful value for patients and shareholders over the near and long term. With that, I will turn the call back over to Nivi for Q&A. Nivi? Nivi Nehra: Thank you, Eric. We will now open the call for questions. Operator? Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press 1 on your keypad to raise your hand. To withdraw your question, please press 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. As a reminder, we ask that you limit yourself to one question. If you have another question, please rejoin the queue. Please stand by while we compile the Q&A roster. Your first question comes from the line of Joseph Schwartz with Leerink Partners. Joseph, your line is open. Please go ahead. Joseph Schwartz: Hey, guys. Will Soghikian: This is Will Soghikian on for Joe. Thanks for taking our question, and congrats on all the progress this quarter. One for us on FSGS. You have messaged several times that the launch is expected to progress at a faster rate than IgA nephropathy. Could you please characterize what you are seeing at this early stage and how it compares to the original IgA nephropathy rollout a few years ago? It seems like the full approval here could also make a difference, especially since we know nephrologists are sometimes slower to adopt innovative medicines. Is what you are seeing in these early days supportive of a more rapid FSGS launch? Thanks so much. Eric M. Dube: Will, thank you so much for the question, and I am very pleased with the early performance and particularly the execution from our field teams. Peter, why do you not give some color to what you are seeing in the early part of the launch? Peter Heerma: Absolutely, Eric, and Will, thank you for that question. Indeed, we are confident in a faster uptake in FSGS relative to the IgA nephropathy launch for multiple reasons. First, this is a very high unmet need and this is the fastest progressive glomerular disease as well, where for IgA nephropathy we really had to establish the urgency to intervene earlier. In addition to that, we built upon very strong brand awareness and many of the physicians already have experience with FILSPARI, given this is basically the same core point for IgA nephropathy. From a payer perspective, we already are in most of the formularies and payer plans. We currently have over 97% pathway to access for patients. We built upon a very strong foundation, and that gives me confidence that we will have a more rapid uptake in FSGS relative to our initial IgA nephropathy launch, and we believe it is an even bigger opportunity with FSGS than IgA nephropathy. Thank you so much. Operator: Next question comes from the line of Tyler Van Buren with TD Cowen. Tyler, your line is open. Please go ahead. Gregory Allen Harrison: Hi. This is Greg on for Tyler. Thanks for taking my question. You noted that the first FSGS PSF arrived the day after approval, and reimbursed treatment started within one week. How many FSGS PSFs have you recorded thus far in the launch, and what proportion of early starts are coming through payer authorizations versus exceptions or appeals? What are you seeing on initial behavior in general? Thanks. Eric M. Dube: Greg, thanks so much for the question. While it is too early for us to be able to quantify some of that, Peter certainly can provide some qualitative and directional views on the demand and the payer dynamics. Peter? Peter Heerma: Yes. Great. I would love to answer that question with specifics, but this is a Q1 call, so I am looking forward to sharing more with you in the second quarter call. Following my answer to your earlier question on the faster uptake than IgA nephropathy, I would say everything we are seeing so far is confirming what I have said, with regard to a faster uptake than our initial IgA nephropathy launch. That counts both for demand as well as for the early approval rates that we are seeing with payers. We are seeing actually a higher first-pass approval at the payer level than what we saw initially for IgA nephropathy. Operator: Your next question comes from the line of Anupam Rama with JPMorgan. Anupam, your line is open. Please go ahead. Anupam Rama: Hey, guys. Thanks so much for taking the question. On the FSGS launch, if you could build upon some of your prior comments, I know you mentioned that there is a need to further educate physicians. I know that it is only three weeks post approval, but I was wondering if you could speak to what is resonating with physicians in terms of the product label and the product profile. And within that, where do you think the education is required? Thanks so much. Eric M. Dube: Anupam, thanks so much for the questions. Peter, why do you not take that? And, Jula, I know your team has extensive engagements with thought leaders, you can add anything that you might want to. Peter? Peter Heerma: Happy to take that question, Anupam. Overwhelmingly positive responses from physicians, but you still have to educate them. I was in the field a few days, and many of the community nephrologists in particular may not know yet that FILSPARI was approved. That awareness you have to build. You have to educate physicians also on the label, in particular on patients not being in active nephrotic syndrome. That requires some education. Once you explain that, it resonates with physicians because it is very similar to how patients are being treated today. It is very consistent with the guidelines. Jula, maybe you can provide some context on that. Jula Inrig: Yes, thanks. Our team, as Eric mentioned, has been out at conferences, advisory boards, and seminars. The approval is getting resoundingly positive feedback from physicians. This patient community has been waiting a long time, and they are excited to have a non-immunosuppressive treatment option to control these patients and get their proteinuria down. You asked about education. Part of it is a reminder that active nephrotic syndrome is not the same as nephrotic-range proteinuria, so we are educating around that. But as Peter mentioned, very positive and excitement to have this option to treat their patients. Anupam Rama: Thanks so much for taking my question. Eric M. Dube: Thanks, Anupam. Operator: Your next question comes from the line of Prakhar Agrawal with Cantor Fitzgerald. Prakhar, your line is open. Please go ahead. Prakhar Agrawal: Hi. Thank you for taking my questions, and congrats on the quarter. Going back to your comments on faster uptake than IgA nephropathy, when I go back to the IgA nephropathy launch in the first few full quarters, you had 400 to 450 patient start forms. Is that how we should think about the uptake for FSGS as well? And secondly, on access, do you expect payers to cover the secondary FSGS patients broadly as well despite the segment not being tested in Phase III? Are you hearing any pushbacks from the payers? Thank you so much. Eric M. Dube: Prakhar, thanks for the questions. With regard to the uptake, we are not going to be providing guidance, and we will not be breaking out the PSFs by indication as we move forward. I will reinforce what Peter shared, that everything we are seeing so far in the first three weeks of launch has confirmed what we have been saying around a faster uptake, an eagerness to prescribe, and payer dynamics helping to get patients from PSF onto therapy. Peter, why do you not take the question around payer access and the different types of FSGS, secondary, etc., and any pushback. Peter Heerma: Absolutely. I am most encouraged by the early approval rates that we are seeing for FSGS, which are higher than what we saw initially for IgA nephropathy. For context, payers understand that FSGS is a rarer disease compared to IgA nephropathy with a more progressive nature. This is what we have been educating payers on over the last six to seven months. In that context, payers are not focused on types or subtypes of FSGS. They understand the common injury pathway and how FILSPARI is the first approved medicine for this patient population that is rapidly progressing. That is what we are hearing and seeing so far in the context of the conversations we have had with payers over the last six to seven months. Prakhar Agrawal: Thank you. Eric M. Dube: Thank you. Operator: Your next question comes from the line of Vamil Divan with Guggenheim Securities. Vamil, your line is open. Please go ahead. Vamil Divan: Great, thanks for taking my questions. I wanted to get back to the topic around the history and nephrotic syndrome. We have spoken to some physicians since the approval, and there seems to be some confusion about this and whether they can prescribe FILSPARI in these patients or not. Could you elaborate in terms of whether physicians should focus on a history of nephrotic syndrome? It sounds like maybe you mentioned that some education is still needed on that topic. Can you elaborate on what you are doing to make sure it is clear, because it certainly sounds like your perspective is that this should not be a limiting factor? Eric M. Dube: Thank you, Vamil, for the question. We firmly believe this is not going to be a challenge. It is certainly an opportunity to educate. Jula, why do you not talk about the efforts that you are doing and the reaction from nephrologists? Peter, you can talk about how payers may be thinking about this topic. Jula Inrig: This has not been an area of focus from physicians, and we have had a fair bit of engagement, as has Peter’s team. We do not believe that a history of nephrotic syndrome should preclude a physician from prescribing FILSPARI. The reason for that is our labeled indication: it is for patients without active nephrotic syndrome. This is very much aligned with KDIGO, which recommends patients with active nephrotic syndrome be treated with immunosuppression, while those without it receive optimized supportive foundational care, and that is where FILSPARI provides the best treatment option for these patients. Peter Heerma: To build upon that from a payer perspective, the most important point is to educate payers that nephrotic syndrome is a dynamic state, not a chronic state, and payers understand that. These conversations have not really come up as issues, given this is a rapidly progressing disease and payers understand that as well. Vamil Divan: Okay. Thank you. Eric M. Dube: Thanks, Vamil. Operator: Your next question comes from the line of Gavin Clark-Gartner with Evercore. Gavin, your line is open. Please go ahead. Gavin Clark-Gartner: Hey, guys. Thanks for taking the question. I wanted to pivot over to IgA nephropathy quickly. What are you seeing as discontinuation rates over time here, maybe at the one-year mark and the two-year mark since patients start therapy? How does that compare to what you saw in the IgA nephropathy Phase III? Eric M. Dube: Peter, why do you not take that question? Peter Heerma: The compliance and persistence rates for FILSPARI in IgA nephropathy have been very high. We have not given specifics on the numbers, but we have not seen any change or disruption in those rates. We have high confidence both from patients, who are being helped, and from physicians, who are seeing that this product works for a patient population that historically did not have a treatment option. Jula, maybe you can provide context on what we are seeing versus what we saw in the PROTECT trial. Jula Inrig: I would say consistent. We saw high persistence of patients staying on treatment during the two-year double-blind trial, and I think it is very aligned with what we are seeing commercially. Part of the reason for that is patients have that positive reinforcement: their proteinuria goes down; they see it; and they feel like they are getting better. With a side effect profile very consistent with irbesartan, patients tend to stay on therapy, and they understand this should be truly lifelong—as long as they keep their kidneys, they should stay on FILSPARI. Gavin Clark-Gartner: Great. Thanks. Operator: Your next question comes from the line of Mohit Bansal with Wells Fargo. Mohit, your line is open. Go ahead. Sadia Rahman: This is Sadia Rahman on for Mohit. Thanks for taking our question. The patient start form number this quarter again looks very impressive. Can you provide some color on the conversion rate for these forms to patients ultimately starting treatment, and any reasons for any drop-off along the way? Thank you. Eric M. Dube: Thanks, Sadia. Peter, why do you not take that? Peter Heerma: I am glad you reflect on the 993 patient start forms as impressive because I am really impressed with my team that is continuing to show growth in IgA nephropathy in a rapidly changing environment. With regards to conversion, we continue to convert those patients quite rapidly over time. We continue to make improvements, though where we are right now is not as dramatic as what you saw in the beginning. We do not see any drop-offs or changes. With regards to translation of patient start forms into revenue, that may be part of your question. I think Chris provided some context on fewer ordering and shipment weeks in Q1 relative to the typical gross-to-net dynamics you usually see in Q1. I hope that answered your question. Sadia Rahman: Yes. Thank you. Eric M. Dube: Thank you. Operator: Your next question comes from the line of Laura Chico with Wedbush Securities. Laura, your line is open. Please go ahead. Laura Kathryn Chico: Thank you very much for taking the questions. I apologize if this has been asked already, but one question I had was on IgA nephropathy dynamics for FILSPARI. It is great to see the PSF number considering the increase, and I am presuming that is predominantly from IgA nephropathy patients. But we also had a competitive update: Novartis indicated the ALIGN confirmatory study for atrasentan did not reach its statistical significance, and while they will pursue an FDA full approval, I am wondering how that changes your views on the competitive landscape dynamics for IgA nephropathy with FILSPARI. How are you thinking about pushes and pulls on demand drivers in 2026? And then I have a quick follow-up, if that is okay. Eric M. Dube: Thanks, Laura. Peter, why do you not take that, and Jula can add any further perspective on the evolution or consistency of the treatment landscape. Peter Heerma: Happy to answer that question. Most important, this is a market in development. Most growth in this marketplace is not coming from competitive share, but mainly from continuing to grow the market, and that is exactly what we see and anticipated. I think FILSPARI is very well positioned to grow in this marketplace because it is really replacing RAS inhibition. There is no other product that has that ability. Most competition is in the other sector—more immunosuppressive agents—where B cells are now playing together with complement inhibitors and histories of steroids. Physicians understand the positioning of FILSPARI very well as the foundational nephroprotective treatment option, and understand FILSPARI’s positioning relative to atrasentan and others. Eric M. Dube: And just one thing, Laura, before your next question. You asked about the PSF increase. That is all based in Q1, so that would be IgA nephropathy before the approval of FSGS. We do expect to see an acceleration of demand over time as we look at both indications, but that very solid number of 993 patient start forms in Q1 reflects our performance in an increasingly competitive landscape of multiple treatment options. I think it is a really impressive number that Peter’s team has been able to deliver. Laura Kathryn Chico: Just real quick, we have got a few weeks in April since the FSGS approval. It does seem like a couple PSFs are coming through here. Just out of curiosity, are these originating from existing FILSPARI IgA nephropathy prescribers versus newly activated FSGS prescribers? Should we presume these are already established prescribers in these early days and quarters of launch? Thanks very much. Eric M. Dube: Laura, thanks so much for the question. It is early. Peter, why do you not comment on what you are seeing thus far? Peter Heerma: It is indeed early. We see both, to be honest, and more color will come in the Q2 call. In this context, it is good to talk about the halo effect. I have spoken about the halo effect in the past: experienced prescribers for IgA nephropathy who now also adopt FILSPARI for FSGS. Vice versa, we are starting to hear anecdotes as well from physicians that have been on the fence who are excited about starting in FSGS, and based on that, are now also excited to start prescribing in IgA nephropathy. I think a halo effect will benefit both indications. Operator: Your next question comes from the line of Maury Raycroft with Jefferies. Maury, your line is open. Please go ahead. Maury Raycroft: Hi. Thanks for taking my question, and congrats on the quarter. Maybe following up on Laura’s question, focusing on PSFs, I am trying to think about how to estimate that going forward for IgA nephropathy. You talked about atrasentan as a competitor, but Otsuka also had a good quarter for PSF growth in IgA nephropathy. Do you have any perspective on how Otsuka is launching their drug and how you are factoring that into your estimates, and any more perspective you can offer on switching to biologics and how you are thinking about that in your total estimate for $3 billion in peak sales? Eric M. Dube: Let me take a couple of those, and Peter can comment on what he is seeing from a competitive standpoint and switching. First, PSFs moving forward will be provided in aggregate, so I recognize you are likely trying to figure out IgA nephropathy alone. There is no reason to believe we cannot continue this level of performance because of the number of patients and the very unique positioning that non-immunosuppressive kidney-targeted therapies have, which Peter can speak to. With regard to the $3 billion peak sales, that really is based on continued growth in both indications, and we have talked about FSGS being a larger opportunity than IgA nephropathy. We fully expect growth in both, but a much faster uptake in FSGS is going to allow us to reach more patients over time and contribute more meaningfully to peak growth. We really do not see market dynamics taking away from our opportunity or performance. Peter, why do you not talk about that in the context of new patients as well as switches. Peter Heerma: The most important point is that we do not see B-cell therapies as direct competitors for FILSPARI. Conceptually, the way patients are being treated for IgA nephropathy is similar to the past with RAS inhibition, and on top of that you use steroids when needed. That concept is not changing, while for RAS inhibition, you now have FILSPARI as a superior option for those patients. For patients needing additional treatments, you have B-cell therapies potentially replacing steroids. The growth in this market is not so much competitive growth; it is developing the market. This is a highly underdeveloped market historically. There are still many patients treated with generic RAS inhibitors and generic steroids. You have better options available now. The KDIGO guideline is reinforcing that. You have more ambitious treatment targets nowadays, which will often mean more combination therapy as well. There is space for multiple products to grow, and FILSPARI is very well positioned in that nephroprotective foundational treatment category. Eric M. Dube: Thank you, Peter. Maury, if we just take a step back, we have talked over the last couple of years about new entrants helping to accelerate growth within the IgA nephropathy market. That is not going to take away from our performance and outlook—that is exactly what we are seeing with the entrants that have come to the IgA nephropathy foundation. The performance we posted this quarter really reflects the opportunity we have, but perhaps more importantly, the opportunity for patients who have been undertreated with off-label therapies to really have innovation moving forward, both with FILSPARI as well as other therapies. That is going to be the foundation for continued performance of FILSPARI. Maury Raycroft: Got it. That is really helpful. Thank you very much. Eric M. Dube: Thanks, Maury. Operator: Your next question comes from the line of Jason Zemansky with Bank of America. Jason, your line is open. Please go ahead. Jason Eron Zemansky: Good afternoon. Congrats on the progress, and thanks so much for taking our question. Maybe, Jula, one for you. Where are you seeing FILSPARI used or sequenced in FSGS? Is it in lieu of ACE/ARBs? Are these patients usually already on SGLT2s? We have gotten some mixed feedback regarding whether this drug is going to be used first line or in those uncontrolled while already on an ARB or an ACE and an SGLT2. Jula Inrig: Thanks for the question. Just like IgA nephropathy, the vast majority of patients are already on some form of a RAS inhibitor, an ACE or an ARB, even by the time they get sent to the nephrologist, so predating their diagnosis. It is slightly lower than IgA nephropathy because kids may or may not always be on an ACE inhibitor, but you are still talking at least 70% to 80% of patients on some form of foundational treatment. As far as SGLT2 inhibitors, I would say they are used, but potentially not quite as prevalent because we do not have as great data around SGLT2s. But as Peter has mentioned multiple times, these patients are at very high risk for rapid progression to kidney failure, so physicians will be pulling at as many things as they can in their tool belt to try and stabilize these patients. Now they have FILSPARI, which is better in a head-to-head versus a RAS inhibitor, so they are going to take patients off their RAS inhibitor and initiate FILSPARI, ideally at their next clinic visit when they see these patients. Eric M. Dube: And, Jula, maybe I can add something else for Jason’s question. Particularly for those patients with primary FSGS and particularly those with active nephrotic syndrome, they are, based on the guidelines, going to be treated with an immunosuppressant. Once they are not in active nephrotic syndrome, they would be eligible and likely placed on FILSPARI. In terms of not being first-line use, it is a slight nuance, but that is also an opportunity moving forward. Jula Inrig: No, that is accurate. Eric M. Dube: Thanks, Jason. Jason Eron Zemansky: Thanks. Operator: Your next question comes from the line of Alex Thompson with Stifel. Alex, your line is open. Please go ahead. Alexander Thompson: Thanks so much. Just a quick follow-up question on IgA nephropathy, and then I would like to ask about pegtibatinase as well. Maybe, Chris, are you able to quantify the shipping week impact at all? That would be helpful for the quarter. And then for pegtibatinase, the Phase III—congrats on restarting that—have you met with the FDA review division recently, and how confident are you that total homocysteine is still going to be an approvable endpoint here? Thank you. Eric M. Dube: Alright, Chris, and then we can turn that over to Bill for the pegtibatinase question. Christopher Cline: Thanks for the question, Alex. We do not typically break down individual weeks of revenue. The best proxy is to take the average for the quarter. We had about 12 weeks of revenue recognition within the quarter, and that will get you to the best proxy there. William E. Rote: I will take the pegtibatinase question. We have breakthrough therapy designation for pegtibatinase, so that allows us to have a lot of interaction with the FDA. Through that process, we reached alignment on the endpoint for the HARMONY study, and it mirrors the timing of what we saw in the COMPOSE study. It was in collaborative discussion with the agency where we settled on that 12-week endpoint. Alexander Thompson: Has that happened since the original alignment this year or since you redosed, or was that the original alignment? William E. Rote: That was the original discussion. We have not had reason to discuss the endpoints of the trial once it was agreed and aligned upon. Alexander Thompson: Okay. Thank you. Operator: Ladies and gentlemen, this concludes the question and answer session of today’s conference call. I will hand the call back over to Nivi. Nivi Nehra: Great. Thank you everyone for joining today’s call. Have a great rest of your day. Operator: Thank you for attending. You may now disconnect.
Operator: Good day, ladies and gentlemen, and welcome to Ichor Holdings, Ltd.'s First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. Instructions will be given at that time. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Claire E. McAdams, Investor Relations for Ichor Holdings, Ltd. Please go ahead. Claire E. McAdams: Thank you, operator. Good afternoon, and thank you for joining today's First Quarter 2026 conference call. As you read our earnings press release and as you listen to this conference call, please recognize that both contain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control and which could cause actual results to differ materially from such statements. These risks and uncertainties include those spelled out in our earnings press release, those described in our annual report on Form 10-K for fiscal year 2025 and those described in subsequent filings with the SEC. You should consider all forward-looking statements in light of those and other risks and uncertainties. Additionally, we will be providing certain non-GAAP financial measures during this conference call. Our earnings press release and the financial supplement posted to our IR website each provide a reconciliation of these non-GAAP financial measures to their most comparable GAAP financial measures. On the call with me today are Philip Barros, our CEO, and Gregory F. Swyt, our CFO. Phil will begin with an update on our business, and then Greg will provide additional details about our results and guidance. After the prepared remarks, we will open the line for questions. I will now turn the call over to Philip Barros. Phil? Philip Barros: Thank you, Claire, and welcome, everyone, to our Q1 earnings call. Just a few months into a multiyear growth cycle, and we are already delivering upside to our outlook and demonstrating strong earnings leverage. Q1 revenues of $256 million came in at the upper end of our expectations, up 15% from Q4. Gross margins of 12.8% also approached the high end of our guidance, enabling us to more than triple our operating income versus Q4 and deliver our highest earnings per share in three years. The early investments we made in ramping labor headcount and prepositioning inventory are paying off. These are enabling Ichor Holdings, Ltd. to deliver strong execution for our customers to achieve growth towards the high end of our demand forecast. Demand across our core markets has further strengthened since our last earnings call. Our visibility now extends deeper into 2026. Within this very robust demand environment, we expect Ichor Holdings, Ltd. to be a top performer both in terms of growth and earnings leverage. Our Q2 forecast now reflects unconstrained demand exceeding $300 million. This is one of the steepest ramps witnessed in Ichor Holdings, Ltd.'s history, representing growth well over 30% in just two quarters. Not only that, but with stronger visibility since our last earnings call, we continue to expect every quarter in 2026 will be a growth quarter for Ichor Holdings, Ltd. We entered the year with increased momentum and a clear strategy. Our higher confidence today reflects Ichor Holdings, Ltd.'s critical role within the WFE industry and strong progress towards our strategic objectives. The technology transitions and strategic capacity expansions underway, largely in support of AI hyperscaling, favor etch and deposition applications, which favors Ichor Holdings, Ltd. A great example of this is the 30% increase in the number of process steps required to produce leading edge logic with gate-all-around architectures. Increased investments in gate-all-around technology are significant tailwinds for Ichor Holdings, Ltd.'s growth. Our objective is to gain share through this cycle and the steps we have taken to preposition inventory and ramp labor headcount will allow us to continue to perform for our customers, and this is how we will win. Turning to an update on our strategic initiatives we introduced last quarter. Q2 is shaping up to be a major step forward in our global footprint realignment. As a reminder, this initiative is aimed at driving three primary benefits. First, we are structurally eliminating the margin challenges we faced previously in order to drive stronger cross-cycle performance and greater predictability in our business. Second, we are enabling more efficient, scalable, high-volume manufacturing of our Ichor Holdings, Ltd.-branded products, which will get us to our cost targets for these components. Third, by driving a higher level of Ichor Holdings, Ltd. content within the systems we build, we will deliver significant improvements in gross margin flow-through and earnings leverage as revenues ramp. We have made strong progress, and I am proud of the team, especially given the scale of the ramp we are operating in. Just a few months into the year, and we have already installed and qualified half of the plant equipment moves, which is ahead of schedule. We are now performing all manufacturing steps for a substrate product line within the same four walls within Mexico. These are the types of efficiency gains that will structurally improve our product margins and drive higher gross margin flow-through within the gas panel manufacturing business. In our valve product line, in Q1, we achieved full customer qualification to manufacture in Mexico. This significantly expands our capacity for this product line, enabling us to source internally and cut our dependence on outside suppliers. We will continue to ramp up capacity through Q2 and expect to be at full production as we exit the quarter. The success and speed of both the moves and qualifications gives us the confidence to reinitiate valve qualifications at one of our major customers, which we had placed on hold due to capacity constraints. As we exit Q2, we will begin to see the gross margin impacts of our footprint realignment, with these moves enabling increased levels of proprietary Ichor Holdings, Ltd. content in the gas panels we make. As we move through the remainder of the year, we will be ramping Malaysia, which will drive a richer mix of machining revenues. Driving higher volumes of machining revenues and completing cost reduction in our footprint realignment are the final two steps in achieving our near-term gross margin targets of at least 15%. As a reminder, while we complete the ramp up of Mexico, we are temporarily increasing external supply to ensure strong, consistent delivery in our integration business. Taking all of this into account, today, we are guiding Q2 revenues of approximately $300 million, plus or minus $10 million, and sequential improvement in gross margin from Q1 to an expected range of 13% to 14%. Beyond Q2, we continue to expect approximately 100 basis points per quarter in gross margin expansion as we complete our transitions into the second half. This level of gross margin expansion continues to support our expectation that gross profit dollars will grow around twice the rate of revenues as we move through the second half. To close, we have made significant progress on our strategic initiatives, and all within a backdrop of rapidly growing demand. We remain confident that Ichor Holdings, Ltd. is well positioned to capitalize on the ramp and deliver strong earnings leverage through this cycle. With that, I will now hand it off to Greg. Gregory F. Swyt: Thanks, Phil. Before I begin, I would like to emphasize that the P&L metrics discussed today are non-GAAP measures. These measures exclude the impact of share-based compensation, amortization of acquired intangible assets, nonrecurring charges, and discrete tax items and adjustments. There is a useful financial supplement available on the investor section of our website that summarizes our GAAP and non-GAAP financial results, as well as a summary of the balance sheet and cash flow information for the last several quarters. First quarter revenues of $256.1 million came in at the upper end of our guidance range, up 15% sequentially, reflecting continued demand momentum and strong execution as volumes ramped through the quarter. Gross margin increased to 12.8%, up 110 basis points sequentially and 30 basis points above the midpoint of guidance, driven primarily by incremental factory leverage on the higher revenue levels in our integration business. Operating expenses in the quarter were aligned with our forecast at $24.1 million. As a result, operating income for Q1 more than tripled compared to Q4, to $8.7 million or 3.4% of revenue, demonstrating meaningful operating leverage as volumes ramped. With both interest and tax aligned with expectations, earnings for the quarter were near the high end of guidance at $0.15 per diluted share based on 35.3 million diluted shares outstanding. Positive cash flow generation from the P&L increased significantly in the quarter, with EBITDA of nearly $14 million. In the early stages of what we expect will be a sustained multiyear ramp, we are making incremental investments in inventory in support of our customers. As a result, cash from operations was a use of $2.9 million. Capital expenditures for the quarter were $7.1 million. We are managing our CapEx investments towards approximately 3% of revenue, so we would expect this CapEx level to trend up modestly as we move into the second half of the year. Which brings us to the balance sheet. Given our current levels of investments in inventory and CapEx, cash and equivalents totaled $89.1 million at the end of the quarter, a decrease of $9.2 million from Q4. DSOs increased modestly to 33 days, and inventory turns improved to 3.7, reflecting improved throughput as volumes increased. Total debt at quarter end was $122 million and our net debt coverage ratio stands at 1.6. Now turning to our guidance for 2026. As Phil mentioned, we are anticipating a steeper revenue ramp for Q2 compared to our expectations a quarter ago. We anticipate revenues in the range of $290 million to $310 million, which at the midpoint represents sequential growth of 17% and a year-over-year increase in revenue volumes of 25%. Our gross margin guidance for Q2 is a range of 13% to 14%, and as Phil noted earlier, we continue to expect gross margin improvement of 100 basis points per quarter through 2026. Our guidance for operating expenses this year is largely unchanged from last quarter. We continue to drive disciplined cost management across the organization in support of higher revenue volumes, and we are managing to a target of only 5% to 6% OpEx growth for the full year. This reflects a relatively consistent run rate of approximately $25 million beginning in Q2, slightly up from Q1's level as a result of higher variable compensation forecast on the improved outlook for the year. The midpoint of our guidance for revenues, gross margin, and operating expenses in the current quarter indicate the highest level of operating income reported since fiscal 2022 and an increase of nearly 80% from Q1, reinforcing the strong earnings leverage expected as we continue to ramp revenues. Our expectations for interest and tax this year are unchanged since last quarter. We anticipate approximately $2 million per quarter in total interest and other income and expense, and our assumed effective tax rate continues to be in the range of 20% to 25%. Finally, our EPS range for Q2 of $0.25 to $0.35 reflects our expectation for a diluted share count of 35.5 million shares. In summary, Q1 reflects improving profitability, strong operating leverage, and disciplined cost control as volumes accelerate, and we believe we are well positioned for continued progress through the remainder of 2026. Operator, we are now ready for questions. Please open the line. Operator: We will now open the call for questions. Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, you may press star 2 if you would like to remove your question from the queue. The first question is from Brian Edward Chin from Stifel. Please go ahead. Brian Edward Chin: Hi there. Good afternoon. Thanks for letting us ask a couple of questions. First question, impressive job in terms of the sequential growth in Q1 and then the outlook. You maintain sort of mid to high teens sequential ramp at this point. Phil, maybe can you walk us through some of the puts and takes in the second half of the year in terms of ramping Malaysia, in terms of product mix, and how that distills down to what level you can sustain sequential growth into the back half of the year? Philip Barros: Yeah. If you follow our customers, they are forecasting, say, a 25% growth year-on-year. We are going to project that at this point in terms of how much we think we are going to grow for 2026 over 2025. What I would say is at this point last quarter, I would have guided [inaudible] for Q2, and now we are guiding $290 million to $310 million. So as you can imagine, we are seeing a lot of growth, a lot of movement, and a lot of puts and takes, if you will. We are seeing a lot of movement in our forecast, and I would say my visibility today is stronger than it was a quarter ago, and it will be stronger, I believe, a quarter from now than it is today. Brian Edward Chin: Great, that is helpful. Then thinking about the gross margin progression in the back half of the year, when you think about the 100 basis points in Q3 and 100 basis points in Q4, can you walk through how much of that is volume-related and how much is mix inclusive of increased vertical content? Philip Barros: In terms of percentages, I would say, in general, think of our gross margin growth as coming from events as much as from volume. I talked about the global footprint realignment. That is a big driver of our cost savings as well as our margin accretion as we move through the year. So I would say they are pretty close to equally weighted in terms of gross margin impact. Volume leverage is about 50% of it, and our cost reductions are about 50% of it. Operator: The next question is from Craig Andrew Ellis from B. Riley Securities. Please go ahead. Craig Andrew Ellis: Yes, thanks for taking the questions, and congratulations on the good results and guidance. Phil, I wanted to start with more of a qualitative question on where Brian left off. So it was the beginning of the year when you outlined a four-point plan to really drive much better gross margins to 15%, and it sure seems like the business is solidly on track for that. But can you talk about how happy you are with where you see the business executing in the different company-controllable areas that you are focused on? Where are you happier, and where do you need to get better performance to be really confident in that 100 basis points per quarter in the back half of the year? Philip Barros: I would say that, in general, I am very happy with the progress the team is making. We are on track, if not ahead of schedule, in most of the initiatives. That is tough to do in this type of environment, obviously, as we are ramping up revenues at the same time as doing a strategic transformation. It is very impressive for me to see the team really execute at this level. If you looked at where I had risk in terms of the transformation in the Q1 time frame, it was getting customer qualifications in Mexico, and it was getting e-beam welding up and running in Mexico. Both of those are behind us. So I am in a much more confident position than I would have said about a quarter ago. Craig Andrew Ellis: That is really helpful. And then just looking ahead to what sounds like a really strong view for the second half of the year, and I think most everybody is really constructive for robust calendar 2027 year-on-year growth. Can you talk about your comfort with capacity upside beyond the level that you are guiding to in the second quarter so we can get comfortable that as demand continues to improve, Ichor Holdings, Ltd. is going to be able to meet that demand? Philip Barros: I would say that the two major drivers or pacers for our output right now would be supply chain, number one, and labor headcount, number two. We are well positioned brick-and-mortar-wise and clean room-wise and infrastructure-wise, which to me are the long-lead items. From a supply chain standpoint, we have boots on the ground; there are always multiple suppliers that pop up in these types of ramp periods. We have boots on the ground as well as increased inventory levels in certain areas where we saw risk, so I feel pretty good about that. In terms of ramping up headcount, we are well along the path. I feel very good about where we are in terms of headcount as well. In terms of brick and mortar, headroom, and room for us to grow, we could more than double what we did last year. I am not worried there. Once again, it is going to be headcount and supply chain that will pace us going forward. Thank you. Operator: The next question is from Christian David Schwab from Craig-Hallum Capital Group. Please go ahead. Christian David Schwab: Great, thanks for taking my question. Just a follow-up on that last statement. In aggregate, do you believe that you have the potential, if the end-market demand remains robust as expected in a multiyear basis, to have roughly $1.8 billion to $2 billion in revenue capacity on a yearly basis given your global realignment in manufacturing? Did I hear that correctly? And congrats on the gross margin progression expected throughout the course of the year. As you increase your branded or vertically integrated products into your end boxes, do you have yet an aspirational goal of where you would like to end gross margins at the end of 2027? And lastly, after such a very strong start in the first half of the year, with 17% sequential growth guidance at the midpoint from March to June, would you expect double-digit sequential growth as we go forward, or would you assume that could potentially be more high single digit? Philip Barros: From a brick-and-mortar and fixtures-and-equipment standpoint, we have some areas where we need to make investments. There is some equipment in the second half of the year that we are going to be positioning to grow to those types of levels, but the long-lead items like clean room, overhead, building space, brick and mortar—we are in a very good position there, especially with our new facility in Malaysia that we turned on last quarter. We have not drawn out the model to the end of 2027 at this point. It is a little bit early to do that. As we enter 2026, it is a little early to guide 2027 because a lot of that is going to be volume-driven as you know. I do expect 2027 to be a growth year, but even with that, I am going to be a little bit shy on guiding 2027 at this point. We could see double-digit growth in the second half in total. At this point, it is going to be our supply chain that is really going to gate us in terms of revenue growth. I am a little bit cautious on the second half until we have good visibility there. But we are executing really well. That is why we are seeing a very big pickup in Q2. We are not leaving a lot of revenue behind; we are not rolling a lot of revenue from quarter to quarter. That is going to show a growth profile that kind of leads our customers because we deliver before our customers receive. Operator: The next question is from Charles Shi from Needham & Company. Please go ahead. Charles Shi: Hi, thanks for taking my question, Phil and Greg. First, congrats on the very strong Q2 guide. A lot of people are going to ask you what your max capacity is right now. I think you previously mentioned potentially getting to 20% gross margin at $400 million per quarter. To me, that implies maybe $1.6 billion capacity. I do not know if you need incremental CapEx to get to that, but what is the thought on getting beyond $1.6 billion capacity? What would be the next milestone, and how much CapEx do you think you are going to need? And is it fair to say that to get to $1.6 billion, the capacity is already in place, and it is more about above $2 billion that you are going to need more equipment? Philip Barros: Let me be clear that we believe we have enough brick-and-mortar capacity today to go well above $22 billion. After that, it becomes very driven by equipment. If you look at the Ichor Holdings, Ltd.-branded products, there is a lot of equipment required to build those. That would be the one area where we would need to invest CapEx. That is what we have alluded to when we said it is going to be second-half CapEx heavy. That is coming in as we fill out the machining capability within Malaysia. But as Greg talked about during his prepared remarks, we are really driving towards about 3% of revenue CapEx. Gregory F. Swyt: For this year? For this year. Philip Barros: In order to keep the 35% to 75% Ichor Holdings, Ltd.-branded content within a $1.6 billion run rate, we need a little more equipment. From a brick and mortar, overhead, and clean room perspective, we are well positioned for that to be around $2 billion. Charles Shi: Got it. May I ask about the demand signal? When you talk about Q2, you are talking about unconstrained demand already above $300 million. What kind of visibility do you have right now? How much are hard commits already from your customers? How many quarters can you see that, and where do you see the end of your visibility as we speak right now? Philip Barros: I always say that we have good visibility for about six months. We have hard PO coverage for about a full quarter and about six months of great visibility. Our customers give us soft guidance past that. Right now, as they have signaled to you, they are signaling growth into 2027. So we are preparing ourselves to capitalize on that growth into 2027. Charles Shi: Last question from me. I noticed from the financial supplement the revenue from Europe was a little bit light in the quarter. With that data point, what is the latest you see on the lithography side of the business, and what is the expectation this year in terms of growth? Philip Barros: Etch and dep are growing faster; they are kind of leading the league right now, so they are ahead of the litho business. We talked last quarter about how our customer has some level of inventory they need to burn through. We do see them burning through that inventory in Q3. We start to see a pickup in the fourth quarter. So it is a little bit of a headwind in Q3 and a tailwind in Q4. That is more about the level of inventory they are holding versus anything to do with their business in particular. Operator: Next question is from Krish Sankar from TD Cowen. Please go ahead. Robert Mertens: Hi, this is Rob Mertens on the line for Krish. Thanks for taking my questions and congrats on the strong quarter and guidance. First, I will piggyback on Charles’ question and ask if there are any changes in your view in terms of silicon carbide demand or from aerospace and defense customers compared to a quarter ago. And then, on the strength you are seeing from your largest customers, you mentioned visibility has improved and that sales should grow sequentially through the back half of the year. Would you expect the mix to shift toward more of your high-margin components and in-sourced products through the back half, or could there be some near-term impact due to the high growth of the gas panels this year? Philip Barros: Aerospace and defense are growing very well. Unfortunately, conflicts drive increased need for defense spending, so we are seeing some impacts of that. Our commercial space business is also growing. A lot of the R&D work that we were doing for that commercial space business is now converting into hard POs, so we are seeing strong growth through this quarter. Silicon carbide is pretty light; we are not seeing a major return in that as we speak today. It has been steadily down since last year. Regarding mix, the reason we will see growth in gross margin sequentially from quarter to quarter is that we are going to be able to ramp up and fulfill more of our own internal sourced parts, a higher percentage of those. As we move into the second half of the year, I expect to fulfill more of our Ichor Holdings, Ltd.-branded products within the gas boxes that we build. That will be a good tailwind as we get into the second half of the year. That is predicated on ramping up our global footprint realignment and what we are doing in Mexico and Malaysia, which we expect to be fully running in the second half of the year. Operator: The next question is from Edward Yang from Oppenheimer. Please go ahead. Edward Yang: Phil, thanks for the time. The first question is more of a clarification. Did you say that you expect 2026 year-over-year revenue growth of 25%? If that is the case, that would imply a bit less than double-digit growth in the second half, but just wanted to clarify that. And given that the industry is supply constrained, are you pretty much set in terms of your 2026 growth outlook, or are there still bottlenecking opportunities that could provide you revenue upside? And finally, on your innovation pipeline, could you speak to any new product or module wins beyond upcycle opportunities? Philip Barros: We are definitely looking at double-digit sequential growth in the second half of the year for sure. There are definitely bottlenecking opportunities that can give us revenue upside. We are seeing some constraints and some noise in the supply chain as we move from Q1 into Q2, but we have a good handle on it. We are well positioned in terms of inventory in order for us to execute, and we have been executing at a high level for our customers. On innovation, we are making great progress in flow control. A ramp like this is the perfect opportunity to get qualified. Some of the constraints we are running into happen to be in the flow control space. There is an open window for us to capture share, and we need to be ready and available for that window of opportunity. Operator: There are no further questions at this time. I would like to turn the floor back over to Philip Barros for closing comments. Philip Barros: Thank you, operator, and thank you, everyone, for joining our call today. I want to once again thank our employees who are taking on this ramp and the strategic transformation all at the same time, executing at a very high level. I have complete faith in the team's ability to execute and could not be more proud to be leading this team along this journey. You can feel the momentum and the energy within Ichor Holdings, Ltd. I look forward to our next update on our Q2 call in August. In the meantime, please reach out to Claire to arrange any follow-up requests for meetings. Operator, you may conclude the call. Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Hello and welcome to Nuvation Bio Inc.'s first quarter 2026 financial results and corporate update call. Today's call is being recorded and will be available on the company's website. All participants are currently in a listen-only mode. A brief question-and-answer session will follow the prepared remarks. Now I would like to turn the call over to J.R. DeVita, Vice President of Corporate Development and Investor Relations at Nuvation Bio Inc. Please go ahead. J.R. DeVita: Thank you, and good afternoon, everyone. Earlier today, we issued a press release summarizing our financial results for the quarter ending 03/31/2026, and provided a business update. The press release is available on the Investors section of our website at nuvationbio.com. Today's call includes forward-looking statements, including statements about the therapeutic and commercial potential of our plans for safusitinib development and future data presentations, the components of our anticipated product revenue, expected milestone payments, and our cash runway. Because such statements deal with future events and are subject to many risks and uncertainties, actual results may differ materially from those in the forward-looking statements. For a full discussion of these risks and uncertainties, please review our quarterly report on Form 10-Q, which we filed with the U.S. Securities and Exchange Commission today. Joining me on today's call are our Founder, President and Chief Executive Officer, David Hung, our Chief Commercial Officer, Colleen Sjogren, and our Chief Financial Officer, Philippe Sauvage. I will now turn the call over to David Hung. David, please go ahead. David Hung: Thanks, J.R. Good afternoon, everyone, and thank you all for joining us. Today, I am excited to discuss the progress we have made across our business in the first quarter. Following the line-agnostic FDA approval of Iptrozy in June 2025, we entered 2026 focused on continuing to build a successful commercial launch in ROS1-positive non-small cell lung cancer, with specific focus on educating physicians, supporting patients, and generating new clinical evidence that reinforces Iptrozy’s differentiated profile. Overall, we are very pleased with our continued execution, highlighted by strong demand for Iptrozy and our ability to significantly increase the percentage of new patients treated in the first-line setting. We successfully treated approximately 200 new patients with Iptrozy in the first quarter, which makes three consecutive quarters of about 200 new patient starts, bringing our total to over 600 since launch. We see a growing trend of more new patients coming from the first-line setting and, in turn, a lower percentage of patients coming from the third-line setting or later. In fact, for the first time since launch, more than half of the new patients who started Iptrozy in the quarter were TKI-naive. Given the changing dynamics of patient mix and moving from later-line to the first-line setting, and considering the significantly increased durability of Iptrozy in earlier versus later-line settings, we are just beginning to see revenue stack in this quarter, as Philippe will shortly discuss. This revenue dynamic is the most important metric for the launch going forward. Therefore, at some point in the future, we will focus on revenue and no longer report new patient starts. This has meaningful implications for the long-term opportunity for our brand, especially now given that based on a recent new analysis presented at AACR, Iptrozy has now extended its median duration of response to 50 months in TKI-naive patients in the pooled results from the pivotal TRUST studies. When patients are treated earlier in their disease course, they are often in a better position to realize increased benefit from a therapy with durable efficacy and generally favorable tolerability. Over time, we believe this can build a larger, longer-duration base of active patients on Iptrozy and support more substantial revenue growth. Since launch, our discontinuations have been driven primarily by disease progression in later-line patients. This is expected in any oncology launch as these patients have already progressed through other approved therapies. From the data that we see, discontinuations in earlier-line patients or for adverse events are consistent with clinical trial results and remain relatively low. As a reminder, and as detailed in Iptrozy’s prescribing information, 6.5% of 337 patients with advanced ROS1-positive NSCLC in our pivotal TRUST studies discontinued therapy due to any adverse reaction. And as we have previously presented, only one of these patients, or 0.3%, discontinued treatment due to any of the six most common adverse events, including liver enzyme elevations, diarrhea, nausea, vomiting, or dizziness. The feedback we continue to receive from both key opinion leaders and our sales organization has been highly consistent. Physicians are impressed with Iptrozy’s clinical profile, citing the durability and tolerability, and the real-world experience is giving physicians increased confidence to both keep patients on therapy longer and to choose Iptrozy when considering a preferred first-line treatment option. This response further supports our belief in both consensus net revenue estimates for Iptrozy in 2026 and its long-term potential. We are also encouraged by the addition of Iptrozy to the latest NCCN CNS guidelines as a systemic therapy option for ROS1-positive NSCLC patients with brain metastases. We believe this is an important recognition of Iptrozy’s demonstrated intracranial activity and further supports its differentiated position in the ROS1 treatment landscape. Turning to our recent abstracts and publications, we were thrilled to present updated pooled results from the August 2025 data cutoff of the TRUST-1 and TRUST-2 studies at the American Association of Cancer Research congress, or AACR. These updated data continue to reinforce the strength of Iptrozy’s profile. In TKI-naive patients in TRUST-1, as recently published in the Journal of Clinical Oncology, median duration of response and median progression-free survival have both now increased to approximately 50 months, or more than four years. As presented at AACR in TKI-pretreated patients, the median duration of response was nearly 20 months in TRUST-2, and the overall survival in the pooled TKI-pretreated population showed a median of nearly 30 months, which is unprecedented in this space. And with this longer follow-up, Iptrozy continued to demonstrate a manageable and consistent safety profile, including lower rates of neurologic adverse events and no new safety signals. We believe these durability data matter not only clinically but commercially. Drugs that combine deep and durable efficacy with a favorable tolerability profile are well positioned to become the therapy of choice for TKI-naive patients, and that is exactly the trend we are seeing in our launch. With approximately three years of follow-up in the pooled analysis, and more than four years of follow-up in TRUST-1, we believe these data further support Iptrozy as an effective, durable, and tolerable treatment option for patients living with advanced ROS1-positive NSCLC. At AACR, we also presented preclinical work which continues to build on our broader scientific understanding of Iptrozy’s differentiated profile. As I discussed on our last earnings call, Iptrozy is designed to achieve deep and durable inhibition of ROS1 while maintaining measured activity against TRK-B. Our presentation showed two important points. First, talotrectinib has nearly complete coverage of ROS1 fusions at clinically relevant concentrations and is effective against ROS1 resistance mutations. Second, talotrectinib has partial, yet biologically meaningful, inhibition of TRK-B, while being sufficiently balanced to avoid significant CNS-related adverse events as seen in our clinical trials and real-world experience. Of note, in the same experiment, a TRK-sparing agent failed to control tumor migration and markers of invasion and metastases, which were well controlled by talotrectinib. These data support the concept that some degree of TRK-B inhibition may be required to inhibit systemic progression, prevent the migration of lung cancer cells, and protect against metastases to the brain. This analysis showed that our medicine may have a mechanistic profile which we believe leads to a potential impact on tumor invasiveness and metastatic behavior in patients, while limiting neurologic adverse events. This balanced approach and ability to prevent resistance could ultimately play an important role in the long-term durable control of ROS1-positive lung cancer, as demonstrated in Iptrozy’s median progression-free survival of over four years. At ASCO in June, we will be presenting additional data from our TRUST program on patient-reported outcomes and our ongoing TRUST-4 study in the adjuvant setting. Turning to safusitinib, we remain very excited about the potential of this program and the opportunity it represents for patients with IDH1-mutant glioma. Beyond its potential clinical importance, we believe safusitinib could address a broad segment of the glioma market and therefore represent a meaningful long-term value opportunity for the company. Safusitinib is currently being evaluated in the ongoing Phase 3 SIGMA study for the maintenance treatment of patients with IDH1-mutant astrocytoma who have high-risk features following standard of care, and in a non-pivotal cohort with grade 3 oligodendroglioma following surgery. In Phase 1 and Phase 2 single-arm studies, safusitinib has shown very encouraging efficacy signals, including durable responses and prolonged progression-free survival across both low- and high-grade IDH1-mutant gliomas. We think about the glioma market as a pie with four parts: low-grade low-risk, low-grade high-risk, high-grade low-risk, and high-grade high-risk tumors. Today, the only approved glioma drug, vorasidenib, is approved in the low-grade, low-risk glioma setting, and prior data have shown limited activity in enhancing or high-risk, high-grade tumors. In contrast, safusitinib has shown significant activity in clinical studies across all four subgroups of IDH1-mutant glioma. The safusitinib SIGMA pivotal trial will target three of the four pieces of the glioma pie, enrolling high-grade high-risk, high-grade low-risk, and low-grade high-risk IDH1-mutant glioma patients. We are also exploring potential studies to further develop safusitinib in the final piece of the pie, low-grade low-risk glioma, and we will provide an update on our plans later this year. I would also like to highlight that a November 2025 publication in Neuro-Oncology summarized the Phase 2 study of safusitinib in patients with chemotherapy- and radiotherapy-naive grade 2 IDH1-mutant gliomas as of a 03/10/2023 data cutoff. Strikingly, as of February 2026, 12 of the 27 patients evaluated in this study remained on treatment with a median follow-up of more than five years. We believe these data continue to support the potential of safusitinib in patient populations with significant unmet need and limited or no FDA-approved targeted treatment options. Importantly, in April, we acquired exclusive rights to safusitinib in Japan from our partner Daiichi Sankyo. With that agreement now complete, we plan to expand the pivotal Phase 3 SIGMA study into Japan, continue to advance the global development program, and pursue presentation and publication of longer-term Phase 2 data so the scientific community remains current on these findings. Finally, we remain on track to provide an update on our drug-drug conjugate platform by the end of the year. Overall, the first quarter confirmed important points in our 2026 outlook. We are seeing solid new patient demand, improving mix toward first-line use, and continued confirmation of Iptrozy’s encouraging efficacy and tolerability profile in the real world. We believe these trends position Iptrozy well for long-term success while we continue to advance a broader pipeline designed to address significant patient needs and create additional future value. With that, I will turn the call over to Colleen. Colleen Sjogren: Thank you, David, and hello, everyone. We continue to see strong momentum in the launch of Iptrozy, and we are particularly encouraged by what we have accomplished in just three quarters, especially when viewed against relevant targeted therapy launch analogs. Based on our internal data, we have generated more new patient starts than the prior ROS1 launches combined over the same time period. We believe this early success reflects the compelling clinical profile of Iptrozy and the focused execution of our commercial team. In addition, it represents a strong foundation for long-term value creation. As David mentioned, new patient starts remained robust at approximately 200 for the third quarter in a row, and this included a greater proportion of patients initiating treatment in the first-line setting. Importantly, our internal data sources indicate that for the first time, over half of new patient starts in the quarter were TKI-naive, compared to approximately 30% in the first full quarter following launch. This continued shift from later-line to frontline use is one of the clearest indicators of the strength of the launch and is in line with what we would expect based on typical uptake trends with new oncology agents. This gives us confidence in Iptrozy’s long term because these patients respond at a higher rate, have the potential to remain on therapy for years, and contribute to a more durable active patient base over time. This dynamic is also important in understanding the discontinuation patterns we have observed, as we are encouraged by how Iptrozy’s clinical profile has translated to the commercial setting. Discontinuations continue to be concentrated among later-line patients, which is expected given the more advanced disease in this population and exposure to multiple prior therapies. As we discussed last quarter, most discontinuations are driven by disease progression in later-line patients rather than tolerability, and this dynamic can introduce some variability in near-term revenue even when new patient demand is steady. Importantly, adverse event-related discontinuations remain low and in line with what we observed in clinical trials, reinforcing the strong overall clinical profile of Iptrozy, including its favorable tolerability. Taken together, these observations, along with feedback from both patients and physicians, reinforce our view that Iptrozy is well positioned to serve patients across the ROS1 lung cancer treatment landscape and has not changed our view of the potential for Iptrozy in this setting. This increasing strength in patient mix and positive real-world feedback on Iptrozy’s treatment profile is matched by expanding adoption across both academic and community settings. We are especially encouraged by the pace of uptake we are seeing, particularly given that ROS1 is a rare disease and the prescriber base is relatively broad. Our commercial efforts continue to translate into strong physician awareness, which we believe is a meaningful indicator of successful launch execution. Based on our most recent market research, aided awareness of Iptrozy among target physicians has reached 97%, underscoring the breadth of our commercial reach and the growing visibility of Iptrozy in the market. We understand that academic and community customers have different needs, and we have been deliberate in aligning our commercial strategy with the distinct value drivers for each setting. As a result, 100% of the top 50 historical TKI accounts in the country have prescribed Iptrozy. Our broad account adoption is another important indicator of launch strength, and when paired with favorable placement on pathways and formularies, it reinforces our belief that institutions recognize the differentiated clinical profile of Iptrozy. We believe the launch progress we have seen to date also reflects the strength of a team that knows how to win in targeted oncology. We are seeing our efforts translate into meaningful account and physician traction, the result is an appreciation for the durability that Iptrozy has to offer and the openness to partnering with Nuvation Bio Inc. Taken together, we believe this positions us well to continue building momentum in the full ROS1 market over time. Lastly, we believe there is meaningful opportunity to increase the number of ROS1-positive patients who are diagnosed and treated with a ROS1 TKI today. Publications and data from the field suggest there should be approximately 3 thousand patients with advanced ROS1-positive non-small cell lung cancer diagnosed annually in the U.S. based on DNA testing. As the field shifts to using RNA- and DNA-based testing together, which may detect an additional 30% of fusions, the annual addressable population could expand to approximately 4 thousand patients. Unfortunately, although effective testing is better in most academic centers, it is currently significantly lower in parts of the community, including below 50% in some centers. To combat this, we have implemented several initiatives to partner with and educate the community on the importance of testing for oncogenic drivers. We strongly believe all patients should have the opportunity to benefit from the prolonged durability and high response rates Iptrozy has shown in the first-line setting, consistent with the NCCN guidelines issued last year. Improving patient identification is the right thing to do for patients and will be a key driver of long-term value for Nuvation Bio Inc. Overall, we are encouraged by the level of demand we are seeing, the shift towards earlier-line use, and the strength of the launch execution to date. The medical community recognizes that Iptrozy’s long durability gives physicians an important tool and offers patients the potential for long-lasting benefit with a generally favorable safety profile so they can stay on therapy for years. With an experienced commercial team, a clear strategy, and disciplined execution across the launch, we believe we are well positioned to continue building momentum and the long-term success of Iptrozy. Now I will turn it over to Philippe. Philippe Sauvage: For detailed first quarter 2026 financials, please refer to our earnings press release which is available on our website. I will highlight a few key points from the quarter. In the first quarter, we generated $83.2 million in total revenue, including $18.5 million in Iptrozy net U.S. product revenue. This represents 18% growth in net product revenue from the prior quarter, which was not only driven by yet another quarter of about 200 new patient starts, but importantly, from a growing population of active patients remaining on Iptrozy due to increasing frontline use. As you can see on this slide, the number of patients starting Iptrozy in the last three quarters has been consistent; however, due to the percentage of first-line patients increasing from approximately 30% in the third quarter last year to approximately 40% in the fourth quarter last year to now more than 50%, net product revenue has grown from $7.7 million to $15.7 million to now $18.5 million, in spite of an expected uptick in gross-to-net. We expect this trend to continue and also expect the number of new patient starts to increase as more U.S. physicians become aware of Iptrozy and testing rates in the community continue to improve. As previously mentioned, our long-term success will be driven by the exceptional duration of response with Iptrozy in the first-line setting. We are pleased that the growing number of TKI-naive patients have started our medicine since the early months of our launch. This trend, combined with our ability to grow revenue despite later-line patients dropping off Iptrozy, demonstrates the potential impact of revenue stacking going forward. Lastly, as noted, we did see an expected uptick in gross-to-net discount at the start of the year; we still expect our gross-to-net expansion to gradually stabilize from here. In addition to product revenue, we recognized $64.7 million in collaboration and license revenue in the quarter, including an upfront payment of nearly $60 million from Eisai pursuant to our partnership, which was announced in January. We also received approximately $1.7 million in royalty payments from our partnerships in Japan and China, both of which are exceeding initial expectations on a new patient starts and net revenue basis. As a reminder, talotrectinib was listed in China’s National Reimbursement Drug List, or NRDL, in January and, since then, sales from Innovent’s launch have increased rapidly. We believe this significant commercial uptake is due to a greater appreciation for effective testing in China, and we also believe this rate of adoption will translate to the U.S. market as patient identification improves over time. We continue to invest in our business and in our programs, resulting in total operating expenses of $73.5 million for the quarter. R&D expenses were $35.0 million, driven by increased investment in the SIGMA and TRUST clinical studies, and SG&A expenses were $38.3 million, primarily driven by commercialization activities. Turning to the balance sheet, we ended the quarter with $533.7 million in cash, cash equivalents, and marketable securities. In addition, $50 million remains available under our existing term loan agreement with Sagard Healthcare Partners through June 30. We also expect to receive a milestone payment of approximately $30 million from Eisai upon the approval of Iptrozy in Europe in 2027. Lastly, on the business development front, we announced our partnership with LSI in January to commercialize Iptrozy in Europe and other territories outside of China and Japan, which we discussed on our previous earnings calls. In April, we also announced the agreement with Daiichi Sankyo to acquire rights to safusitinib in Japan. This transaction made sense to us from a strategic and financial perspective, as it allowed us to fully secure global rights to safusitinib, including ownership of all clinical data and rights to future publications and data generation, without changing our expected cash runway. Acquiring full global rights will reinforce our speed of execution and now allow us to expand our commercial reach to Japan. I would like to thank Daiichi Sankyo for their efforts in developing safusitinib and for their confidence in us to take the program forward to potential global regulatory approvals. Overall, our capital position continues to provide us with the flexibility to support the Iptrozy launch, advance our pipeline, evaluate additional strategic opportunities, all while maintaining a disciplined approach to spending. We continue to believe we are well positioned to execute on our priorities without the need for additional external financing, even on our current trajectory and operating plan. I will now turn it back to David for closing remarks. David Hung: Thanks, Philippe. As we move through 2026, we remain focused on disciplined execution, continuing to build on the momentum of the launch, advancing our clinical and scientific understanding of Iptrozy, and progressing our broader pipeline. I want to thank our team for their continued commitment, our investigators, partners, shareholders, and, most importantly, patients and their families for their ongoing support. We will now open the call for questions. I will now ask the operator to open the line. Operator: We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press 1 to raise your hand. To withdraw your question, press 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please standby while we compile the Q&A roster. Your first question comes from the line of an analyst with Jefferies. Your line is now open. Please go ahead. Analyst: Thank you. Congrats on the progress, and thank you for taking my question. Can you comment on whether the growing first-line patients are coming from the academic or the community settings? And then what specific educational field force initiatives have been implemented to accelerate adoption in the high-volume community setting? Right, adoption and basically use over the chemo-IO agent. Colleen Sjogren: Hey, Farzin, it is Colleen. I will take that one. First, we are very encouraged. We have about 97% awareness right now, and this is uniform adoption of Iptrozy across both academic and community. Most importantly, when we look at historically the top ROS1 accounts—which we have a historical list of about 50 of those accounts—100% of them have prescribed Iptrozy. So we are seeing broad adoption across all channels: academic, IDN, and community. We believe that speaks directly to oncologists being driven by the clinical evidence and TRUST data. It is so compelling that, in each channel, we are seeing really good uptake and adoption. On your question about specific initiatives to accelerate adoption over chemo-IO, one of the things we are really focused on is testing rates. This is a real challenge, and we are not dismissive of it, but we are also not passive about it. The gap between academic and community testing is very well documented, and, frankly, in some community centers, we are seeing testing rates that still remain below 50%. In our opinion, that is unacceptable from a patient care standpoint and represents a really meaningful community opportunity. What gives us confidence is that we have a targeted strategy in place. We are partnering directly with community oncology practices, investing in educational initiatives, and directly working with testing platforms to make sure comprehensive molecular testing is the standard of care and not the exception. We believe in the size of this market, we acknowledge the testing issue, and we are addressing it directly. David Hung: Hi, Farzin. This is David. To add a little more precision, the ability to get first-line patients really depends on them being diagnosed. While we have great awareness in both community and academic centers, testing rates are currently higher in academic centers than community centers. Therefore, the diagnosis of new patients is right now higher in academic centers because that is where more testing is being done. But we have already seen significant improvement in multiple community centers, and we are very heartened by that improvement in testing rates and the awareness that there is a drug that is highly efficacious, durable, and well tolerated to use when those diagnoses are made. We are excited about the change we have seen in first-line percentage—from about 30% in the first quarter after launch to about 40% and now to over 50%. That is a pretty exciting growth trajectory for us because we think it will allow us to meet our consensus expectations for the year if that were to continue. Analyst: Thank you so much. Congrats. Operator: Your next question comes from the line of an analyst with RBC Capital Markets. Your line is now open. Please go ahead. Analyst: Thanks for taking my question. I wanted to follow up on that a little bit, trying to better understand the dynamics of the new patient starts. It seems like it has been 200 for the past three quarters, and you have laid out a lot of reasons why there should be growing awareness and better testing. I am trying to understand why that has not pulled through into more new patient starts yet. For example, why the proportion is changing towards first-line, but you are not necessarily also seeing more of the later-line patients coming on as well. Is there a bottleneck somewhere? If this is something that can be helped by expanding the salesforce and hitting more prescribers, please talk about that dynamic. Thank you. David Hung: It is a great question. The main reason is that, in our early quarters of launch, we were getting mainly late-line patients—third-, fourth-, and fifth-line. Those patients can discontinue therapy in literally a month or two. Very late-line patients drop out very quickly, unfortunately, to pursue other therapies or they pass away. The reason it appears to be a plateau is not that demand is plateauing; it is that the late-line patients are dropping out very quickly. We are getting first-line patients, but those are incident cases. The prevalence pool has already been diagnosed—those are easier to find because they have already had a ROS1 diagnosis and have been on therapy—but they do not stay on very long and drop off quickly. The first-line patients have to be newly diagnosed, and that incidence pool obviously takes longer time to build. The fact that we have gone from 30% to 40% to now over 50% first-line shows we are finding those first-line patients, while the third-, fourth-, and fifth-line patients are dropping off rapidly. That should stabilize because eventually we will deplete that pool. We think we have already captured a significant amount of the late-line patients. That is why we are really focused on first-line. That is what really matters given that we now have a PFS or DOR of more than four years—50 months—which no drug is even within a year of. We think that is going to lead to revenue stacking that will really start to kick in, and we are just seeing that this year. So even with roughly the same number of new patient starts, and in spite of an increase in gross-to-net, revenue still went up 18%. If we keep the same growth rate in first-line patients that we have seen from Q3 to Q4 and Q4 to Q1, we think we should make our consensus for the year comfortably. Operator: Your next question comes from the line of an analyst with Clear Street. Your line is now open. Please go ahead. Analyst: Good evening. Thanks for taking my questions. Maybe a question on repeat prescriptions and distribution. Previously you mentioned a 70% versus 30% academic versus community split, but today you also mentioned that 100% of top 50 accounts have prescribed Iptrozy, which I assume are mostly community-based. Any insight you can provide there? Also, how does the NCCN CNS guideline inclusion help you get more first-line adoption? And on the lower testing rates in the community, are these rates lower because of lack of awareness, or are there other hurdles that could take longer to change? Colleen Sjogren: A couple of things to keep in mind. Across the top historical accounts—100% of those 50 accounts have now written Iptrozy—we see much greater usage now across community, IDN, and academic. You are right: when we first launched, we saw very fast uptake in academics. Now we are seeing just as much strength in uptake across other channels, especially in the community. Academic oncologists are driven by clinical evidence, and the TRUST data speaks directly to that. Community oncologists need practical support—reimbursement pathways, patient support programs, and confidence that their patients can tolerate therapy over time. They are now seeing all of that: the surround sound of Nuvation Connect, reimbursement pathways in effect, and our patient support programs. We believe that is directly linked to increasing uptake in the community. On testing, our accounts are increasingly prioritizing flagging mutation status. As RNA-based testing gains ground alongside DNA, more ROS1-positive patients are starting to be identified each month and year. We are laying the groundwork in education, positioning Iptrozy to benefit as identification rates improve. We are also educating on effective testing—making sure oncologists wait until they get all oncogenic driver testing back before making a treatment decision. David Hung: On the NCCN CNS guidelines, that is important because one of the most widely used previous TKIs in ROS1 was crizotinib, and crizotinib does not get into the brain. The new NCCN CNS guidelines specifically call out the CNS profile of Iptrozy, which contrasts starkly against crizotinib’s complete absence of brain penetration. About 36% of ROS1 cases have brain metastases at first diagnosis, and another 50% will progress in the brain upon first progression. It would be inappropriate to give a drug that is not CNS-penetrant. Not only is Iptrozy highly CNS-penetrant, but even in the second-line setting—often the most difficult-to-treat patients—our intracranial response rate is 66%, the highest recorded so far of any TKI in the pretreated space. That is independent of our unmatched first-line durability. We think the new NCCN CNS guidelines make it even more imperative that doctors select the right therapy. Colleen Sjogren: And, Kaveri, to add to David’s point, we have already received early feedback from HCPs that this will enhance Iptrozy’s profile and impact treatment decisions. Analyst: Very helpful. This has a lot of exclamation points. Thank you so much. Operator: Your next question comes from the line of an analyst with Truist Securities. Your line is now open. Please go ahead. Analyst: Good afternoon, David and team. Congrats on the progress and results, and thanks for taking my question. A competitor recently presented data suggesting activity in patients previously treated with talotrectinib. How would you expect treating physicians to interpret such results? Would you see this influencing sequencing decisions or Iptrozy’s positioning compared to competing or potential agents in the market? David Hung: It does have implications. First, we are delighted that new treatment options are becoming available for patients as they fail therapy. But if you look at Iptrozy’s efficacy—with a response rate of 90% and now a PFS of about 50 months—there is nothing close to it in the first-line space. Repotrectinib’s PFS is about 36 months, so you are still talking about almost a year-and-a-half difference. In the second-line setting, with our DOR approaching 20 months and a response rate of 56% without excluding any oncogenic drivers—and an intracranial response rate of 66% without excluding any oncogenic drivers—there are no agents today that can claim numbers that match those. When a competitor has data in the third-line setting showing response after Iptrozy fails in the second-line setting, we are delighted that patients have another option in the third line. The competitor you are referring to received Breakthrough Therapy designation in the third-line setting, while Iptrozy received Breakthrough Therapy designation in the first- and second-line settings. We think things are playing out as the FDA initially saw them: Iptrozy will be used in the first- and second-line settings; other agents are needed in the third line, and we welcome that because that is what patients need. Operator: Your next question comes from the line of an analyst with B. Riley. Your line is now open. Please go ahead. Analyst: Good afternoon, team. Thanks for taking our questions. Building on the prior point of how Iptrozy is now considered relative to crizotinib and how entrenched positions could shift with additional market education—how relevant is the development of new CNS meds to the clinicians you talk to? And could you comment on dose interruptions or reductions tracking in frontline patients versus later lines? And on a go-forward basis, since new patient adds may not be a very relevant metric, what should we focus on—updates on first-line proportion, durability, gross-to-net—to think about modeling beyond 2026? David Hung: CNS is highly relevant. ROS1 NSCLC is aggressive not only in tumor growth but also in where tumors go. More than a third of patients have brain metastases at diagnosis, and in 50% of cases, upon progression, the brain is the first site of metastasis. That makes it imperative to have CNS coverage as early as possible with an agent that has proven long-term efficacy. Our intracranial response rate in the second-line setting is 66%, our duration of response in second line is about 20 months, and overall survival approaches three years—no other agents have published data close to that. In first line, the difference is even more pronounced: there is no agent remotely within Iptrozy’s 90% response rate and 50-month PFS. Regarding dose reductions and interruptions, the drug is well tolerated. We are not seeing anything new in the real world that we did not see in clinical trials. Dose reduction and interruption rates in practice are essentially what we saw in clinical trials. On efficacy, it is early to quantify real-world durability, but we expect similar performance to trials—about 50 months in first line and roughly 20 months in second line—based on what we see so far and physician feedback. Philippe Sauvage: On the forward-looking metrics, the key driver is the build-up of first-line patients and the resulting revenue stacking. We grew first-line patients by roughly 35% from Q3 to Q4 and again by about 35% from Q4 to Q1. If we keep increasing at that rate from Q1 to Q4, we will hit consensus; if we do better, we can beat consensus. The apparent stability in total new starts reflects two opposing dynamics: first-line patients increasing quarter after quarter, while the finite pool of late-line patients drops off faster. Looking ahead, we will keep talking about first-line build, given the incredible tolerability and durability that help patients stay on therapy a long time and help us progress quarter after quarter. On gross-to-net, Q1 typically sees an uptick due to price changes and mix effects such as 340B and Medicaid. Our gross-to-net increased a few percentage points this quarter as expected. We continue to expect stabilization around the high-20s to roughly 30% over time. There are no surprises here—no surprises on GTN, patients, or operating expenses—everything is tracking as we anticipated. Operator: Your next question comes from the line of an analyst with TD Cowen. Your line is now open. Please go ahead. Analyst: Thank you so much, and thanks for all the detail. As the proportion of first-line, treatment-naive patients rises from 30% to 40% to now over 50% of new starts, can you give us a sense of what percentage of total on-therapy patients are treatment naive at this point? And on gross-to-net, should we assume you will be in the high-20s and stabilize there this year, given it was around 25% last quarter? Philippe Sauvage: On your first question, yes, the proportion of first-line patients among new starts is increasing quarter after quarter, and we expect that to continue. We have limitations on exact real-time data for the full on-therapy base, but you can estimate based on first-line growth rates and the drug’s favorable tolerability profile, plus the late-line versus first-line discontinuation dynamics we described. On gross-to-net, it is fairly mechanical. Increased 340B and Medicaid exposure and the inflation-linked price dynamics drive gross-to-net higher by roughly the amount of the price increase for those segments. We expect to stabilize around ~30% as the mix normalizes and inflation dynamics flow through. This is aligned with what we said previously. Operator: Your next question comes from the line of an analyst with JonesTrading. Your line is now open. Please go ahead. Analyst: Thanks for taking my questions. How is the duration of therapy in first-line patients comparing to your expectations based on clinical trials? And with the recent NCCN additions, do you expect a noticeable inflection, or is that more of a background tailwind? David Hung: It is still early, but first-line patients are clearly staying on longer, which is reflected in revenue growth and the growing active patient base. We expect an average of over four years, consistent with trials, and so far discontinuations are predominantly in late-line patients, as expected. Philippe Sauvage: Side-effect profiles are aligned with clinical trials, so there is no reason for adverse events to drive early discontinuations. David Hung: On the NCCN updates, there is usually some lag. The first NCCN change a year ago—clarifying that IO is contraindicated—took time to shift practice. The CNS guideline may be appreciated sooner given high awareness that ROS1 is brain-tropic. In any case, it is a positive tailwind consistent with Iptrozy’s profile. On issuing annual sales guidance, now that we have hundreds of patients and a clearer growth trajectory, we would be willing to consider providing guidance at some point in the future. Operator: Your final question comes from the line of an analyst with Citizens Bank. Your line is now open. Please go ahead. Analyst: Thanks for taking the question, and congrats on the results. We have gotten a lot of color on CNS efficacy. Could we get the team’s perspective on comparing talotrectinib’s CNS profile to emerging clinical candidates rather than already approved ones? And does the NCCN CNS guideline reinforce the benefit here? David Hung: The nearest not-yet-approved competitor has reported an intracranial response rate of about 45% in the second-line setting, with exclusions. Our intracranial response rate is 66% without excluding oncogenic drivers. Against approved TKIs, Iptrozy’s intracranial activity is also higher. So, based on available data today, Iptrozy’s CNS activity compares favorably, and the NCCN CNS guideline does reinforce that benefit. Operator: Your next question comes from the line of an analyst with UBS. Your line is now open. Please go ahead. Analyst: Hey, thanks for squeezing us in. A quick one on the IDH1 program. Could you remind us of the standard of care in the high-grade glioma setting? And what PFS or ORR would be clinically meaningful in the broader population and in the subset that could read out next year? What would a good result look like, and what could the next steps be? David Hung: The SIGMA trial is a placebo-controlled study. There is absolutely nothing approved for the management of high-grade IDH1-mutant glioma. Management today is surgery for tumor debulking, radiation, and chemotherapy, with limited effectiveness. For response rate, anything north of 20% would be clinically meaningful in an indication with no approved therapies, and we would go to the FDA to discuss an approval pathway. For grade 3 oligodendroglioma—less aggressive than grade 4 astrocytoma/GBM—we would expect higher response rates, and again anything north of 20% we believe would be of strong interest to the FDA given the lack of options. We feel good about this based on data presented so far. Operator: There are no further questions at this time. I will now turn the call back to David for closing remarks. David Hung: Thank you all for your support. We are really excited about what we are seeing with the Iptrozy launch—it has gone pretty much as we had hoped—and we cannot wait to report our next quarter’s results. Thank you very much. Operator: This concludes today’s call. Thank you for attending. You may now disconnect.
Operator: Hello, everyone. Thank you for joining us, and welcome to Pinterest, Inc. first quarter 2026 earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Andrew Somberg, Vice President of Investor Relations and Treasury. Please go ahead. Andrew Somberg: Good afternoon, and thank you for joining us. Welcome to Pinterest, Inc. earnings call for the first quarter ended 03/31/2026. Joining me on today's call are William J. Ready, Pinterest, Inc. CEO, and Julia Brau Donnelly, our CFO. The statements we make on this call reflect management's view as of today, and will include forward-looking statements. Such statements involve a number of assumptions, risks, and uncertainties, and actual results may differ materially. We disclaim any obligation to update these statements. For information about assumptions, risks, uncertainties, and other factors that could affect our results, please refer to our earnings press releases and the periodic reports we file with the SEC and available on our Investor Relations website at investor.pinterest.com. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release and presentation, which are distributed and available to the public through our Investor Relations website. Lastly, all growth rates discussed today are on a year-over-year basis unless otherwise specified. I will now turn the call over to William. Thanks, Andrew. Good afternoon, and thank you for joining our first quarter 2026 earnings call. William J. Ready: We entered 2026 focused on delivering the next phase of growth at Pinterest, Inc., and our stronger than expected first quarter results reflect our early progress. We delivered more than $1 billion in revenue, up 18% year over year, and grew adjusted EBITDA to more than $207 million. Pinterest, Inc. is a destination where our 631 million monthly active users, all of whom are logged in, come to discover what they want and go do it in the real world. That experience is powered by one of the largest image corpuses in the Western world and a powerful proprietary dataset. Together, they allow us to solve a problem that text-based general purpose search was never built for. It is the classic “I will know it when I see it” problem. When a user knows what they want but cannot quite describe it, an image can do what text cannot. That is where our AI and proprietary taste graph come in. By understanding not just what a user is searching for today, but who they are and how their interests are evolving, we have made Pinterest, Inc. a highly personalized AI-powered shopping assistant. The result is more than 80 billion monthly searches on our platform, approximately half of which are commercial in nature, and a platform that continues to distinguish itself as both a destination for users and a vital partner for advertisers. That said, we remain clear-eyed about where we are in this journey. Users are growing, and engagement continues to deepen globally and in UCAN, our highest engagement region. Improvements to shopping and actionability are at the heart of those trends. We have also built an ads platform that is delivering performance for advertisers, but we still have more work to do to ensure monetization more fully reflects the strength of that user activity. Our priorities remain clear. First, continue building a differentiated visual search, discovery, and shopping experience to drive sustained momentum with users. Second, keep AI at the core of everything we do, from powering our user experiences and ad platform to optimizing our internal operations. And third, accelerate monetization through improved go-to-market and measurement capabilities, so our revenue more fully reflects the strength of our engagement. With that context, let me turn to how AI is driving user growth and engagement. Ten straight quarters of double-digit user growth are the direct result of multiyear investments in AI improving personalization and curation within visual search and discovery. At the center of this is our taste graph, which captures visual intent and curation signal built on hundreds of billions of user actions over a decade. Every search, click, and save gives our AI more signal about who a user is and what they care about, which allows us to deliver more relevant and personalized experiences across the platform. Higher relevance drives deeper engagement. Deeper engagement increases retention. And stronger retention brings users back with higher intent. Powering this flywheel is our deliberate approach to AI at Pinterest, Inc. We pair a world-class engineering team with the unique signal from our taste graph to build the models that deliver the best results for our specific use cases. In some cases, that means fit-for-purpose proprietary models that outperform leading third-party alternatives. In others, it means post-training suitable open-source models in our own environment within our cloud infrastructure that deliver comparable outcomes to third-party models, but at a fraction of the cost. Deploying these and other models across our platform has led to meaningful gains in user experience and advertiser performance over the last several quarters, and with ongoing model improvements, we see significant opportunity ahead to extend these models to more surfaces over time. An example of this is PinRack, our proprietary generative retrieval system, which is trained on user activity and our taste graph. Rather than building separate models optimized for each surface, PinRack is now a single model that generates personalized results for each user across all surfaces simultaneously, informed by the full depth of what we know about their taste and interests. We initially launched this model on search and related surfaces in 2025, and subsequently extended it in Q1 to serve content globally site-wide. This launch improved search fulfillment by approximately 180 basis points. It also drove a roughly 180 basis point reduction in CPA and CPC for advertisers. On our search surfaces, where over 72% of our impressions occur today, across both visual and text-based searches, we continue to see searches grow as we improve the experience. In Q1, we updated our proprietary search ranking model, extending user context windows within search by 30-fold, similar to the expansion we previously made to our home feed ranking model. We now use up to 16 thousand user actions over a two-year period to inform the search results shown to each user. This launch improved search fulfillment by approximately 70 basis points and saves by approximately 390 basis points. Our AI capabilities also extend into creative generation with Canvas, our in-house AI image generation model trained exclusively on Pinterest, Inc. data. Canvas allows us to build experiences that reflect the high bar for visual quality and aesthetics that users and advertisers expect from Pinterest, Inc., while operating at an order of magnitude lower cost than leading third-party models. It already supports Pinterest, Inc. Performance Plus creative optimization, enabling advertisers to dynamically edit backgrounds and transform basic catalog images into high-performing lifestyle images. With the newest version of the model now supporting real-time, high-fidelity image editing, particularly in key verticals, we expect to expand Canvas to enable more creative experiences for users and advertisers in the months ahead. Our AI investments are also translating into better advertiser performance, as Pinterest, Inc. Performance Plus, our AI-powered performance ad suite, continues to drive strong results for advertisers. In particular, we are focused on driving adoption of Pinterest, Inc. Performance campaigns, our automated bundle of bidding, budgeting, targeting, and creative features that reduces CPAs and CPCs while requiring half as many inputs to set up as a standard campaign. As we have said in the past, Pinterest, Inc. Performance Plus will be a multiyear customer adoption and product cycle. Just over a year in, approximately 30% of lower-funnel revenue is now running through Pinterest, Inc. Performance Plus campaigns, but we are still early in capturing the full opportunity, as adoption continues to expand and we continue to build out functionality of the suite. Advertisers using Pinterest, Inc. Performance Plus campaigns continue to see higher ROAS and improvements in CPA and CPC compared with business-as-usual campaigns. And importantly, in Q1, adopters of Pinterest, Inc. Performance Plus campaigns grew their lower-funnel spend nearly twice the rate of non-adopters. We are now making it easier for advertisers to validate that performance using the metrics they value most. In Q1, we launched a native A/B testing tool in beta directly in Ads Manager, allowing advertisers to run structured, KPI-driven tests comparing Pinterest, Inc. Performance Plus campaigns to their existing ones. And we are starting to see strong early results. For example, Mejuri, a leading fine jewelry brand, ran a four-week A/B test comparing a dedicated Pinterest, Inc. Performance Plus campaign to its business-as-usual approach. The Pinterest, Inc. Performance Plus campaign delivered a 46% increase in ROAS and a 62% increase in conversions, which led Mejuri to adopt Pinterest, Inc. Performance Plus campaigns more broadly. We are also continuously upgrading our core ads models. In Q1, we unified and retrained our Shopping ROAS models to better predict and optimize for advertiser return on ad spend across multiple stages of our ad stack. In experimentation, these improvements drove ROAS gains of up to 11% and are an indication of what continued investment in our ads platform can unlock. As our ads platform gets better at driving outcomes, the next priority is ensuring advertisers can fully see and attribute the value we are generating for them. That means capturing more of the actions Pinterest, Inc. drives and connecting that data more directly to the measurement tools and bidding systems advertisers use to evaluate and optimize their spend. For our largest and most sophisticated advertisers, we are continuing to pilot integrations with their proprietary in-house measurement systems, which enables our bidding systems to respond dynamically to their specific definition of a successful outcome, whether that is customer lifetime value, profit per order, or something else entirely. In early testing with one advertiser that prioritizes lifetime value, the advertiser cited a 15% to 20% improvement in lifetime value ROAS. These and other bidding optimizations helped drive stronger performance in Q1, and we were encouraged to see some advertisers lean in further over the course of the quarter. We plan to expand this pilot to additional large, sophisticated advertisers later this year. We also expect to deepen integrations with key third-party measurement partners later this year, giving a broader set of advertisers both the attribution clarity to see what Pinterest, Inc. is driving and the bidding tools to act on those insights at scale. Whether an advertiser uses a first-party measurement system or a third-party partner, our goal is the same: help them better understand the full value Pinterest, Inc. is driving, while also helping us optimize our AI bidding systems toward the outcomes that matter most to them. And as we deepen our performance and measurement capabilities on Pinterest, Inc., we are also extending that performance to the biggest screen in the home through our acquisition of TV Scientific, which closed in Q1. With TV Scientific, we are unlocking the ability to extend Pinterest, Inc.’s unique consumer intent signal and audiences beyond our owned and operated properties to power high-performing CTV campaigns. We have already begun integrating Pinterest, Inc. audiences and signals with TV Scientific’s algorithms via TV Scientific’s buying platform. The early results are encouraging. One early partner, a leading home furnishings omnichannel retailer, saw a nearly 190% increase in incremental audience reach and a 159% increase in incremental sales after leveraging Pinterest, Inc. audience data in its CTV campaigns. These are early days, but they demonstrate what becomes possible when Pinterest, Inc.’s deep understanding of consumer intent meets the scale and reach of connected TV. Over time, we expect to integrate TV Scientific capabilities directly into Pinterest, Inc. Performance Plus, turning Pinterest, Inc. into a full-funnel search, social, and CTV performance solution that should open larger and incremental budget pools. As part of our efforts to accelerate the monetization of our platform, I will now turn to how we are strengthening our global sales and go-to-market organization. Since joining as our Chief Business Officer earlier this year, Lee Brown has been focused on making our monetization motion more durable and scalable so we are better positioned to capture the opportunity ahead. He is moving with urgency and has already begun making key changes, particularly in leadership across parts of our international and go-to-market organizations, and how we drive accountability across the sales force and in accelerating adoption of internal AI tooling. For example, we have sharpened our coverage model to position sellers closer to the clients they serve, with higher expectations for how they engage, and we are evolving our sales incentive structures to drive more accountability and give a sharper insight into execution across the organization. We are also incorporating internal AI adoption and advertiser conversion signal quality into how we measure performance. Our performance and measurement sales specialists, the technical sales teams supporting performance and measurement solutions, will soon have product activation and customer engagement targets. And we have rolled out a globally consistent merchant playbook, giving our teams a standardized, scalable way to bring Pinterest, Inc. best practices to market across every region. Looking forward, our ongoing go-to-market work is organized around three broader themes. First, broadening our revenue base. During our last earnings call, I noted that we were seeing pressure from our largest retail advertisers. While it was encouraging to see that dynamic improve in Q1 relative to our expectations, as Julia will describe a bit later, our conviction around broadening our revenue base has not changed. We continue to see meaningful upside over time by expanding our footprint across mid-market, enterprise, managed SMB, and international advertisers. Second, increasing the consistency of our global go-to-market execution. We have evolved from a primarily upper-funnel sales force into a more full-funnel and performance organization. The changes I just described are designed to translate that more reliably into advertiser outcomes and revenue at scale. Third, strengthening our measurement foundation. As measurement becomes an increasingly important part of performance selling, we are leveling up our technical expertise to ensure advertisers adopt our measurement solution and can better understand the full value we are driving. As we said last quarter, some of these changes will take a couple of quarters to fully play through, and progress may not be perfectly linear. But we believe these changes are critical to broaden our revenue base and position us to execute more consistently against the large opportunity ahead. Ultimately, the reason we have conviction in this work is because Pinterest, Inc. is doing something different, and that difference matters. What sets Pinterest, Inc. apart is not just that we help people discover ideas; we help them act on those ideas in the real world. Consider a homeowner renovating their garage who knows they want their space to feel more functional but may not know where to start. On Pinterest, Inc., they can start with garage organization ideas, visually explore different layouts and styles, identify solutions like pegboards or modular storage, and ultimately find and shop the products that bring that vision to life. The same is true for a parent planning a child's first birthday party or a Gen Z user designing a manifestation board. In each case, Pinterest, Inc. helps turn inspiration into action. That reflects the kind of experience we have been building for years. We have long focused on creating a more positive platform—one centered on time well spent, not just time spent. That foundation is becoming even more relevant as the broader online ecosystem faces increasing scrutiny around youth mental health, well-being, and online safety. We were the first major online platform to make accounts for users under 16 private only. We have also supported efforts like phone-free schools and App Store age verification while applying AI in ways to prioritize positivity. Our new brand campaign brings that differentiation to life for consumers. Launched earlier this month in the US and UK, the campaign marks a meaningful step up in how we are showing up in the market. It reaches Gen Z and millennial audiences across television, streaming, cinema, out-of-home, and digital channels through the end of the year. The message is simple and true to Pinterest, Inc.: the best thing you can find online is a reason to live your life offline. In closing, as AI reshapes how people discover, plan, and shop, Pinterest, Inc. is in a differentiated position. Our taste graph and rich curation signal give us a data foundation that is hard to replicate. We are pairing that foundation with product, measurement, and go-to-market improvements to better translate that deep engagement into more durable growth over time. And importantly, we are doing that in a way that stays true to what makes Pinterest, Inc. distinct: helping people discover what they want and then go do it in the real world. I am proud of our team's execution this quarter and excited about the work ahead. With that, I will turn the call over to Julia to share more details about our financial performance. Julia Brau Donnelly: Thanks, William, and good afternoon, everyone. Today, I will be discussing our first quarter 2026 financial results and provide an update on our second quarter 2026 outlook. All financial metrics, except for revenue, will be discussed in non-GAAP terms unless otherwise specified, and all comparisons will be discussed on a year-over-year basis unless otherwise noted. Q1 was a strong quarter. We delivered over $1 billion in revenue for the third consecutive quarter, growing 18% year over year and above the high end of our guidance range. Stepping back, we remain in the early stages of fully monetizing the engagement and commercial intent on our platform. As William discussed, improving the consistency of our go-to-market execution and strengthening our measurement foundation are central to that opportunity. While these changes will take time to fully play out, we believe the progress we are making across the business and the outcomes from our AI investments will lead to durable growth over time. Year to date through today, we repurchased roughly $2 billion of stock, or 109 million shares at a weighted average price of approximately $18, reflecting our confidence in the long-term value of the business. Funded with a $1 billion convertible note and cash on hand, this $2 billion stock repurchase has resulted in an approximately 16% reduction in our shares outstanding versus a quarter ago. We now have $2 billion remaining on our new board-authorized $3.5 billion share repurchase program. We believe these actions reflect both the strength of our business as well as our significant opportunity ahead. Now I will turn to more specifics about our first quarter results. We ended the quarter with 631 million global monthly active users, or MAUs, growing 11% and reaching another record high. We continue to demonstrate user growth across all of our geographic regions. In Q1, our US and Canada region had 106 million MAUs, growing 4%. Our Europe region had 159 million MAUs, growing 7%. And in the Rest of World markets, we had 367 million MAUs, growing 15%. Shifting to revenue, in Q1 our global revenue was $1.08 billion, up 18%, or 15% on a constant currency basis. We saw strength from our conversion and, to a lesser extent, our consideration objective. Across verticals, growth was driven by retail—though with puts and takes—as well as smaller but faster growing categories on our platform, including financial services. As we previewed on the last earnings call, we saw a continued headwind from our largest retailers in Q1. However, AI-driven ad platform improvements, including bidding optimizations for this group, partially offset some of this headwind later in the quarter. Revenue growth excluding these large retailers accelerated in Q1 relative to Q4, underscoring the progress we are making to diversify our revenue base. Turning to our geographical breakouts for Q1: in the US and Canada, we generated $750 million in revenue, growing 13%. Strength came from retail and emerging verticals, including financial services. In Europe, revenue was $186 million, growing 27% on a reported basis or 16% on a constant currency basis. Growth in Europe was driven by retail. Revenue from Rest of World was $72 million, growing 59% on a reported basis or 50% on a constant currency basis. In Q1, overall ad impressions grew 24% while ad pricing declined 5% year over year. The deceleration in ad impression growth versus recent quarters was primarily driven by lapping the initial ramp of monetization in previously under-monetized markets, including from resellers in Rest of World, which had contributed to outsized impression growth the prior year. On pricing, the sequential improvement versus recent quarters was driven primarily by a higher relative mix of UCAN ad impressions, which carry higher average pricing overall, due to the lower growth of international ad impressions I just mentioned, as well as stronger UCAN ad demand. Moving to expenses, in Q1 cost of revenue was $232 million, up 20% year over year and up 5% versus Q4, driven by increased infrastructure spend related to our user and engagement growth. Our non-GAAP operating expense was $574 million, up 16%. The increase was primarily driven by Sales and Marketing due to headcount investments and marketing expenses, as well as R&D to support our AI and product initiatives. In Q1, we delivered $207 million in adjusted EBITDA, above our guidance range, with an adjusted EBITDA margin of 20%, up 40 basis points versus Q1 last year. The higher-than-expected adjusted EBITDA was driven by flow-through from higher revenue as well as a reversal from Canada Digital Services Tax following its repeal. We also delivered Q1 free cash flow of $312 million. Consistent with prior years, Q1 is seasonally our strongest quarter of free cash flow conversion due to higher Q1 collections following Q4 peak revenue. We ended the quarter with cash, cash equivalents, and marketable securities of $1.3 billion. Now I will discuss our guidance for the second quarter. We expect Q2 revenue to be in the range of $1.133 billion to $1.153 billion, representing 14% to 16% growth year over year. Based on current spot rates, our guidance assumes the impact of foreign exchange will be approximately one point of tailwind. For Q2, we expect adjusted EBITDA to be in the range of $256 million to $276 million. We anticipate Q2 2026 non-GAAP cost of revenue to grow sequentially from Q1 2026 by mid-single digits percent, partially driven by the full quarter impact from TV Scientific and our investment in GPU capacity. In Q2, our primary area of year-over-year investment within non-GAAP operating expense will continue to be Sales and Marketing, including in our brand campaign, as well as sales headcount. As a reminder, Sales and Marketing trends tend to be seasonally higher in Q2 than in Q1 due to the timing of certain marketing expenses within the year. Within R&D, we are continuing to invest in headcount to support our AI and product initiatives. As we are still early in the year, our full-year margin outlook is largely unchanged from what we shared last quarter, so I will keep these reminders brief. Starting with cost of revenue, as with Q2, we continue to expect modest headwinds from cost of revenue as a percentage of revenue in 2026 as a result of the investments in areas such as additional GPU capacity, as well as the impact from the inclusion of TV Scientific. Importantly, we are already starting to see strong yield from our GPU capacity investments, including the engagement and performance improvements that William mentioned earlier. For adjusted EBITDA, we continue to expect full-year 2026 margins to come in around 29%, including the approximately 100 basis point drag from TV Scientific that we called out previously. We expect adjusted EBITDA margin pressure to moderate in the second half compared to the Q2 adjusted EBITDA margin implied by our guidance range. In closing, our Q1 results reflect a strong start to the year and the underlying health and relevance of our platform. Our user base is growing, our AI investments are producing measurable results for users and advertisers, and the changes we are making to our go-to-market organization are the right ones for the business long term. Progress may not always be linear, but our direction is clear, and our conviction in our ability to return to our long-term targets and capture the large and growing opportunity ahead remains unchanged. With that, I will hand it over to William for some final words. William J. Ready: Thanks, Julia. I want to thank our teams at Pinterest, Inc., our advertising partners, and all the people that come to Pinterest, Inc. to find inspiration and take action. And with that, we can open up the call for questions. Operator: We will now begin the question and answer session. Please limit yourself to one question. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question. And if you are muted locally, please remember to unmute your device. Your first question comes from the line of Douglas Till Anmuth from JPMorgan Chase. Please go ahead. Douglas Till Anmuth: Thanks so much for taking the question. Can you talk more about the drivers of upside in Q1 across the core business, TV Scientific, and FX? And also how you are thinking about Q2, and do you expect to maintain revenue growth in the mid-teens on an FX-neutral basis in the back half? Thank you. Julia Brau Donnelly: Sure. Thanks, Doug. So on Q1, the story of the strong quarter is really two things. First is the continued broadening of our revenue base, and second, better-than-expected performance from our largest retail advertisers as we continue to drive improvements to the ad platform. In Q1, revenue growth excluding these large advertisers accelerated relative to Q4 as we continue to make progress diversifying our business across mid-market, enterprise, managed SMB, and international. Overall, large retailers remained a headwind to growth, but AI-driven platform improvements, including bidding optimizations we delivered for these advertisers, began to offset some of this headwind later in the quarter. We are seeing strong early results there, including our efforts to link our AI bidding systems directly to advertisers' measurement sources of truth, and we plan to scale that pilot to additional large advertisers later this year. We do not intend to break out TV Scientific's revenue contribution specifically going forward, but I will say for Q1, the TV Scientific contribution was broadly in line with the updated guidance we gave in mid-February. Looking ahead to Q2, given the change in FX impacts in Q2, our guidance for Q2 revenue growth is consistent with Q1 on a constant currency basis. Maybe just to dive in a little bit into some of the color by region, starting with UCAN, which is roughly 75% of our revenue. We achieved double-digit growth in Q1 in UCAN, and we expect to repeat that in Q2. We are really encouraged by the stability we are seeing in that core market. We believe we are on the right trajectory there. International revenue is a smaller portion of our business, but there are a few factors which we expect to moderate international growth in Q2. We are making deliberate leadership and structural changes in our international go-to-market organization to best position for the long-term opportunity, including a new Head of International joining soon. As we said last quarter, progress as we rebuild and retool the organization will not always be linear, and that modest disruption is playing out here in our international regions in Q2. And then, as a reminder, in Q2 we are also lapping more difficult comparisons in Rest of World and Europe due to the ramping of resellers last year and elevated cross-border spend following the introduction of US tariffs. We are still significantly under-monetized internationally relative to the strength of engagement and commercial intent we see on the platform, so our long-term conviction in international is unchanged. We think the changes that we are making now best position us to fully capture that opportunity over time. To your last question on the outlook for the rest of the year, we do not guide beyond one quarter, of course. But stepping back, the plans that we laid out last quarter to return to our mid- to high-teens long-term growth targets are proceeding well, and we are encouraged by the early progress here in the first half of the year. The work that we are doing across the business is focused on returning us to consistent delivery of those targets over time. Operator: Your next question comes from the line of Eric James Sheridan from Goldman Sachs. Please go ahead. Eric James Sheridan: Thanks so much for taking the question. Maybe coming back, William, to some of your comments about the hiring of Lee into the role in the organization. I just want to go a little bit deeper in terms of his areas of focus, what signal investors should be taking in terms of what that means for your go-to-market strategy not only in 2026 but longer term, and how should we be monitoring that in terms of what we will see showing up in the business in the years ahead? Thanks so much. William J. Ready: Thanks for the question, Eric. First of all, at the platform level, it is really important to remember that today our user engagement and commercial activity continues to outpace our monetization. While we have made real progress building a full-funnel performance ads platform, the significant opportunity to broaden our revenue base across performance, mid-market, SMB, and international is still largely in front of us. Over the last three years, we have gone from primarily selling upper-funnel ads to large US CPG and retailers to selling full-funnel performance solutions across more verticals, more advertiser segments, and more geographies than ever before. As those channels have expanded, they have also introduced a higher level of scale and complexity, and that is exactly what Lee is laser-focused on addressing. That scale and complexity is a great thing for our business, but clearly it requires a different operating approach for us to fully pursue the opportunity. What he is focused on first is bringing more accountability, more consistency, more operational rigor, and AI tooling to how we go to market. The through-line across everything he is doing is making performance more visible and measurable and making sure we are executing with greater consistency across regions and teams. Some of the near-term changes I mentioned in my prepared remarks are already underway, including leadership changes across parts of the international and go-to-market organization, accelerating adoption of internal AI tools, and sharpening accountability across the sales force. We are also restructuring and reallocating resources so we can move faster in the parts of the market where we see the biggest opportunity, including mid-market, enterprise SMB, and international. At the same time, we are doubling down on measurement and technical selling capabilities across the organization, and that includes increasing accountability for technical sales teams by adding product activation and customer engagement targets to how we measure performance. As industry has advanced on attribution, we know that we need to move faster, and that is an area we are very focused on improving. Stepping back, I have high confidence in Lee and in the team, and we are already seeing good early progress. The focus now is on building a go-to-market organization that matches the strength of the product foundation that we have spent the last several years putting in place. Operator: Your next question comes from the line of Ross Adam Sandler from Barclays. Please go ahead. Ross Adam Sandler: Great. Julia, you mentioned that the small and midsized accounts accelerated in March. Just curious what you are seeing both in that area and with the large accounts since the conflict started and what the early read is on Q2. In particular, when do we expect the larger accounts to start maybe pick up the pace a bit? Any thoughts there? Thank you. Julia Brau Donnelly: Yes, happy to take that one. As we said, in Q1 the large retailers remained a headwind, but we did see some strength there later in the quarter, largely driven by ad platform and product improvements. And then outside of those large retailers, the rest of the business—the areas we have been talking about in terms of driving growth—accelerated in Q1 relative to Q4. To your question on macro and the Middle East, broadly the environment we are seeing in the ad market is relatively consistent with last quarter. Those large retailers do continue to navigate some tariff-related margin pressure, though we are seeing some stability there. We are continuing to focus on how we grow outside of that business, driven by a lot of the product and go-to-market changes that William was just talking about and that Lee is really focused on driving. We are tracking the conflict in the Middle East, but I would say the impact we are seeing so far from that conflict is small on a dollar basis based on what we now know. We see it most directly in our Rest of World region and to a lesser extent in Europe as well, where it is really isolated to certain verticals impacted by higher oil prices. This has all been factored into our Q2 guidance range. Operator: Your next question comes from the line of Rich Greenfield from LightShed Partners. Please go ahead. Rich Greenfield, if you could double check that your line is unmuted. While we troubleshoot, let us move on to our next question, which comes from the line of Colin Alan Sebastian from Baird. Please go ahead. Colin Alan Sebastian: Great. Thanks. Good afternoon, and thanks for taking the question. Maybe as a follow-up to Ross' question regarding the efforts to diversify the advertiser base, Performance Plus now running at approximately 30% of lower-funnel revenue. What adoption trends are you seeing within the mid-market and SMB segments? And related to that, given that Performance Plus adopters are growing their spend at, I think, twice the rate of non-adopters, how are you leveraging tools like Canvas and PinRack to lower those barriers for smaller advertisers? Thank you. William J. Ready: Thanks for the question, Colin. As I noted, we are really encouraged by the progress in Q1. Our business accelerated in the quarter, and that acceleration was driven by growth outside of our largest retailers. So the diversification we have talked about—we feel really good about the progress we are making there. On SMB, to be very clear, we are referring to advertisers with tens of millions to $100 million of GMV—not really the long tail of mom-and-pop advertisers. It is also important to remember that Pinterest, Inc. Performance Plus only reached general availability approximately a year ago. For the first time, we have a product built to serve smaller advertisers that do not have the time, resources, or expertise to manage campaigns across multiple platforms, and we are only about a year into that journey, which we expect to be a multiyear cycle just as it was for the larger platforms when they deployed their AI-driven automation suites. Early adoption is encouraging. The 30% of our lower-funnel revenue that is now running through Performance Plus campaigns—we feel good about that, but obviously that is still early in the journey of capturing the full opportunity, both in terms of driving continued adoption—because there is significant room to grow adoption—and also because we continue to roll out meaningful performance improvements, a few of which I noted on the call, and we see much more opportunity for that to continue. We are adding more functionality across bidding, targeting, creative, and measurement over time, and a lot of that leverages our in-house capabilities and taste graph—things that we think we are really uniquely positioned to do and are demonstrating. I would also mention that mid-market, enterprise, and international are also still relatively early opportunities for us. We made a good start in both areas last year, and now we are focused on building the teams, processes, and go-to-market motions required to serve a much broader set of advertisers at scale. As I commented earlier, that takes a different level of operational rigor than serving a smaller group of large retailers, and that is exactly what Lee is focused on building. We feel good about the early progress, but we still have a lot more to go—much more of that opportunity is in front of us. We still very much believe that SMB, along with mid-market and international, can become a meaningfully larger part of our business over time, and we have the product and tooling to do that. We are building out the go-to-market to do it as well, but much more build is still in front of us to fully capture that opportunity. We are encouraged by the progress. Operator: Your next question comes from the line of Jason Helfstein from Oppenheimer. Your line is open. Please go ahead. Jason Helfstein: Thank you. I will ask a high-level question and then a quick margin question. How are you viewing the impact from chatbots with respect to the competitive landscape and emerging visual discovery? And second, I know you are not guiding for next year, but is there any way to think about how we should be thinking about expenses for next year relative to what might be a higher level of investment this year after the headcount reduction? Thanks. William J. Ready: Thanks for the question. Obviously nobody can perfectly predict the future, but we are actually several years into a massive AI adoption cycle, and that means we can really learn a lot from what people are already doing. I would start with what we can see and what our users are telling us through their actions already. It is important to note that at the same time chatbots have grown in popularity over the last few years, we have put up ten straight quarters of double-digit user growth and deepening engagement per user. Users, including Gen Z, are engaging with chatbots and Pinterest, Inc. at the same time for very different things. Of Pinterest, Inc.’s more than 80 billion monthly searches, half are commercial in nature, whereas ChatGPT’s own data says that only 2% of their prompts are commercial. You are seeing specialization versus generalization play out among the AI models on enterprise versus consumer, but consumer search has historically had a significant generalization-versus-specialization split as well, and we believe we have clearly carved out a unique and specialized use case on visual search and shopping—again, as evidenced by the fact that many, if not most, of our users have interacted with AI chatbots but are deepening their engagement with Pinterest, Inc. Users come to Pinterest, Inc. leaned in with intent, and Pinterest, Inc. offers something that other platforms are not built to solve, which is visual search and discovery. We surface relevant, personalized recommendations before the user even knows how to ask for what they want, and we connect that to real products that they can act on. We are solving the “I will know it when I see it” problem, which is such a significant component of so many consumer shopping journeys. We are seeing this dynamic play out right now even amongst the largest players, where it is clear that focus has been more successful than trying to be all things to all people all at once. Pinterest, Inc. is a specialized platform, and that is a position of strength. It is very hard to be a text-based general-purpose search platform and simultaneously deliver the depth of visual discovery and taste-based personalization that Pinterest, Inc. offers, and specialization is where we believe we can win. In comparison, general-purpose chatbot platforms start with a blank screen and a command-line interface, and the user has to know what to type, which is a meaningful barrier for discovery and planning use cases because often the user does not yet have the words for what they are looking for. When these platforms generate an image, there is often no path to a real product, brand, or purchase, versus on Pinterest, Inc., where that same journey centers on shoppable content, product comparisons, and real purchase paths, particularly in a primarily visual nature. On agentic commerce more broadly, you have also seen meaningful strategic pivots from some of the platforms that were most aggressively pursuing that space. That validates our view that the barriers to progress in agentic were likely not technical, but around user behavior and ecosystem incentives. We have been clear about partnering with advertisers and not disintermediating their relationship with customers. Hope that helps to give a little more color, and I will give it to Julia on the second part of your question. Julia Brau Donnelly: It is obviously too early to talk about 2027 margins specifically. However, I will reiterate what we said on the last call about the long-term targets of 30% to 34% adjusted EBITDA margin still being the right ones and still being the ones we are shooting for in the medium term. We laid out those targets at the very end of 2023 and made very rapid progress toward those targets. This year we are aiming for 29%, partially because we are including TV Scientific, but if you exclude that, we are basically flat year over year. I still think the 30% to 34% targets are the right ones to be focused on, and we will have more to say specifically on the exact trajectory for 2027 as we get later into this year. Operator: Your next question comes from the line of Justin Patterson from KeyBanc. Please go ahead. Justin Patterson: Great. Thank you. William, I wanted to touch on your deepening engagement point a little bit more. What do you see as the core levers to continue doing that? Given UCAN is a more established market, how much more runway do you have to drive further engagement growth here? Thank you. William J. Ready: Thanks, Justin. While we do not comment on or validate third-party data, our user and engagement strength continues to be one of the real highlights of the transformation we have driven over the last few years. It is eleven straight quarters of record-high users, and it is important to note that 100% of our reported users are logged in and 85% come directly to our mobile app, making Pinterest, Inc. a clear destination app. We have also had ten straight quarters of double-digit user growth. We see ourselves as having effectively turned Pinterest, Inc. into an AI-powered shopping assistant that operates in a primarily visual manner, which is consistent with large portions of how people actually shop. In terms of how we are deepening engagement, we are doing so in the areas that matter most, globally and in UCAN: 80 billion monthly searches, half commercial in nature, which is a much more significant skew toward commerciality than you would see in general search elsewhere or in chatbots. We have also talked about how we are winning with Gen Z—over 50% of our platform and our fastest growing cohort. Not only are they coming to Pinterest, Inc. to shop, but they also value our platform as a more private, positive space committed to their well-being. Our intentional choices to prioritize safety and positivity are really resonating with Gen Z specifically, as well as other generations that we track, and we continue to see growth across generations, including with millennials. Longer term, at the heart of our engagement strength is how we continue to leverage AI to drive better personalization and relevance. Our ongoing improvements to the platform, including the launches we highlighted this quarter across search ranking, content recommendations, and creative generation, are all pointing in the same direction, which is a more relevant and personalized experience that gives users more reasons to come back and anticipates what they are looking for next—all built off of our proprietary signals and unique curation behavior. I have talked about this consistently since joining Pinterest, Inc.: that curation behavior that occurs on Pinterest, Inc., which we see as completely unique in the Western world, gives us a highly differentiated signal that we can use to train AI in ways that others without that signal cannot. That is why Gen Z—who are obviously very familiar with chatbots—are coming to Pinterest, Inc. in larger and larger numbers and with increasing depth of engagement per user, as they clearly get something very different from Pinterest, Inc. than they get from chatbots. Julia Brau Donnelly: One other thing I would add on user and engagement trends: it is worth a quick reminder that Q2 is typically our seasonally softer period for quarter-to-quarter sequential user growth, particularly in Europe. We measure monthly active users on a thirty-day lookback from the last day of the quarter. As we get into the summer months, users tend to travel and spend more time outside, so we often see a seasonal pattern there in Q2. Overall, we feel really great about where the user and engagement trends for the business are heading right now. Operator: Your next question comes from the line of Rich Greenfield from LightShed Partners. Please go ahead. Apologies for the technical difficulties. Your next question comes from the line of Ronald Victor Josey from Citibank. Please go ahead. Ronald Victor Josey: Great. Thanks for taking the question. Two, please. William, as part of the sales reorg that we talked about, I believe you talked about having ad sales closer to clients. Can you talk a little bit more about how the sales force is now structured going forward? Are we talking more regional versus vertical? Any insights about go-to-market would be helpful. And then teeing off on your latest comments around personal assistant and shopping assistant getting greater adoption—we are seeing consumers do that—but talk to us about how retailers are preparing for this going forward. As you look out maybe one to three years and we hear about the personal assistant on Pins, how do you envision that future going forward? Thank you. William J. Ready: Thanks for the questions, Ron. On the sales reorg, we have had regional focus previously—really around segments that report as UCAN, Europe, and Rest of World. The most notable thing over the last few years, as I mentioned in my prepared remarks, is that a few years ago we were primarily an upper-funnel ads platform that really went to market with a smaller number of large CPG and retailers in the US and internationally. As we have built a broader set of user engagement, that allows us now to engage with a much broader set of advertisers. There are different things required for a very large enterprise versus a mid-market advertiser versus an SMB. We really just got the ad product that would let us start to go beyond those largest retailers into mid-market and SMB—that went GA approximately a year or so ago. Over 2025, we saw good early progress there, but we also saw that we need more specific efforts around those different segments, and we need to target our sales and go-to-market approaches differently for a mid-market or SMB than for the largest retailers, which is where more of the approach had been focused in the past. As you do more and more performance selling, you have more to do around measurement and technical selling. We talked about measurement and the things we are doing around getting more technical sales capabilities and the right measurement implementation. As I mentioned, we have more than 5x’d the number of clicks we send to advertisers over roughly the last three years, but our monetization has not increased nearly at that rate, which means there is a lot more shopping activity that we are driving than what our monetization currently reflects. Part of that is driving deeper measurement integrations to get credit for that. So that is part of the go-to-market motion—the technical selling capability is a really important addition. Those are some of the things in terms of going a little bit deeper on the go-to-market there. On the second part of your question—shopping assistance and AI—a few things. We launched Pinterest, Inc. Assistant in beta in Q4 of last year. As we continue to have strong user engagement trends, we are being intentional and taking our time on getting the product-market fit right with Pinterest, Inc. Assistant and incorporating important learnings into our core user experience. I think you have seen some false starts from others in the space that they then had to pare back. We have such strong commerciality and great traffic that we are driving to advertisers that we want to make sure we are doing this in a way that deepens the relationship between the user and the advertiser. Over the past couple of months, we have materially advanced capabilities of the underlying model powering the Pinterest, Inc. Assistant, due to both advancements in the underlying open-source model as well as our ability to post-train that model with our unique data and integrate it into our suite of in-house models. As we bring that to market, we are growing our excitement about being able to solve more of the shopping journey, but in a way that more deeply connects the user to the advertiser. For our brands and retailers, we want them to gain a customer, not just a transaction. We have been really successful in doing that over the past few years, and we want to make sure we continue to do that with our assistant. We are seeing good ability to do that, with more to come in terms of how we will continue to ramp that over the coming months and quarters. Last, on models across the industry, the industry is converging on a view that we reached at Pinterest, Inc. relatively early on: the unit economics of relying on large proprietary third-party LLMs do not make sense for many use cases, as companies end up paying a significant premium for what might be an overengineered generalized capability that is not necessarily optimized for company-specific problems. It is increasingly clear that the narrative that you have to rely on only one of the largest proprietary models to get significant benefits from AI is not holding up. Our approach has been deliberate from the start. We build compact, fit-for-purpose models trained on our proprietary data for our most unique and core use cases such as visual understanding, and we have seen these consistently produce better results at far lower cost for the majority of what our product does. For the more generalized LLM capabilities, we use suitable open-source models running in our own cloud environment within our infrastructure when they are the right tool, and then we post-train them on our own proprietary data. That has multiple advantages: since it runs in our environment, it is more secure; it has much lower latency; and since it has been trained on our unique data, it delivers better performance than off-the-shelf proprietary models at a fraction of the cost. That is all enabled by the unique feedback loop that we get from the curation on our platform. Pinterest, Inc.’s dataset is fundamentally different from what third-party models have been trained on. As we think about advancing our assistant, pairing our fit-for-purpose in-house models that are great at understanding and driving commerciality and recommendations with some basic LLM capabilities—and then post-training that in the places that can be helpful to the user—we think that unique combination can really help a lot and we can do differentiated things. Lastly, in terms of the incredibly valuable assets that we have with our data and our taste graph and how much that lets us do unique things with AI, I would point you to what we are doing with TV Scientific. It is a very tangible example of what we can do with that data beyond our Pinterest, Inc. app, where we have been able to achieve a 27% increase in outcomes and a 65% increase in purchases by leveraging our taste graph on top of TV Scientific’s algorithms. That is one tangible example we talked about on the call of how we can use our data on top of algorithms to get even better outcomes and is part of what we are doing with AI models generally—both what we build in-house and where we retrain open-source models. Hopefully that gives you a sense of how we are thinking about the assistant and the advancement of the AI landscape overall. Operator: Your next question comes from the line of Shweta Khajuria from Wolfe Research. Please go ahead. Shweta Khajuria: Thank you for taking my question. Could you please talk to your view on the evolving regulatory environment and the focus on online safety for younger folks, and perhaps the opportunities or risks from the pending and/or proposed regulations? Thanks, William. Thanks, Andrew. William J. Ready: Thanks, Shweta, for the question. We are seeing a clear trend where parents, policymakers, and governments are raising the bar on online safety for young people, and this is a conversation we have long pushed for. We believe social media companies should compete on their safety record the same way car manufacturers compete on their safety ratings. We have proven that prioritizing safety and well-being can lead to better business outcomes. As a specific example, when we made accounts private by default for under-16s in 2023, many people thought it would hurt our relationship with Gen Z. Instead, Gen Z is now our largest and fastest growing demographic, representing more than 50% of our user base. Beyond what is happening from a regulatory perspective, we see that young users are becoming much more keenly aware of the negative effects of traditional social media and are looking to create a healthier social media diet and spend time in places that they know are positive for their well-being. In addition to making accounts private by default for users under 16, we have supported phone-free schools and App Store age verification, and we apply AI in ways that prioritize and tune for positivity. The response from users reflects that there is genuine consumer demand for a more positive and safer space online, and Pinterest, Inc. has earned that trust by making the right choices over many years. While neither we nor anybody else can perfectly predict what happens in the regulatory environment, we welcome that conversation. We have been an active voice in those discussions, and we have seen policymakers recognize and appreciate the proactive stance that we have taken on these issues. For the sake of all our young people, we are hoping to see more advancement of that dialogue. Operator: Your final question comes from the line of Brian Thomas Nowak from Morgan Stanley. Please go ahead. Brian Thomas Nowak: Great. Thanks for taking my questions. Maybe just two. One, on the upside in the first quarter—it sounds like it was driven by some of the attribution improvements from the large advertisers toward the end of the quarter. As you look into Q2, are you assuming you see further benefits from that attribution modeling across even more advertisers, or would that be a source of upside to your base case expectation? And then secondly, William, you have quite a few innovation irons in the fire. Are there any one or two that you would point to and say this could be a driver of substantially faster growth in revenue even this year, like the attribution modeling was? William J. Ready: On the first part of your question on attribution—this is not a guidance commentary, to be very clear—but as I mentioned in the prepared remarks, linking our AI bidding systems to the measurement sources of truth of the advertiser allows the AI to deliver more and more outcomes that are aligned with the way the advertiser sees value. As we rolled it out in Q1—and we were in beta with that in Q4—we are seeing that work well. We have more deployment to go, and we are excited about that. We also think that, as I mentioned a few times, continuing to deepen our measurement integrations with our partners should allow us to capture much more of the value that we are creating. Again, we have more than 5x’d the number of clicks to advertisers over the last three years, but revenue has not increased nearly as much as that. As you look at what is happening with other platforms, you hear them talking about model conversions, you see them growing revenue faster than the rate of their supply growth. Those model conversions and similar dynamics mean that some platforms are doing a better job of taking credit for clicks and conversions that they may not have driven directly or where they were a more tangential part of the path. We think as we get more deeply integrated into measurement platforms, that gives us opportunities to get more of our rightful credit for those things. Simultaneously, another positive trend is that as advertisers start to really give more credit to actions beyond just the last click, we have a lot of upper- and mid-funnel activity as well. As we see that playing out, we think that is generally, in the long term, a good thing for our platform, but there is a lot of work to do in terms of getting the measurement and integrations adopted—both from a product standpoint and via the sales and go-to-market efforts—which is why we have had the meaningful retooling of our sales and go-to-market. In terms of innovation, one of the things I would point you to—we see and are driving much more commerciality than what we believe we are getting credit for today, and we also think that commerciality can let us take that very unique, highly commercial audience that we have and drive outcomes well beyond just our owned-and-operated property. TV Scientific can be thought of as the first move in that direction, and we shared some of the stats we are really excited about: the 27% increase in outcomes and 65% increase in purchases when you brought the Pinterest, Inc. audience on top of the TV Scientific algorithms. We have a lot more to do in CTV, and we are very excited about that. We also think there is more we can do in terms of leveraging our audience beyond surfaces—beyond just the Pinterest, Inc. app—which we think is a really interesting area of opportunity. Connected TV is off to a good start; lots more to do, but we think there is more that we can do in terms of the value of that audience more broadly. Julia Brau Donnelly: To wrap up, our plans here all factor into our Q2 guidance numbers. It is way too early to talk about what is happening in the second half of the year, but we are feeling really good about the first-half progress against the plans, and our goal is to continue hitting consistently our mid- to high-teens revenue growth targets, which are our long-term targets. Operator: This concludes our question and answer session. We will now turn the call back to William J. Ready for closing remarks. William J. Ready: Thank you again to all of you for joining the call and for your questions. We look forward to keeping this dialogue going, and we hope you enjoy the rest of your day. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Thank you for standing by. My name is Jordan, and I will be the conference operator today. At this time, I would like to welcome everyone to the Q1 2026 Ameresco, 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, simply 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 Leila Dillon, Chief Marketing Officer. Please go ahead. Thank you, and good afternoon, everyone. Leila Dillon: We appreciate you joining us for today’s call. Our speakers on the call today will be George P. Sakellaris, Ameresco, Inc.’s Chairman and Chief Executive Officer; Mike Backus, who will become the CEO of Neogenix Fuel; Nicole Bulgarino and Lou Maltezos, newly appointed co-presidents of Ameresco, Inc.; and Mark A. Chiplock, Chief Financial Officer. In addition, Josh Barabow, our Chief Investment Officer, will also be available during Q&A to help answer questions. Before I turn the call over to George, I would like to make a brief statement regarding forward-looking remarks. Today’s earnings materials contain forward-looking statements, including statements regarding our expectations. All forward-looking statements are subject to risks and uncertainties. In particular, some of the commentary is predicated on the expected closing of the Neogenix Fuels transaction. Please refer to today’s earnings materials, the safe harbor language on Slide two of our supplemental information, and our SEC filings for a discussion of the major risk factors that could cause our actual results to differ from those in our forward-looking statements. In addition, we use several non-GAAP measures when presenting our results. We have included the reconciliations of these measures and additional information in our supplemental slides that were posted to our website. Please note that all comparisons that we will be discussing today are on a year-over-year basis unless otherwise noted. I will now turn the call over to George. George? Thank you, Leila. George P. Sakellaris: And good afternoon, everyone. I am pleased to report that we had a solid start to the year, with the Ameresco, Inc. team delivering 14% revenue growth, despite experiencing adverse weather conditions affecting several of our RNG facilities. New business also remained quite strong, with 20% growth in awarded backlog, against a backdrop of significant activity, especially with the federal government. We also announced several important corporate actions which we have taken to better position ourselves for substantial future growth opportunities while also maximizing shareholder value. Today, after the market closed, we announced the signing of a transformational agreement with HASI for a $400 million strategic investment in our biofuels business. This agreement will create a newly formed joint venture named Neogenix Fuels. Ameresco, Inc. has been a leader in the biofuels industry for the last 25 years. When completed, this transaction will enable us to monetize a portion of the $1.8 billion enterprise value that we have created in our biogas business. Of the $400 million commitment from HASI, $300 million will be directly invested in Neogenix Fuels to drive business growth, and $100 million will be direct compensation to Ameresco, Inc. for the existing business, which would be used for strategic opportunities, working capital, and deleveraging throughout the year. I would like to turn the call over to Mike Backus, a member of my management team for nearly 30 years and who will become Chief Executive Officer of Neogenix Fuels, to comment on this exciting introduction. Mike? Thank you, George. Good afternoon, everyone. First and foremost, I very much appreciate the confidence and trust that George and HASI leadership have bestowed on me to take the helm of what we see as a transformative business. As many of you are aware, I have been leading Ameresco, Inc.’s biogas business since the founding of the company, helping to create one of the country’s largest greenfield developers of biogas projects. We are thrilled to be taking the next step in this evolution along with our long-term partner, HASI, with the creation of Neogenix Fuels, which will be 70% owned by Ameresco, Inc., and 30% by HASI. As part of the transaction, Ameresco, Inc. will contribute its operating biogas assets along with one of the most robust development pipelines in the industry. The organization will be staffed by Ameresco, Inc.’s seasoned team of biogas veterans. Both Ameresco, Inc. and HASI recognize the tremendous opportunities to deliver resilient energy and biofuel solutions while building the foundation for renewable molecules and next-generation drop-in fuels of the future. This transaction represents a combination of Ameresco, Inc.’s proven history and expertise in successful biogas development with HASI’s deep sector financial knowledge and scalable capital platform. We see this partnership as positioning Neogenix to become a global industry leader in the next generation of fuels as our addressable market continues to expand. As noted, we have a signed agreement and expect the timely close to the transaction. George, I will turn the call back to you. George P. Sakellaris: Thank you, Mike. We are very excited about this transaction, which I believe not only recognizes the tremendous tangible value of our energy assets, but also positions Ameresco, Inc. to better drive long-term profitable growth. And also during the quarter, we strengthened our corporate structure to position us to fully execute on our great growth opportunities. We recently promoted proven leaders, Nicole Bulgarino and Lou Maltezos, to co-presidents of Ameresco, Inc., and Peter Grisakas to Chief Operating Officer. Lou and Nicole both came to Ameresco, Inc. 22 years ago with our successful Duke Solutions acquisition. As co-presidents, Nicole and Lou will work closely with me on Ameresco, Inc.’s continued growth strategy while at the same time maintaining clear and distinct areas of operational focus. The easiest way to understand the operational alignment is to look at our current project business, which is split evenly between energy infrastructure and building efficiency. Nicole is responsible for the energy infrastructure half of the business while continuing to guide the company’s federal solutions business. Lou focuses on the building efficiency side, overseeing the core non-federal projects. Now I will ask each of them to comment on some of the market dynamics in their respective area. Nicole? Nicole Allen Bulgarino: Thank you, George, and good afternoon, everyone. Ameresco, Inc.’s federal business continues to be a core strength of the company. We see strong demand across our traditional federal programs, including energy efficiency and infrastructure modernization with long-term ESPC and design-build work. Ameresco, Inc.’s military and civilian federal government customers remain focused on upgrading buildings, improving reliability, reducing life-cycle costs, and hardening critical facilities, and I am pleased to note a nice uptick in federal government proposal activity over the last year. Ameresco, Inc.’s longstanding relationships, technical expertise, and proven execution track record position us well to continue delivering strong results in this important market. In parallel, we are seeing great demand for our energy infrastructure solutions. We have built a strong pipeline of large and complex projects, including transformational data center opportunities. This activity is being driven by growing demand for on-site reliable power solutions where access to utility power is constrained or delayed. We are approaching this market with discipline, focusing on larger, experienced developers and projects where Ameresco, Inc.’s behind-the-meter capabilities can provide clear value. While still disciplined in what we advance, we are encouraged by the quality and the scope of opportunities we are pursuing and how they are progressing. I will now turn the call over to Lou. Thank you, Nicole. Lou Maltezos: It has been a very exciting time for our project business, with our long history and expertise in providing building efficiency solutions. For many of our customers, energy represents one of their single largest operating expenditures. More and more, our customers are experiencing spiking electricity prices, leading to heightened interest in energy efficiency solutions. In addition to these challenges, many customers have older, often outdated buildings with limited capital budgets to pursue new construction. So upgrading their existing facility is not only the best economic option, but it is often their only option. The cost savings generated from our energy efficiency upgrades can then be reinvested in a laundry list of facility improvements, all done by Ameresco, Inc. As electricity prices rise, energy efficiency investments drive much faster returns, allowing our customers to tackle more and more improvement. This enables Ameresco, Inc. to execute larger, more comprehensive projects. As one of the largest energy services companies in North America, Ameresco, Inc. should be a main beneficiary of increasing energy costs for years to come. I will now turn the call back over to George for a few brief comments before Mark covers our financials. Thank you, Lou. George P. Sakellaris: Before we turn to the financials, I want to step back and connect the themes you have heard over the last few minutes. We see the creation of Neogenix Fuels with HASI as a clear validation of the scale and value we have created in our biofuels platform, while also bringing in a strong long-term partner and incremental capital to accelerate the next phase of growth. At the same time, the leadership updates we announced reflect the depth of our bench and our focus on continuity and execution as we scale, positioning Mike to lead Neogenix Fuels and elevating Nicole and Lou as co-presidents to sharpen execution across our energy infrastructure and building efficiencies business. Together, we see these actions strengthening our operating model, enhancing our ability to deploy capital and talent where returns are most attractive, and keeping Ameresco, Inc. firmly on the same strategic path: delivering durable growth while creating long-term shareholder value. With that, I will turn it over to Mark to walk through the core financial results and guidance reflective of the Neogenix Fuels transaction. Mark? Mark A. Chiplock: Thank you, George. We had a solid start to the year, with total revenue of $[inaudible] million, up 14% year-over-year, reflecting broad-based growth across our core businesses, and led by continued strength in Projects and O&M. Project revenue increased 16% to $291 million, driven by solid execution across federal and key geographies as well as continued demand for both building efficiency and energy infrastructure solutions. Importantly, business development activity remained very strong. Awarded project backlog grew 20% to $2.8 billion, with over $500 million of new awards during the quarter, bringing our total project backlog to $5.3 billion. We continue to see a healthy pipeline of opportunities and strong proposal activity, particularly in the federal market. Energy Asset revenue grew 7% to $61 million, supported by the continued expansion of our operating portfolio. We did see some weather-related impacts at certain RNG facilities during the quarter, but the underlying performance of the portfolio remains strong. Our operating energy asset base now stands at 838 megawatts, with 568 megawatts in development and construction, positioning us well for continued long-term growth. As we continue to scale this platform, we are increasingly focused on both the operational performance and the capital efficiency of our asset strategy. In line with that strategy, and as George highlighted, we entered into an agreement to sell a 30% equity interest in our biofuels business. Of the $400 million commitment from HASI, $300 million will be directly invested in Neogenix Fuels to drive business growth, and $100 million will be direct compensation to Ameresco, Inc. for the existing business, which will be used for strategic opportunities, working capital, and deleveraging throughout the year. This transaction implies a post-money enterprise value of approximately $1.8 billion and recognizes the tremendous value embedded within our energy asset portfolio. In addition, it will allow us to retain control of the platform and bring in a trusted partner to help fund future growth, which will allow us to continue scaling the business in a capital-efficient manner. Turning back to the financials, O&M had another strong quarter, with revenue up 22%, driven by the continued additions of new long-term contracts. Our long-term O&M backlog now exceeds $1.5 billion, reinforcing the visibility and durability of this revenue stream. Gross margin of 14.1% reflects project mix along with the impact from adverse weather conditions at certain RNG sites. We continue to make targeted investments in people, project development, and execution to support future growth. These investments drove operating expenses to $46 million during the quarter. Net interest and other expenses were slightly higher than expected, driven primarily by $1.8 million of non-cash mark-to-market impact and approximately $1 million in foreign exchange losses. Net loss attributable to common shareholders was $18.3 million, with a GAAP EPS loss of $0.35 per diluted share and non-GAAP loss per share of $0.33. Adjusted EBITDA of $40.5 million was in line with the company’s expectations. Turning to our balance sheet, we ended the quarter with $104 million of unrestricted cash. Total corporate debt was $417 million, reflecting our investment in working capital to support continued growth across both our project and energy asset businesses. In the quarter, our senior secured lenders reaffirmed their confidence and commitment to Ameresco, Inc. by increasing our term loan by $45 million. Our corporate leverage was 3.2 times, which remains below our 3.5x covenant. Our cash generation remains solid this quarter, with adjusted cash flows from operations of approximately $62 million. On a longer-term basis, our eight-quarter rolling average adjusted cash from operations was approximately $57 million. Now turning to guidance. Given our solid start to the year and strong visibility, we would have been reaffirming our 2026 guidance, but in anticipation of the closing of the Neogenix Fuels transaction, we are updating our full-year guidance to reflect the expected impact on our reported results. Given the structure of the transaction, we plan to consolidate Neogenix Fuels, and therefore our revenue guidance remains unchanged. Thirty percent of adjusted EBITDA and net income from the biofuels business will be attributable to HASI and reflected as noncontrolling interest. Consistent with this, our operating assets and assets-in-development metrics will reflect our 70% ownership, and the 100% of Neogenix Fuels’ assets and liabilities including all related project-level debt. HASI’s 30% ownership will be reflected as a noncontrolling interest within shareholders’ equity, representing their share of the JV’s net assets. We continue to anticipate placing approximately 100 to 120 megawatts of total energy assets in service, including two RNG plants. Expected CapEx is $300 million to $350 million, the majority of which is expected to be funded with a combination of energy asset debt, HASI’s investment, tax equity, and tax credit sales. The revenue cadence for the remainder of the year is expected to follow our historical seasonal pattern, with results weighted towards the second half. We expect the second half to contribute approximately 60% of total 2026 revenue, consistent with recent year performance. And finally, for the second quarter, with the expectation that the Neogenix Fuels transaction will close in the quarter, we expect adjusted EBITDA of $58 million to $62 million and non-GAAP EPS of $0.18 to $0.23. Now I would like to turn the call back to George for closing comments. George P. Sakellaris: We are not only off to a solid start in 2026, but we are also taking decisive steps to position the company to thrive long term and build shareholder value. We look forward to seeing many of you at upcoming meetings and conferences. In closing, I would like to once again thank our employees, customers, and stockholders for their continued support. Operator, we would like to open the call to questions now. Operator: We will now open the call for questions. In order to ask a question, press star followed by one on your telephone keypad. Please limit yourself to one question and one follow-up question. Your first question comes from the line of Craig Aaron from ROTH Capital Partners. Your line is live. Analyst: Good evening, George. Congratulations on another really foundational move for the company with the investment in Neogenix here. We have advocated for this for years, and it is really just a fantastic thing that I think will generate a lot of value for your company. So congratulations. George P. Sakellaris: Thank you. Thank you, Craig. Analyst: As we look at the value of Neogenix, you know, a lot of people know that Mike has been incredibly loyal to your company, having built your asset portfolio from his early days, I guess, at Duke Solutions. Right? And it seems that the multiple that you are using for the enterprise value might be kind of at the low end of the range versus what some of the other public competitors are trading at. If you were to use a public mark for the valuation of this business, what are the features of this business that you would point people to that would have you compare this to some of your peers that seem to trade at a better than 15x multiple? George P. Sakellaris: Well, we went out and we spent over a year evaluating the company and looking at various proposals and so on, and we think we got a very fair valuation for the company. And the fact that we are only selling 30% is because with the additional investment that we will make in the company, the $300 million coming into it, we will accelerate development. We have almost 10 projects under development right now, and it will help us accelerate the development. At the end of the day, we will substantially increase the value and become much more significant. And Josh did lots of the analysis. I think you might want to add some color to that. Joshua Riggi Baribeau: Sure. Yeah. So one of the reasons we did this transaction and, of course, got board approval and we had a lot of brainpower behind the advisers we used is because we actually believe this is in line, if not above, market multiples. We are at over 20 times post-money valuation on the $1.8 billion. So again, we believe that is significantly greater than Ameresco, Inc. was trading prior to this, as well as what a lot of the prior transactions in the market—either public comps or transaction multiples in the past three, four years in the space—have been. So we are very comfortable that we created a lot of value here and unlocked a lot of value. Analyst: Congratulations on that. The next question is also not really about the quarter. For the last many years—how long it has been, I guess, 10, 15 years—investors have had a hard time separating out the debt related to your ESPC receivables financing. There has been constant debate about do we take it out, do we leave it in. We have been squarely in the camp that you take it out because it is nonrecourse debt. It is debt where the federal government is the agency recourse there. You have never had a project not accepted by the federal government. You handled one of the biggest issues today with Neogenix that I think will drive value for the company over the long run. This is another key thing that I know that you have been bringing some creative ideas to over the last many years. Is it possible that we see this other point of structural confusion in the market—similar changes that might allow a cleaner valuation on Ameresco, Inc. versus its peers so people can see how clearly your company is undervalued? George P. Sakellaris: Yeah. We will go back and convince the SEC to change the way we were doing it before. You know? And you have a good point, Craig. No question about it. It is nonrecourse debt, and it should not show up as people combine it, and they indicate that the company will be over-leveraged when indeed it is not. So Mark, I might want to ask you to add color. We will not geek out on the accounting with our GAAP account, Mark A. Chiplock: But the federal ESPC—I mean, the contract structure, I think, that the federal government likes to use—certainly, Nicole can speak more to that. So yeah, I think we are constrained a little bit, and I think some of the complexity is just really how we need to report this, not only on the balance sheet but coming through the cash flows. But we do not consider this to be debt, and so we do not include it in our reported debt in our metrics. But I do not know, at this point—I guess you will be able to tell us—you know, we see that changing of the contract structure. I do not see any. You know, it might not be a bad idea to start George P. Sakellaris: Think about it and see if maybe we can do something. Yeah. Analyst: Excellent. Excellent. If I could squeeze in one last question. Your EBITDA dollars are $1 million ahead of consensus, $2 million ahead of us in this quarter. You mentioned some weather headwinds that impacted things a little bit in the first quarter. Clearly, the federal business is not facing some of the potential issues from the shutdown. Everything is tracking in line. Were there any particular closeouts or big wins or big pieces of book-and-burn business that maybe contributed to the strength in the quarter, or is this just indicative of a strong start to the year? George P. Sakellaris: It was a strong start for the year, and probably, I would say, $20 million to $30 million of next quarter revenue that we pulled into this quarter. But the weather, though, did have a major impact. We had the freeze-up on three of our RNG plants, and that was for at least a couple of weeks, Mike, or more. So we would have had an excellent quarter if that had not happened. And then, of course, the snow cover—we had more snow this season than we did the last couple of seasons. And that did not help some of the solar farms that we had. Even on the construction side, some of the solar farms, we could not get in. We had to demobilize, remobilize. But anyway, not a one-time pickup. Mark A. Chiplock: I think it was purely mix that in a way helped to some of the impacts, but nothing unusual or one-time from a closeout perspective. Yep. Analyst: Great. Well, thanks for taking my questions and congratulations on these big changes. Operator: Next question comes from the line of George Gianarikas from Canaccord Genuity. Your line is live. George Gianarikas: Hi, everyone. Good afternoon, and thank you for taking my questions. Again, maybe to focus on Neogenix. What are the plans that you have in place to accelerate growth? And are there any additional plans to maybe go public with this asset as well? Thank you. George P. Sakellaris: You know, we always look at opportunities to maximize value. And if Craig is right, we grow it, get it to a large enough size, and then we will look at opportunities, no question about it. And as far as the money that we will invest, the $300 million, no question about it, we will accelerate the growth. Right now, we are building a couple of plants a year. I think it will take us probably a couple of years at least to get to about four plants a year, and maybe we could do a little bit better than that as we go down the road. But as you know, to permit some of these plants, it takes a couple of years. So you are not going to see anything till late 2028 and beyond. But the plan is to accelerate the growth, double up. And then Mike might want to add some more color—some other opportunities that we are looking at—that will help us accelerate the growth. Mike Backus: Yeah. And, George, just from me again. Look. There is a tremendous amount of opportunity, I think, in our space to see some consolidation. And so there is a fair bit of, I think, platform—small—that might do M&A and help us grow the business in addition to our organic growth. As you know, to date, our portfolio has been 100% greenfield. We have not acquired anything yet. I also think that the market has really started to transition to more of a global opportunity, and I think the capital will allow us to expand our resources to potentially export some of our product that we produce today. George Gianarikas: Thank you. And maybe as a follow-up on the cash. So you are expecting $100 million of cash from the transaction internally to Ameresco, Inc. And if I may bring this up, at some point, you are going to get, if our math is correct, about another $100 million from the SEC deal. So you will be, I would argue, at a corporate level at least, relatively underlevered. What are your plans for that about $200 million of cash infusion? George P. Sakellaris: I can start. Look. One of our business plans is to have sufficient cash in order to be able to accelerate the growth of this company. We have been growing in the high single digits, and we want to add a few percentage points to that to get over the 10% threshold that we have established as a goal internally. And then we know—we added a substantial amount of resources in expanding our, what I call, the large energy infrastructure projects, like data centers and so on and so forth. And that is why the OpEx picked up for the first quarter, because so many of these people charge into OpEx now rather than capitalizing the cost. And then, of course, we have Europe. We have quite a few opportunities where we can expand our market and our reach. And then, of course, if there are some strategic acquisitions, we will always be looking at them, and that, of course—rather than hiring one person at a time—when you buy a particular company, especially if they have the human resources that we will need, it will help us accelerate the business. And then to point out— Mark A. Chiplock: I will not add too much, except what George said. I think we will take a balanced approach, George, if you look at this. I mean, this is going to be a great place for us to be when we start talking about that cash and the flexibility it will give us. So, certainly, we will focus on supporting working capital, but we will selectively delever throughout the year. We are going to want to give ourselves plenty of dry powder to stay flexible for opportunities. So yeah, this is going to be a good place for us to be. We are looking forward to all of this coming in. George P. Sakellaris: Thanks. Operator: Your next question comes from the line of Dhrushant Alani from Jefferies. Your line is live. Analyst: Hi, team. Thanks for taking my question. Maybe just to follow up on the prior comment there. Maybe could you share the timeline that would take for you guys to cross over that 10% hurdle or threshold that you have set for top line, and then maybe specifically—you touched on some of the key drivers—but what would be more imminent if you had to discuss that? Mark A. Chiplock: Yeah. So maybe just some clarity on the question. You are talking about the top line 10% growth? Analyst: Yep. Mark A. Chiplock: Yeah. I mean, I think that is just going to come down to execution. We feel really comfortable in the plan we put in place for the year and the visibility we have coming out of our backlog, especially with the Projects business. So yeah. I mean, that is why we said in our remarks we would have reaffirmed guidance, and revenue does not change in any of this with the transaction. So I think our plan this year probably puts us right around that 10% growth year, and we feel pretty confident about that. Analyst: Got it. And then maybe just another question on—I know you guys talked about tax equity earlier in your comments. Have you seen any slowdown in tax equity in terms of if there have been any FIAC concerns on tax equity that have been impacting your projects? I know that we have heard some comments around FIAC for tax equity, but I do not know if that has been impacting you or not. Joshua Riggi Baribeau: The compliance around FIAC—this is Josh—the compliance around FIAC has been more of the concern, more so than a pullback in availability. We are probably not large enough to source those mega tax equity funds or syndications that some of those sort of tier-one utility-scale developers are, or that we have also been hearing have been pulling back. We use a mix of transferability, which we are tapping into bank markets as well as corporate, and we use smaller regional banks as well as large life co’s. So we have a pretty diversified pool of tax investors or tax equity, and so far, given the strength of our pipeline, our reputation, and probably even the fact that our appetite is not huge, we have not seen any meaningful pullback because of that. Analyst: Got it. Thank you. Operator: Your next question comes from the line of Ben Kallo from Baird. Your line is live. Ben, your line is live. Benjamin Joseph Kallo: Hi. Sorry about that, guys. So a couple quick ones for me. Congrats on the JV. First, if pricing is impacted, could you just maybe talk to it—just from the amount of natural gas that is being demanded to power data centers. Maybe it is a completely different market. Maybe talk to that, and then I have a follow-up. Analyst: Second question, Peter. Peter? Joshua Riggi Baribeau: Well, Ben, this is Josh. Let me see if I can reiterate the question. You are wondering if the price of natural gas impacts the end market for renewable natural gas, based on either data center demand or other— Analyst: You know, will demand any RNG, or if that changes the market at all. Well, or if the data center— Mike Backus: Yeah. I mean, I will say if you are tracking some of the stats, I think there was a whole host of projects—I think almost 200 data center projects—that have been in jeopardy because of community groups. And so a lot of data centers are looking to green their power supply to get through the concerns of some of the local community groups. So we have seen an uptick in interest in fuel, and I think part of it is it is a baseload security supply. The RNG, it is all local. So that has a lot of interest versus intermittent resources. Analyst: Okay. A follow-on just on data centers. You guys talked about being targeted and selective. Maybe could you just talk more about where you would play in data centers, and then also if you could just mention any kind of more work you are doing with military bases as well and data centers related to the U.S. government. Thank you. Nicole Allen Bulgarino: Yeah. So this is Nicole. To answer your second question first, we are continuing our strategy of working on military land because we feel like it is a great position for data centers to be located on. It has fewer land permitting requirements than commercial properties do. It is also usually away from communities and on secure military bases, which is another plus in the field. And certainly the ultimate tenant there serves nicely for the government IT. So that is top of our strategy, but also we are working with a lot of commercial developers who need to bring power and land solutions to the market. And we are seeing that across lots of states right now because of the constraints from the grid. And that is our specialty—doing these behind-the-meter microgrid, eventually-to-connect-to-the-grid future solutions as well. Operator: Great. Thank you, guys. Analyst: Uh-huh. Thanks, Ben. Operator: Next question comes from the line of Eric Stine from Craig-Hallum. Your line is live. Eric Stine: Hi, everyone. This is—so, obviously, I know it would be in a different form, but any thoughts about something like the joint venture that you are forming for RNG and doing that in the data center space? I know that your first award, I believe, you are counting 10% or so of the megawatts in your backlog with the expectation that you would have a partner in some ways. So just curious. I mean, is there a path to having—rather than each project maybe a separate—do you have a defined partnership where you can accelerate that? George P. Sakellaris: Yeah. Definitely, Eric. We are looking into it. We are talking to several people, but we do not have anything concrete to announce yet. When we are ready, we will do it. But the data centers, as you know, require a rather substantial amount of capital, and even on the development stage. And so it will be good to have somebody with deep pockets that will help us accelerate the development of those data centers. Yep. Eric Stine: Okay. And the larger infrastructure projects that you are developing and building, like we are doing the hydro plant up in Alaska, the wind farm up there, and so on—that is the infrastructure business. We are getting pretty good traction into it, in addition to the data centers. It is a good question, and we are looking into it. I will definitely stay tuned. I guess maybe my follow-up—just curious. You touched on this a little bit last quarter. But after the award that you made back in—I believe it was September—you know, I come and get the question, you know, when is the next order? So I know these projects take time. I know often that these are greenfield situations where you need to wait for the data center to even be built out before you start your work. So could you maybe just touch on the typical project you are going after and why maybe that timeline is a little longer than other parts of your business? Nicole Allen Bulgarino: Yeah. I mean, I think you have already kind of highlighted it very well. These are complex projects, and it is not just the power side, but it is also the data center side itself and getting the right specs for the tenants that they are serving, and then matching that with the power that we can put there, matching that with the permitting, the air permitting that is required, the gas supply, the future interconnection. There is a lot of complexity there. So our pipeline consists of a lot of projects that are in various stages—some very far in development that we have been brought into for the power specifically, others we are developing together on the land side to bring solution there. When you are talking with a large amount of capital required that George mentioned, these are complex projects and just require a lot more—I mean, our normal assets require a lot of development in there, but again, having a diverse pipeline will help us hedge against when these start coming online. Eric Stine: Got it. That is very helpful. Thank you. George P. Sakellaris: Thank you. Operator: Next question comes from the line of Manish Somaiya from Cantor. Your line is live. Manish Somaiya: Thank you. Thank you for taking my question. Mark, you mentioned 60% of the earnings are in the second half. Maybe if you can just talk about the biggest execution milestones embedded in the second half outlook? Mark A. Chiplock: I mean, we have great visibility coming out of contracted backlog, which just becomes our ability to execute conversion of that. And then there is a portion of that coming out of our awarded backlog that will require us to convert that to sales, get to a contract, and then start executing on that revenue. We drive that forward-looking view based on the best visibility we have coming out of the backlog. We feel pretty confident not only based on the mix of what is coming out of the backlog but with our ability to execute. Manish Somaiya: Okay. And then the $522 million of new awards that you had in the quarter, maybe you can just talk about where you see the biggest opportunities going forward? Nicole Allen Bulgarino: Certainly a lot of it is on the federal side. We have seen an uptick in activity for infrastructure modernization with GSA, with VA, even with the Department of War. So we are seeing new activity and modifications in the federal government. We also, again, on the power infrastructure side of this, are providing new projects for electrical distribution and for other generation-type projects as well. Lou Maltezos: Yeah. Alright. I think in the rest of the projects business, we are also seeing a lot of increased demand. I mentioned in the comments that electricity prices are increasing pretty dramatically for some of our customers. That is creating a real motivation for them to get to the table and look at projects that might have been borderline in the past. Manish Somaiya: Super helpful. Thank you so much. Congrats again on the JV. George P. Sakellaris: Thank you, Manish. Operator: As a reminder, if you would like to ask a question, press 1 on your telephone to ask a question or rejoin the queue. Next question comes from the line of Ryan Pfingst from B. Riley Securities. Your line is live. Ryan James Pfingst: Hey, guys. Thanks for taking my questions. Mark A. Chiplock: Hey, Ryan. Ryan James Pfingst: Hey there. Mike, it would be great to hear your view on the recently finalized RVO and any expectations you might have for D3 pricing. Mike Backus: Yeah. I think the EPA was focused on trying to get an RVO set that meets market conditions, and that is why I think we have seen the rates have been pretty steady—between $2.40 and currently, I think today was around $2.51. And I think what you are going to see if you think about where the market expansion and what is going on in the industry—we are starting to see more gas go to Canada. California is going to start seeing more gas go through their program, which is a non-RFS, SB 1440. You are going to start seeing more go to Europe. So you have some of the gas leaving the RFS program, which will just create more demand to fulfill the RVO. So I think we were happy with where it ended up on the volume. Ryan James Pfingst: Appreciate that. And then turning to the data center opportunity, are there any updates or milestones that we should look for around the CyrusOne project as that one moves forward? Nicole Allen Bulgarino: I mean, we are continuing to develop that, work with the timing of when the data center can be built and constructed as well, because that needs to match up with the energy build as well. We are continuing to refine those dates and when they can come online together. But in the meantime, we are continuing to work with Cyrus on other opportunities as well. Ryan James Pfingst: Great. Thanks, Nicole. I will turn it back. Operator: Your final question comes from the line of Noah Kaye from Oppenheimer. Your line is live. Noah Duke Kaye: Alright. Great. Thanks for taking the questions. I want to start by congratulating Nicole and Lou and Mike on your new roles and responsibilities. Just great to see how you all and how the company has kind of continued to grow over the years. So I wish you all a lot of success. Let me ask a question, or two questions, on the JV. I just want to make sure I got this right. I guess the comments imply something like a $90 million EBITDA profile for the platform—that is where it is running for 2026. First of all, is that right? And then I guess with 74 megawatt-equivalent in the development pipeline, where does that kind of grow to, do you think, over the next three years? Because that pipeline is usually what you expect to bring online in the next three years. Joshua Riggi Baribeau: This is Josh. I will start with the valuation. If you just look at what we have to back out for noncontrolling interest at 30%—so $22.5 million at midpoint divided by 0.3—it is more like a $75 million type of number at the midpoint for this year. Mike, in terms of growth and pipeline? Mike Backus: Yeah. I mean, you are pretty spot on. Typically, we have visibility three years out on our pipeline, which is what we have now with the 11 projects in development, and we continue to add to that pipeline. So right now, we have good visibility through 2029, and we are working on some new awards right now that we would expect to build into that 2030 time frame and beyond. Noah Duke Kaye: Okay. Thanks. And then I guess the follow-up is as the platform continues to grow in size, just how should we think about the ability to further recycle capital or monetize? Is this going to stay a 70/30 split? Is there any kind of an option to adjust ownership percentages going forward? Just curious about the mechanics. Joshua Riggi Baribeau: This is Josh. I will start again. What is important to note is that Ameresco, Inc. does not have to put another dollar into this business until HASI’s $300 million commitment is exhausted. We think that will last us a few years, unless something really material and exciting comes along from an acquisition standpoint. But pure CapEx, this is multiple years’ worth of cash that Ameresco, Inc. does not have to put in. And just to be absolutely clear, those dollars will not dilute us further at 70/30 for this $400 million commitment. The natural other side of that is that all the dollars we would have normally had to put into that business ourselves are now back at Ameresco, Inc., where we can invest in Lou’s business, Nicole’s business, and the rest of what we are doing at a corporate level, including potential acquisitions if they are accretive. I want to make sure that is clear for everyone listening, as well as yourself. I think that is our key message. After that $300 million is exhausted, then the partnership—if there are further capital calls—could be pro rata, or depending on how the partners choose to fund, that is kind of when you will get maybe a change in ownership. But as of right now, we do not have to put a dollar into this business for the foreseeable future. Noah Duke Kaye: Yeah. I mean, you marry up the pipeline visibility with now the funding visibility. Just great to hear. Congratulations to all. Joshua Riggi Baribeau: Thanks. And actually, I will add a comment just to be also clear. This does not change any of the strategy around nonrecourse debt and tax equity, and that is how we are able to stretch these dollars so far. We will still be levering the assets probably somewhere between 60% to 70% if we can get it on a loan-to-value on a nonrecourse basis, and monetize a majority of the tax credits themselves through partnerships or tax transfer. That is why we are able to stretch this $300 million very far and really pull in the build and potential acquisitions. Operator: There are no further questions in the question-and-answer session. That concludes today’s meeting. You may now disconnect.
Operator: Name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Biodesix, Inc. First Quarter 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. To ask a question, simply press star 1 on your telephone keypad. It is now my pleasure to turn the call over to Christopher F. Brinzey, Investor Relations. You may begin. Christopher F. Brinzey: Thank you, operator, and good afternoon, everyone. Today, Biodesix, Inc. released results from the first quarter of 2026. Leading the call today will be Scott Hutton, Chief Executive Officer. He is joined by Robin Harper Cowie, Chief Financial Officer. An audio recording of today's call and the press release announcement with the quarterly results can be found in the Investor Relations section of the company's website at biodesix.com. As today's call includes forward-looking statements, we encourage you to review the statements contained in today's press release and the risks and uncertainties described in our SEC filings which identify certain factors that may cause the company's actual events, performance, and results to differ materially from those contained in the forward-looking statements made on today's webcast. In addition, we will discuss non-GAAP financial measures on this call. Descriptions of these non-GAAP financial measures and reconciliations of GAAP to non-GAAP financial measures are included in today's press release. I would now like to turn the call over to Scott Hutton, Chief Executive Officer. Scott Hutton: Thank you, Christopher F. Brinzey, and thank you all for joining today. Biodesix, Inc. delivered an exceptional start to 2026 with first quarter results that demonstrate continued momentum across our commercial, operational, and strategic priorities. Revenue growth accelerated, margins expanded, and we continued to demonstrate operating leverage as we progress towards profitability. As a reminder, our focus in 2026 centers on three objectives: driving top-line growth, improving operational efficiency and leverage, and advancing our pipeline to support long-term expansion. In the first quarter, we made meaningful progress across all three objectives. Total revenue for the quarter was $25.6 million, representing 42% growth year over year, accompanied by strong operating discipline and execution. Starting with our diagnostic testing business, revenue grew 37%, driven by accelerating test volume growth and improved ASPs over 2025. Total test volumes grew 29% year over year due to increased adoption from both pulmonology and primary care, with test volumes from primary care now representing 15% of total tests delivered in the quarter. In support of both healthcare provider and payer adoption, we continue to present and publish clinical data for our on-market test. Specifically, Notify Lung testing is used by pulmonologists and primary care providers to triage patients by risk of lung cancer, helping determine who needs intervention versus surveillance, and allowing higher-risk patients to be prioritized for prompt follow-up. In February, we announced the publication of the largest lung nodule biomarker clinical validation study that included over 1.1 thousand patients leveraging our ongoing real-world evidence study, Clarify. The study demonstrated consistently strong NotifyCDT test performance with high specificity, or low false positive rates, regardless of nodule size or other patient risk factors. Recent data on patients without biomarker testing reported that 40% of malignant nodules had progressed in tumor size between the time of the first detection and the time of initiation of definitive treatment, underscoring the urgent clinical need for tests like Notify Lung to expedite diagnosis and enable earlier intervention when outcomes are most favorable for the patient. Turning to development services, revenue in the quarter nearly doubled year over year. This reflects execution on contracted programs, as well as continued success securing new agreements, reinforcing the strength and differentiation of our development platform. The depth and breadth of our offering was recently highlighted with several presentations at AACR in April. It is especially exciting to see our multi-omic technologies, combined with advanced data informatics, translating into meaningful clinical impact on our pipeline product concepts and fueling strong interest in our development services offering. Additional data on our pipeline products, including our genomic and proteomic MRD and ROR test, the Veriskrat test clinical utility in prostate cancer, and our new AI-based digital diagnostic test will be shared at upcoming conferences and events throughout the course of the year. Gross margin for the quarter was 84% on a GAAP basis and 82% excluding a one-time sales and use tax recovery, representing a 300 basis point improvement year over year. Margin expansion continues to be driven by scale in diagnostic testing, improved pricing realization, and ongoing workflow optimization in the laboratory resulting in decreasing cost per test. We are encouraged by the consistency of these trends and strong revenue growth and operating leverage, and believe they reinforce the scalability of our model. As a result of the performance across both diagnostic testing and development services in Q1, and our continued progress towards profitability, we are raising our full-year 2026 revenue outlook. With that, let me turn it over to Robin to review our financial performance. Robin? Robin Harper Cowie: Thanks, Scott, and good afternoon, everyone. Total revenue for the first quarter was $25.6 million, representing a 42% increase over the prior-year period. Diagnostic testing revenue was $22.3 million, an increase of 37% year over year. The increase in lung diagnostics revenue was driven by growth in volumes and higher average revenue per test. Test volumes were approximately 17.8 thousand, an increase of 29% year over year, supported by an average of 100 sales representatives in the field in the quarter, and we expect to continue our commercial expansion, as described in prior calls, at a cadence of about six representatives per quarter through 2026. Improvements in average revenue per test over the prior year are primarily driven by additional payer coverage and improvements to revenue cycle management, continuing a trend that began in 2025. We believe recent improvements in average revenue per test reflect durable changes in payer coverage and revenue cycle execution rather than discrete or one-time effects. Development services revenue for the first quarter was $3.3 million, an increase of 99% year over year, driven by delivery of our contracted program and the addition of new development services agreements. We finished the quarter with approximately $10.4 million in contracted business, following accelerated revenue conversion velocity in the quarter. We continue to see strong demand and visibility across our development services pipeline and do not expect the timing of these completions to impact our full-year expectations. Gross margin for the first quarter was 84%, which included a one-time recovery of 400 thousand related to previously paid sales and use taxes. Excluding the one-time recovery, gross margins were 82%, representing a 300 basis point improvement over the prior-year period. Year-over-year margin expansion was driven by growth in lung diagnostic testing, improvements in average revenue per test, and decreases in average cost per test. Gross margins continue to reflect Biodesix, Inc.’s strong operational efficiency and execution. Operating expenses, excluding direct costs and expenses, were $27.6 million, an increase of 18% year over year supporting the 42% revenue growth delivered during the quarter. The increase in operating expenses is driven by a 19% increase in sales, marketing, and general administrative expenses due to our planned commercial organization expansion. The company expects continued operating leverage as our expanded sales team advances along the productivity curve and converts growing experience into sustained performance. R&D expense for the quarter was $3.3 million, representing a 14% increase over the prior-year period. R&D investment reflects continued clinical studies supporting adoption of our lung diagnostic tests and progress across our pipeline. Net loss for the quarter was $7.8 million, a 30% improvement compared to the prior-year period. Adjusted EBITDA, which excludes non-cash and other one-time items, was a loss of $4.1 million, representing a 35% improvement over 2025. We also strengthened our balance sheet, ending the quarter with $25.6 million in unrestricted cash and cash equivalents, a 35% increase compared to the fourth quarter, providing solid runway to support our growth initiatives. The change in cash balance includes $16.8 million of at-the-market net proceeds raised during the quarter, partially offset by planned cash outflows that occur annually during the first quarter. Looking ahead to the remainder of 2026, and in addition to our planned headcount expansion, we expect sales productivity to continue to improve as our various sales cohorts gain experience and tenure, which remains a key driver of operating leverage through 2026. Following the strong first quarter performance and improved visibility into demand and execution, we are raising our full-year revenue guidance to $108 million to $114 million. The increased midpoint represents 25% growth over 2025, which reflects the strength of the first quarter while remaining consistent with our full-year planning assumptions. We also expect continued progress towards sustained adjusted EBITDA profitability, driven by increasing sales productivity, expanded clinical evidence supporting the Notify Lung test, growth in the development services pipeline, and demonstrated operating leverage. With that, I will turn it back to Scott for some closing thoughts before we begin the Q&A. Thank you, Scott. Scott Hutton: In April, Biodesix, Inc. was recognized as a top workplace for the third consecutive year. This recognition reflects who we are at our core: a team built on trust, collaboration, growth, and shared ownership of results. Our culture here at Biodesix, Inc. is not aspirational; it is operational. Our first quarter performance reflects that discipline and reinforces our confidence in the scalability and durability of our business model. We continue to see significant opportunities ahead as adoption expands, clinical evidence grows, and our commercial organization continues to mature. We remain focused on executing with discipline, improving capital efficiency, and delivering meaningful value to patients, providers, partners, and shareholders. In closing, I want to thank the entire Biodesix team for their continued focus, discipline, and commitment to our mission and culture. We will now open the call for questions. Operator, let us start the Q&A session. Operator: At this time, I would like to remind everyone, in order to ask a question, simply press star 1 on your telephone keypad. Our first question is from the line of Andrew Frederick Brackmann with William Blair. Please go ahead. Andrew Frederick Brackmann: Hi, Scott. Hi, Robin. Good afternoon. Thanks for taking the questions. I wanted to focus on the commercial team. I think you called out about 15% of volumes were coming from the primary care channel there, so clearly something is working. I guess as you think about some of the learnings, the successes, and some territories that are driving a lot of that volume growth, how transferable are those to other territories? And where are we in the process of amplifying these learnings across the entire salesforce? Scott Hutton: Thanks, Andrew. Great question. It has been about three quarters since we brought on that first sales cohort focused on primary care physicians, so you nailed it. We continue to learn, but we had some immediate learnings that we have been able to apply. We had our national sales meeting in February, which is a great opportunity for us to share best practices and to roll that out. What we have learned is that starting with the pulmonologist, building a really strong relationship, and allowing them to help us with introductions into their referral network really aids in a smooth transition. It allows the pulmonologist to track those patients through that referral process, and we are continuing to see that growth across the United States. We really started more in the Northeast when we first had our initial hires, and we are seeing that transition and progress more westward. So it has been transferable. We feel good about the progress we have made. I think we knew with a high level of confidence, based upon our early pilot experience, that this was the right decision, and this confirms that we have made the right decision. We still have a lot of opportunity to grow, and I will just remind everybody, what it really did was open up the addressable market that was serviceable to us. We knew that about 49% of those patients with incidentally found nodules are stuck in primary care, so we think that we have begun tapping into that, and we are really confident that over time it will start to show that we are getting to patients earlier. We know in this scenario earlier detection and diagnosis is going to lead to better outcomes. Andrew Frederick Brackmann: Perfect, appreciate all that color. And then just on the evidence front, you called out the publication of the validation study in February. Can you talk about what impact it has had on the field? In particular, you mentioned across that study there are low false positives regardless of the nodule size. Are you seeing an increase in the use of Notify in those smaller nodules? And how big of an opportunity is that for you in the grand scheme? Scott Hutton: Thanks. For us, it really is about data development. I think there is a continued opportunity for us to educate and empower pulmonologists and primary care physicians to utilize Notify testing. The more we can publish and present, it gives us opportunities to put new data out in front of healthcare professionals, and that is what this did. You nailed it. We know that not only do physicians want to get to these patients earlier, but they want to be bolder than they have been in the past. Something has to change because we have not seen a significant change in screen detection over the last 10 to 15 years. We are seeing an increase in addressing smaller nodules, but that goes hand in hand with the advent of robotic bronchoscopies, where interventional pulmonologists feel more confident that they can get to some of the smaller nodules that they would not have been able to get to easily and successfully in the past. The time was right, we are excited to get that data out, and I would add that whenever we see strong performance in a real-world environment, it really starts to show that these tests are durable, that our growth is sustainable, and that we are going to continue to have a significant impact with the healthcare professionals that we serve. Andrew Frederick Brackmann: Great. I will keep it at two. Thanks, guys. Scott Hutton: Thanks, Andrew. Operator: Our next question comes from the line of Thomas Flaten with Lake Street. Please go ahead. Thomas Flaten: Hey, Scott and Robin. Just a question to follow up on the PCPs. I am curious what you are hearing anecdotally from the PCPs about their level of comfort at retaining these patients with this test result in hand. Do they feel comfortable with the referral networks? I get that having it come from the pulmonologist is probably helpful, but anything you can share on their experience that they have had? I know it has only been three quarters, but I am just curious if there is anything you can share. Scott Hutton: Yeah, thanks, Thomas. It is a great question. Speaking on behalf of the healthcare professionals in the primary care setting, one of the things that we anticipated and we have confirmed is they have an abundance of patients that are eligible for Notify testing. They still have questions as to how to interpret those test results and defining who they refer on versus who they keep to monitor or surveil. What we have seen is that through our brochures and materials, and sharing of publications and data, they have become very comfortable with how those test results can better inform what they do with those patients, building that confidence. One of the things we have seen in primary care is they are very comfortable with diagnostic testing. It is what they do. They understand it. They have phlebotomy services on-site, and from a workflow implementation standpoint, we have actually found primary care to be really accessible and receptive to Notify testing. We are excited to continue to help educate them. One of the things that we really focus on is ensuring that when those patients are referred on, that they stay in contact with that pulmonologist. That primary care physician will always be that patient's primary care physician, so they, over time, will gain additional confidence as they see what ends up happening for those patients. Hopefully, we are able to see a stage shift, and we are starting to see patients live longer, which will build even more confidence within the primary care community. Thomas Flaten: Sticking with this theme, you called out what the PCPs are going to do with the incidentally identified nodules, but you did not mention the screening nodules. I am curious what you are hearing from the PCPs—not necessarily that having access to your test is going to help them get more patients into screening—but have they shared anything anecdotal about pushing the high-risk patients into the screening programs, by that I mean low-dose CT? And more broadly, have you seen any change in the trends in the number of patients getting pushed into that screening protocol? Scott Hutton: Yeah, it has been one of the challenges regardless of whether you talk to pulmonology or primary care physicians. Ten years ago, lung cancer screening compliance for those screen-eligible patients was low to mid-single digits. We have seen improvements in the last five to ten years, but most of the reports out there will still state that it is less than 15% to 20% of the screen-eligible patient population. We have come a long way, and we still have significant room to grow and improve. One of the beauties of Notify testing is our test works not only in incidentally found nodules but also in screen detection. As we see more support and compliance with screening programs, it will only increase this opportunity for us. We have seen that a little bit, but we are still not there. I do think the advent of blood-based screening tests in lung cancer will help, and we think this will benefit Notify testing and the Biodesix, Inc. team. Thomas Flaten: Got it. Appreciate that. Thanks, guys. Scott Hutton: Thanks, Thomas. Operator: Your next question comes from the line of John Wilkin with Craig-Hallum. Please go ahead. John Wilkin: Hi, guys. Thanks for taking the questions. Just a couple questions on the guide. Can you break out how much is baked into the guidance for development services versus testing revenue? I know Q1 came in really strong, and I am trying to get a sense of what you are expecting with that business for the remainder of the year. Robin Harper Cowie: Yeah, absolutely. We are anticipating that development services revenues for the full year remain consistent with where we had expected them to be. We had a little bit of a pull-forward in the quarter, so we were able to recognize more revenue earlier in the year. We expect the services business to remain consistent with those expectations, and the majority of the increase is included in the lung diagnostics revenues. John Wilkin: Perfect, that is super helpful. And then on the lung side, how much, if any, additional ASP expansion are you factoring in for the remainder of the year? Is that something we should expect to see continued progress on, or is growth embedded in the guide more skewed towards the volume side? Robin Harper Cowie: Growth in the guide is absolutely weighted towards volume. We do anticipate that we will see a little bit better ASP versus the first quarter. I anticipate somewhere like what we saw mid-year last year; fourth quarter was skewed higher due to the one-time collections that we had in that quarter. While we anticipate a little improvement in ASP, we are very pleased with where we are right now and the improvements made both through coverage contracting and revenue cycle management. Volumes should be the growth driver. John Wilkin: Perfect. That is all for me. Thanks so much. Scott Hutton: Thanks, John. Operator: Your next question comes from the line of Kyle Mikson with Canaccord Genuity. Please go ahead. Kyle Mikson: Thanks for the questions. Congrats on the quarter. It looks like you did better on the pharma front this quarter. Could you talk about the pipeline funnel there? What is most attractive within your portfolio relative to prior years that is helping you succeed on that front? Scott Hutton: Yeah, Kyle, great question. This was more of a cadence or timing scenario. We had a number of retro samples that came in earlier than we anticipated and forecasted. We were able to pull a couple of those contracts forward, so we do not see it changing our long-term performance. As a reminder, this has historically been about 8% to 10% of our total annual revenue. We continue to see great progress and momentum within the biopharma services and development services front, and you may have noticed that we exited the quarter with $10.4 million in contracted dollars to be recognized over the coming months and quarters. We have stayed above that $10 million mark for quite some time now, so that gives us a lot of confidence about what the future looks like. It really is not a shift or a change; this momentum has been building over the last few years. It is interest across our portfolio on the genomic side and the proteomic side—being a company that is focused on multi-omic solutions resonates with our biopharma services partners. Our team continues to do a great job on that front. We are excited about the rest of the year. We just finished AACR, and we have ASCO upcoming, and those two meetings usually set us up for a strong second half. Kyle Mikson: Perfect. You had a great top-line beat, and margin has been really solid the past few quarters. Could you specify how you are going to reinvest those dollars—sales force, new products, new markets? How do you think about that? And with respect to EBITDA positivity going forward, how does that affect that pathway? Robin Harper Cowie: We are obviously very pleased with the gross margins and the continued improvements that we have seen over the last several quarters. The team works very hard to not only improve our ASPs, but also gain real efficiencies and productivity improvements within our operations to drive down the average cost per test. The dollars that are coming in through those gross margins go to support the business, and our main focus is our commercial expansion, growing the top-line revenue, and then getting to sustained adjusted EBITDA positivity and cash flow positivity. So the dollars really are going towards commercial, and we are still on track. We are executing to plan and on the path to profitability. Kyle Mikson: On that note, anything additional to pipeline investment? Salesforce expansion is kind of an obvious one that you are going to be consistent with—several reps per quarter—but anything on the pipeline going forward, maybe partnerships that you can accelerate with this extra money? Scott Hutton: Yeah. We hope so. As we look toward the remainder of 2026, we think we have great opportunities to highlight progress being made, investments, and the return on those investments, and hopefully additional partnership and collaboration opportunities. We will look forward to sharing those when we get there. For us, it really is about controlling what we can control. We have worked long and hard to build what we believe is the strongest and best pulmonology-focused sales team in the market, and we want to continue to give them an opportunity to flex and demonstrate that we can continue to build this market. Last year, at the beginning of the fourth quarter, we had an R&D day. We will look forward to providing more on our R&D and development services front in the second half, but anything that happens between now and then, we are going to share that broadly and celebrate it. Operator: Our next question comes from the line of Dan Brennan with TD Cowen. Please go ahead. Analyst: Hi, Pradeep Ambrose on behalf of Dan Brennan. Can you quantify how much quarter one revenue was impacted by weather versus typical seasonality? Robin Harper Cowie: Yeah, it is a great question. Like everybody else, particularly those in the areas of the country that were impacted by the series of storms, we were as well. It was a pretty significant impact to us in the late January, early February timeframe as the FedEx hubs across the country were impacted. But we were very pleased with how the team responded and clearly finished the quarter strong to end with a nice strong beat for the quarter. Analyst: Awesome. Thank you. Operator: With no further questions in queue, this does conclude today's conference call. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Q1 2026 L.B. Foster Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Lisa Durante, Director of Financial Reporting and Investor Relations. Please go ahead. Lisa Durante: Thank you, operator. Good morning, everyone, and welcome to L.B. Foster's First Quarter of 2026 Earnings Call. My name is Lisa Durante, the company's Director of Financial Reporting and Investor Relations. Our President and CEO, John Kasel; and our Chief Financial Officer, Bill Thalman, will be presenting our first quarter operating results, market outlook and business developments this morning. We'll start the call with John providing his perspective on the company's first quarter performance. Bill will then review the company's first quarter financial results. John will provide perspective on market developments and company outlook in his closing comments. We will then open up the session for questions. Today's slide presentation, along with our earnings release and financial disclosures were posted on our website this morning and can be accessed on our Investor Relations page at lbfoster.com. Our comments this morning will follow the slides in the earnings presentation. Some statements we are making are forward-looking and represent our current view of our markets and business today. These forward-looking statements reflect our opinions only as of the date of this presentation, and we undertake no obligation to revise or publicly release the results of any revisions to these statements in light of new information, except as required by securities laws. For more detailed risks, uncertainties and assumptions relating to our forward-looking statements, please see the disclosures in our earnings release and presentation. We will also discuss non-GAAP financial metrics and encourage you to carefully read our disclosures and reconciliation tables provided within today's earnings release and presentation as you consider these metrics. So with that, let me turn the call over to John. John Kasel: Thanks, Lisa, and hello, everybody. Thanks for joining us today for our first quarter earnings call. I'll begin with Slide 5, covering the key drivers for our results of the quarter. As you can see from our earnings release, we carried positive momentum generated at the end of last year into the first quarter, delivering strong results across the board. The robust sales growth in Q1 was as expected, up 23.9% over last year. The growth was highest in the Rail Group, which was up 38.4% over last year, with all business units delivering significant improvements. Sales for Infrastructure segment were also up 5.9%, driven by continuing demand in our precast concrete business. The strong sales growth translated into a significant improvement in profitability, with EBITDA up 183% over last year. The improved profitability was realized within our margins with gross profit up 27.5% and gross margins improving 60 basis points to 21.2% -- we also continue to leverage our operating structure with SG&A as a percent of sales declining 240 basis points compared to last year. Our normal working capital cycle increased total debt $16.9 million during the quarter as we prepared to support our customers' construction season. Our disciplined capital allocation approach reduced total debt $22.8 million compared to last year. Coupled with significant improvement in profitability in the quarter, our gross leverage was cut in half from 2.5x last year to 1.2x at quarter end. So in summary, we're really pleased with the strong start to the year, and we remain optimistic about our prospects for continued progress in 2026. I'll cover the market outlook and our financial guidance for the year after Bill runs through the financial details for the quarter. Over to you, Bill. William Thalman: Thanks, John; and good morning, everyone. I'll begin my comments on Slide 7, covering the consolidated results for the first quarter. Reconciliations for non-GAAP information and other financial details are included in the appendix of the presentation. Net sales for the quarter were $121.1 million, up 23.9% over last year, primarily due to the strong growth in the Rail segment. As a reminder, last year's sales in Rail were weaker than normal due to a pause in government funding programs that delayed customer project work. As John mentioned, the consolidated gross profit was up 27.5% in the quarter, with gross margins improving 60 basis points to 21.2%. Both segments realized double-digit increases in gross profit in the quarter, highlighting the broad improvement realized in our results. I'll provide more color on segment sales and margins later in the presentation. SG&A expenses totaling $23 million were up $2.1 million or 9.9% compared to last year. The primary driver was higher employment costs, including a $1.2 million increase in incentive compensation expense with the improved results in Q1 compared to last year. This year's incentive expense also includes $0.7 million in accelerated stock compensation expense associated with annual incentive plan grants awarded to retirement-eligible employees. Despite the higher expenses year-over-year, the SG&A percent of sales improved 240 basis points to 19%. EBITDA was $5.2 million, up 183% versus last year, driven by the sales growth and improved gross profit. First quarter cash flow improved over last year with operating cash flow favorable $15.7 million on improved profitability and lower working capital needs. And lastly, consolidated orders and backlog were both lower compared to last year, 4.7% and 11.7%, respectively. I'll cover segment-specific drivers later in the presentation. The financial profile of our results on Slide 8 highlights the seasonality in the business over the last 3 years. We're entering the construction season for our customers, which typically translates to higher sales and profitability during our second and third quarters. Last year, first quarter sales were unusually low due to a pause in government funding impacting rail demand early in the year. These delays were resolved throughout 2025, resulting in an unusually strong fourth quarter last year. So while 2025 looks relatively normal compared to the averages, the quarterly splits last year were far from normal. This year's first quarter results represent a typical level of demand, and we expect the phasing of business to follow a more normal pattern in 2026. I'll cover the segment specific performance on the next couple of slides, starting with Rail on Slide #9. First quarter revenues were $74.8 million, up 38.4% compared to last year's soft start, primarily in Rail Products. The improvement was strongest for Rail Products with sales up 40.8% due to higher demand for rail distribution and transit products. Global Friction Management sales were up 39.5%, as this growth platform continues to perform well. Technology Services & Solutions sales were also up 29.1% due to short-term project work in our U.K. business. Rail margins of 21.6% were down 70 basis points, driven primarily by unfavorable sales mix with the higher Rail distribution volumes this year. Turning to Rail orders and backlog. Q1 orders were down 3.2% due to lower orders for Friction Management after a very strong level attained last year. Rail Product and TS&S orders were relatively flat compared to last year. And the Rail backlog was up 11.3% due to a large multiyear order secured in our U.K. business late last year. Turning to Infrastructure Solutions on Slide 10. Net sales increased $2.6 million or 5.9%. The improvement was realized in Precast Concrete with sales up 17.2%, highlighting the strong demand that continues in this growth platform. Steel Products sales declined $2.3 million, primarily due to lower bridge form volumes. Infrastructure gross profit increased $1.4 million with the margins up 200 basis points to 20.6%. The improvements were realized in Precast Concrete driven by higher sales volumes and favorable sales mix, coupled with improved manufacturing execution. I'll mention here that one cost driver we're starting to see elevate is fuel charges within our freight costs. This was not a big impact in Q1, but something we're working on mitigating starting here in Q2. Infrastructure orders declined $4.4 million due to lower intake for Pipeline Coatings after a very strong level in last year's first quarter. Partially offsetting were Precast Concrete orders up $2.3 million or 5.5%. Infrastructure backlog totaling $107.4 million is down $38 million versus last year. About $30 million of the decline was in Steel Products with $19 million due to the Summit Pipeline Coating order cancellation in Q3 last year. Precast Concrete backlog was also lower $8 million with reduced open orders for CXT buildings. I'll provide some additional color on segment orders and backlog at the end of my review. I'll next cover liquidity and leverage metrics on Slide 11. The chart reflects the ongoing improvement in our management of net debt and leverage. Net debt of $55.7 million was down $24.2 million compared to last year, with the gross leverage ratio cut in half to 1.2x, driven by improved profitability and lower working capital levels. Our capital-light business model has translated into significant cash generation over the last several years. As a reminder, we wrapped up the $8 million per year Union Pacific settlement payments at the end of 2024. Excluding these payments, we generated about $85 million in free cash flow over the last 3 years or approximately $28 million per year on average. We also have about $75 million in federal NOLs available, which should continue to minimize cash taxes for the next several years. We utilize a systematic disciplined approach to deploying capital across our priorities, which I'll now cover on Slide 12. Managing our debt and leverage at reasonable levels remains our top capital allocation priority. At the end of the first quarter, the gross leverage ratio per our revolving credit agreement was just under 1.2x, well within our target range of 1x to 1.5x. Seasonal working capital needs are expected to increase debt further in the second quarter, but we should stay around our target leverage range and remain favorable compared to last year. Capital spending in the first quarter totaled $3 million or 2.4% of sales. We have several targeted organic growth programs within our Precast Concrete business that we expect will increase the 2026 CapEx rate to 2.7% of sales approximately. We've also systematically repurchased our stock over the last 3 years with just over 1 million shares repurchased since early 2023, representing 9.3% of the outstanding shares. We did not make any open market repurchases in the first quarter after buying about 582,000 shares in 2025. We have $28.7 million authorized to spend on buybacks over the next 2 years, which represents approximately 9% of the shares stock value outstanding at today's valuation. As always, we will remain disciplined and conservative in our approach to this important capital allocation priority. And finally, we continue to evaluate tuck-in acquisitions to add breadth to our growth platforms, primarily in the Precast Concrete market space. I'll wrap up my comments with some additional color on order rates and backlog on Slides 13 and 14. We've mentioned in the past that order rates tend to be choppy for our business given the project nature of the work we support for our customers. Generally, orders received are fulfilled within a year with only about 10% of the open backlog relating to projects expected to extend beyond a year. On a consolidated basis, the trailing 12-month book-to-bill ratio at the end of the quarter was 0.95:1, down from both last year's first quarter and the end of 2025. The decline versus last year was driven by the lower ratio in Infrastructure at 0.84:1, driven primarily by the Summit order cancellation and softer Pipeline Coating order intake impacting Steel Products. Rail order rates overall remain positive with the trailing 12-month ratio at 1.03:1, although down from the end of 2025 after the strong finish last year. And lastly, the consolidated backlog reflected on Slide 14 totaled $209.6 million, down $27.6 million from last year, with the decline realized in Infrastructure stemming primarily from lower Pipeline Coating open orders, including the impact of the Summit order cancellation. We're focused on building our backlog across the business during the second quarter to set up a strong second half of the year. John will cover some additional backlog details and developments in his closing remarks. I'll wrap up here by saying we're very pleased with the start of 2026 and remain optimistic about the prospects for further progress this year. Thanks for the time this morning. I'll now hand it back to John for his closing remarks. Back to you, John. John Kasel: Thanks, Bill. I'll begin my closing remarks on Slide 16, reviewing developments in our key end markets. Starting with Rail, Bill highlighted that the significant growth realized in Q1 was due to a return to normal customer demand levels after last year's slow start. The federal government programs that fund our customers' repair and maintenance projects remain active with no significant disruptions evident as of today. This should provide a favorable demand tailwind in the U.S. for our Rail Products for the foreseeable future. Friction Management had another phenomenal quarter with 39.5% sales growth to start the year. This is on top of 42% growth in the fourth quarter last year and 19% growth for all of 2025. We continue to invest our commercial and technology capabilities for this important growth platform, and we're targeting further domestic market penetration as well as geographic expansion into Western Europe. The total track monitoring product line was somewhat flat in the first quarter, but commercialization of our Rockfall monitoring product line is expected to provide lift in volumes as the year progresses. All in all, we expect a more normal year in demand for the Rail segment in 2026, which would be a significant improvement over last year. Turning to Infrastructure. The end market developments remain favorable as well. Precast Concrete sales were up 17% in Q1 after 20% growth in 2025. As expected, the backlog at the end of the quarter was a bit lower for the CXT buildings product line, which had a record year in 2025. However, civil construction activity remains robust, which is bolstering demand for Precast Concrete products, helping to mitigate the lower building volumes. We're also seeing demand for our Envirokeeper water management solution continue to increase, and we're making capital investments to support further growth of this product line. So all in all, we're off to a great start for Precast and expect growth to continue as 2026 unfolds. Turning to Steel Products. Market conditions continue to improve, driven primarily by the recovery of oil and gas investments and favorable impact on our Protective Coatings product lines. Steel Products sales declined slightly in the first quarter due to softer demand for our bridge forms, while Protective Coatings were essentially flat in Q1 after nearly 43% growth in 2025. Bill mentioned the Infrastructure backlog was down primarily to the Summit order cancellation that was communicated last year, coupled with lower bookings for Protective Coatings. But it's important to note that bidding activity remains robust, and we believe the market recovery for domestic energy and pipeline investments will translate into improving Protective Coatings backlog. In summary, we believe we're well positioned for continuing growth across our key end markets and product lines with ongoing emphasis on our growth platforms, noting that the volatile geopolitical environment has not had a significant impact to date on our end markets or demand of our products. Of course, we'll continue to monitor conditions and adjust as necessary. So in conclusion, we're off to a great start in 2026, which allows us to reaffirm our financial guidance, which I'll cover in my closing remarks now on Slide 17. I'll start by highlighting again the significant progress we made through 2025. I'm very proud with our team's accomplishments and the strong start to 2026 highlights the favorable momentum we've generated in the business. The year-over-year growth and profitability expansion achieved in our first quarter results was primarily driven by a recovery to normal demand conditions for our Rail business. One way to look at the favorable momentum in our results is our trailing 12 months metrics with sales of $563.4 million and adjusted EBITDA of $42.4 million. Both metrics are already at or near the midpoints of our 2026 full year guidance. So as long as quotation activity remains strong and backlog builds in line with expectations, we should be well positioned to deliver a strong year of growth in 2026. So in closing, we're reaffirming our full year financial guidance for now, and we'll revisit our outlook after the second quarter. Thank you for your time and continuing interest in L.B. Foster. I'll turn it back to the operator for the Q&A session. Operator: [Operator Instructions] And our first question will be coming from Liam Burke of B. Riley Securities. Liam Burke: John, I mean in your prepared comments, you talked about Friction Management, which is a great driver of growth and margin. How difficult is it to take the North American model and move it over to European markets? John Kasel: Well, that's -- well, first of all, thanks for joining us today, Liam. And we've been working on that actually for the last 5 years of getting that acceptance, not just here in North America, but getting the excitement of this product over specifically in Western Europe, and we're going through Germany to make that happen. So we started working directly with the largest German transit authority over there, getting acceptance and accreditation of the product, and we're looking for continued interest as well as actual orders and sales happening this year -- end of this year as well as going to next year. So it is a slower adoption, if you will, because of the brand recognition is primarily North America, but they're picking up on the excitement, especially in the transit space over there because it's just adding so much value. They're seeing the value. And the world is -- as far as friction management is relatively small. And so we're pretty excited about what we have right now and the ability to continue to grow that. Liam Burke: Great. Bill, you had negative operating cash flow for the quarter, which is perfectly normal for seasonality purposes. But on a year-over-year basis, as you point out in your comments, it was significantly better. What contributed to that improvement? William Thalman: Yes. A few things, Liam. The profitability of the business overall, first of all, was much better. And then working capital needs this quarter were also a bit lower. And then the incentive arrangements for the company were a bit higher last year than they were this year just in terms of the payouts. So we would expect, where our working capital is at the moment, we will start to build further through the second quarter as we start to get ready for the growth expectations we see through the balance of the year. But just timing of some of the [indiscernible] a lot of time thinking about and addressing our U.K. business and the working capital deployed over there. So the model actually requires less working capital, and that's part of the benefit that we saw in Q1. Liam Burke: So just a quick follow-up, and I'll turn it over. Do you see any change in your overall working capital metrics or is it just normal quarter-to-quarter seasonality? William Thalman: I would say, overall, we are running at a lower working capital need overall on an average as a percentage of sales. Operator: [Operator Instructions]. Our next question will be coming from Julio Romero of Sidoti & Company. Julio Romero: Bill, you mentioned that fuel costs within freight -- fuel charges within freight costs for Infrastructure Solutions are starting to creep up, not a big surprise there given the macro front. But can you highlight if higher fuel and freight costs are isolated to just the Infrastructure Solutions segment or is it the broader portfolio? And then also how you're navigating these costs? And are there other -- are there any other rising input costs that are worth highlighting? William Thalman: Yes. So maybe just to start with the fuel costs. Certainly, that would be within our inbound and outbound freight cost structure. Obviously, with the current market conditions, that's been an escalating cost that we're seeing across the portfolio. It's the most significant for sure, within Infrastructure, just given the delivery costs associated with the Precast Products being a heavier overall tare weight. But we've had different programs that we're implementing in terms of pricing where we can to mitigate those costs. Just like any other company, that's something that we're looking to pass on. It wasn't a significant driver in Q1, but certainly starting to see it here in Q2, and we're managing that cost with pricing actions where we can. And then I guess to follow up on your other question, in terms of other escalating costs, nothing of significance at this point that we would point to. Julio Romero: Okay. Very helpful there. You highlighted you're seeing some early signs that the actions taken in the U.K. Rail business are translating into improvements. Is that business becoming less of a drag? Was it less of a drag to your pretax profit here in the first quarter than it was in the fourth quarter? And what kind of sequential improvement in that business is kind of embedded in the 2026 outlook? John Kasel: Yes. So our actions are definitely taking hold. We made a number of structural changes over there as well as focus on what business that we have and more importantly, what we want to do over there, and so we're seeing the benefits of that. And when Bill was mentioning the working capital as far as the amount of working capital as a percent of sales, that's a big part of our improvement year-over-year. So we're very pleased with where we're at right now, and we'll continue to make sure that we stay in front of what it is. But it's a big part of our company. It's a big part of Rail. When we talk about the year-over-year improvement and the improvement of profitability, that's where the technology innovation is. And when earlier question by Liam, that's a big part of our continued growth that we're doing, specifically in Friction Management, and that's kind of our gateway to make that happen. So we're -- we've been taking quite a bit of action, and we're going to stay focused to make sure that it's where we want it to be. But we are pleased with the first quarter results and coming out of where we ended last year. Julio Romero: Excellent. And then last one for me would just be if you could touch on the inorganic growth pipeline for Precast Products and any other market penetration initiatives you currently have underway within Precast Products? John Kasel: Well, first of all, we really focus on organic. I just want to make sure we really hammer that. We got a lot of really good exciting things going on, and that's where we're taking our capital. Bill mentioned we spent $3 million of capital in the quarter, 2.4% of sales. We talked about spending 2.7% as far as the year. That's where we're spending our money because we got great growth, organic growth programs going on right now, specifically in the Infrastructure business and namely in Concrete. And of course, we have our filter related to other inorganic opportunities where it makes sense. We will -- we continue to look at bolt-on type operations and that we will be able to add additional product lines or geographic expansion for us. And they're out there, and we're working through options or opportunities right now. But first and foremost, we're executing on what we have in front of us, and that's some nice growth here organically in those specific businesses. So we're pleased with results to date. Operator: And I would now like to turn the call back to John Kasel for closing remarks. John Kasel: Well, thank you, operator. Thank you for joining us today. And I'd like to close with 2 points maybe that didn't come up today in the call or specifically as it relates to the quarter. And Bill mentioned that our order rates are choppy and the project work and that's true that you see in our sales, sometimes it [indiscernible] as we close the quarter, we had a very strong April for order intake about 15% was added to our backlog in the month of April across the entire company. So we talked a lot about momentum in Q4. We had a strong finish to the year. And we're here telling you now that momentum is carried in Q1. [indiscernible] concerns are not with us today. We have plenty of work to be able to achieve what we want to get done this year, and we're seeing that uplift happening across the company [indiscernible] and of course, bidding activity is extremely strong as well. The last point I'd like to leave with you is our ability to pull this off and do it well. And I'd just like to call out the Infrastructure Group, Precast and our Steel Products side, that performed the entire quarter with 0 injuries in our company. And I think that's just a great testament to not just the fact that we're here now 124 years, but we're here really curating a culture of safety and performance and really a commitment to our employees of doing it right. And the Infrastructure Group, led by Bob Ness, has done just a tremendous job of doing it right each and every day and keeping our employees safe and getting our products to our customer. So -- and we'll continue to work on that, and we'll continue to strive into a wonderful second quarter. So we're looking forward to catch up with you at the end of Q2, and I wish everybody a wonderful start to May. Take care. We'll talk to you next time. Operator: And this concludes today's program. Thank you for participating. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the ADC Therapeutics Q1 2026 Earnings Conference Call. [Operator Instructions] This call is being recorded on Monday, May 4, 2026. I would now like to turn the conference over to Nicole Riley, Head of Investor Relations and Corporate Communications. Please go ahead. Nicole Riley: Thank you, operator. Today, we issued a press release announcing our first quarter 2026 financial results and business updates. This release and the slides we will use in today's presentation are available on the Investors section of the ADC Therapeutics website. I'm joined on today's call by our Chief Executive Officer, Ameet Mallik, who will discuss our operational performance and recent business highlights, followed by our Chief Financial Officer, Pepe Carmona, who will review our first quarter 2026 financial results. We will then open the call to questions. Before we begin, I would like to remind listeners that some of the statements made during this conference call will contain forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain known and unknown risks and uncertainties, and actual results, performance and achievements could differ materially. They are identified and described in the accompanying slide presentation and in the company's filings with the SEC, including Form 10-K, 10-Q and 8-K. ADC Therapeutics is providing this information as of today's date and does not undertake any obligation to update any forward-looking statements contained in this conference call as a result of new information, future events or circumstances, except as required by law. The company cautions investors not to place undue reliance on these forward-looking statements. Today's presentation also includes non-GAAP financial reporting. These non-GAAP measures should be considered in addition to and not in isolation or as a substitute for the information prepared in accordance with GAAP. You should refer to the company's first quarter 2026 earnings release for information and reconciliation of historical non-GAAP measures to the comparable GAAP financial measures. I will now turn the call over to our CEO, Ameet Mallik. Ameet? Ameet Mallik: Thank you, Nicole. We continue to make good progress in the first quarter of 2026 as we advance towards multiple important milestones for ZYNLONTA over the remainder of the year, beginning with the expected LOTIS-5 top line readout in the second quarter. From a commercial perspective, we continue to focus on execution and delivering on our commercial strategy, maintaining ZYNLONTA as a differentiated treatment option for third-line plus DLBCL patients. First quarter net product revenues were $20.0 million as compared to the prior year's first quarter net product revenues of $17.4 million. The increase was driven primarily by normal quarter-to-quarter variability in customer ordering with underlying demand broadly stable. Looking toward the second line plus setting where we believe the largest growth opportunity lies. For LOTIS-5, our Phase III confirmatory trial of ZYNLONTA plus rituximab, we expect to share top line data before the end of June, potentially bringing us another step closer to providing this combination to significantly more patients. While this time line is rapidly approaching, I do want to highlight that we are currently still blinded to the data. Turning to LOTIS-7. We expect to complete enrollment of approximately 100 patients at the selected dose level of ZYNLONTA plus glofitamab in the second quarter with full data anticipated by year-end. In indolent lymphomas, we continue to anticipate data publication between the end of 2026 and mid-2027 from the multicenter investigator-initiated trials ZYNLONTA in combination with rituximab to treat relapsed or refractory follicular lymphoma and of ZYNLONTA as a monotherapy to treat relapsed or refractory marginal zone lymphoma. We continue to pay close attention in the quarter to managing our cost base and optimizing our balance sheet. On a non-GAAP basis, we've reduced our total operating expenses by 13% versus Q1 2025, and we ended the first quarter of 2026 with a healthy cash balance of $231 million. This maintains our expected cash runway at least into 2028, enabling us to deliver against our strategy. We are building off the well-established role of ZYNLONTA as a single-agent therapy in third line plus DLBCL where ZYNLONTA has a profile of rapid, deep and durable efficacy, as well as manageable safety with simple and convenient administration. We believe the relative stability we've seen in net product revenues over multiple quarters demonstrates that ZYNLONTA has a clear place in this market. This is just a starting point as we believe in the potential for ZYNLONTA to reach significantly more patients by expanding use into earlier lines of therapy in DLBCL and into indolent lymphomas. The data we've seen across these settings so far have been consistently encouraging with the potential to be highly differentiating. Through expansion into these settings in DLBCL and into indolent lymphomas, we are confident that ZYNLONTA has the potential to reach peak annual revenues of $600 million to $1 billion in the U.S., assuming both compendia listing and regulatory approval. The upcoming LOTIS-5 trial readout, if positive, we'll begin to unlock the value of our life cycle management efforts with ZYNLONTA. Taken together with the upcoming data expected from LOTIS-7 and the indolent lymphoma studies, we expect to accelerate our revenue growth trajectory starting in 2027. Now I would like to turn the call over to Pepe Carmona, our CFO, who will discuss financial results for the first quarter. Pepe? Jose Carmona: Thank you, Ameet. On the financial front, ZYNLONTA net product revenues in the first quarter of 2026 were $20 million as compared to $17.4 million in the same quarter in 2025. Licensing revenues and royalties were lower this year due to $5 million milestone we received from our partner in the prior year period. Cost of product sales increased by $1.6 million to $3.6 million for the 3 months ended March 31, 2026. This increase reflects a shift in the allocation of certain personnel costs due to a change in focus from research and development activities to commercial manufacturing activities. Total operating expenses were $46.1 million for the first quarter. On a non-GAAP basis, total adjusted operating expenses were $42.9 million for the quarter. Total adjusted operating expenses were down by 13% over the prior year period, primarily driven by lower R&D expenses. As Ameet noted, when managing our costs carefully, and we remain disciplined in our capital allocation towards potential value creation while driving efficiency. On a GAAP basis, we reported a net loss of $33 million for the first quarter of 2026 or $0.21 per basic and diluted share as compared to a net loss of $38.6 million or $0.36 per basic and diluted share for the same period in 2025. On a non-GAAP basis, the adjusted net loss was $19.7 million for the first quarter of 2026, as compared to a net loss of $24 million for the same period in 2025. The lower net loss on both GAAP and non-GAAP basis was primarily due to reduced R&D expenses. The year-over-year reductions on a per share basis were additionally impacted by the higher number of weighted average shares outstanding. You can find the reconciliation of GAAP to non-GAAP measures for the first quarter in the compounding financial tables of the press release issued earlier today and in the appendix of this presentation. At the end of the first quarter, we had cash and cash equivalents of $231 million as compared to $261.3 million as of December 31, 2025. This provides us with an expected cash runway at least into 2028. Turning to upcoming milestones. We expect to have multiple data catalysts during the remainder of 2026 across the ZYNLONTA program. First, we expect to share the top line data for LOTIS-5 before the end of June with publication of full results anticipated by the year-end. As Ameet noted, we're currently blinded to the data. Until the top line data has been presented, we will remain in a blackout period, which means we may need to cancel our participation in any conferences as well as meetings with investors and analysts. Assuming the results are positive, we plan to submit a supplemental biologics license application to the FDA by year-end, with potential publication and compendia inclusion in the first half of 2027 and confirmatory approval to follow thereafter. With LOTIS-7, we are on track to complete enrollment in the second quarter. We plan to share the next update with full data at a medical meeting by the end of 2026. In addition, assuming positive results, we plan to pursue compendia inclusion as well as assess our regulatory strategy. With indolent lymphomas, we expect the lead investigator to share additional data at medical conferences between the end of 2026 and mid-2027, and we plan to assess regulatory and competing strategies once sufficient data are available. I will now turn the call back over to Ameet. Ameet Mallik: Thank you, Pepe. To close, I am pleased with our start to 2026. We have achieved solid commercial performance while maintaining our strict capital discipline as we look forward to multiple anticipated value-creating catalysts, beginning with the expected LOTIS-5 readout. We are excited about delivering on our strategy and confident we can drive significant potential long-term growth starting in 2027. We can now open the line for questions. Operator: [Operator Instructions] Your first question comes from Maury Raycroft with Jefferies. Maurice Raycroft: Congrats on the progress. You mentioned on the call that you remain blinded to the data. Can you clarify if the database is locked at this point and when you reach the 262 events? And from a process standpoint, can you say what's happening currently? And what are the drivers that will allow you to unblind the data? Ameet Mallik: Yes. Thanks for the question. So what I can tell you is we're on track to be able to read the data. So the -- we're completely blinded to the data side. I don't know any information yet. But as soon as the database gets locked and we do the statistical analysis, we'll then be able to disclose top line data. So we're not at that point yet. But we are on track to basically to share the data this quarter. Maurice Raycroft: Got it. Okay. And for when you reach the 262 events, is there anything more on that you're saying? From a timing perspective? Ameet Mallik: Yes, we're not commenting on exactly where we're going to the events. But what I can tell you is we're on track to hit the -- to basically to get to the top line results this quarter in the second quarter. Maurice Raycroft: Okay. Understood. Maybe one other quick question. Just following the site level interventions you implemented to address the early dropout in censoring, do you have any perspective potentially from the IDMC to provide any indication that sensoring rates improved after those changes? I guess any -- any more color on that could be helpful. Ameet Mallik: I can't comment further. What I can tell you is the last IDMC look, which is from a safety standpoint, was last fall. And again, that recommendation wants to proceed as it is. There's been -- any other looks from the IDMC at the data. Operator: Next question comes from Michael Schmidt with Guggenheim. Michael Schmidt: I have a couple. Maybe first commercially, the $20 million in 1Q, it's about 15% growth annually. I know you mentioned ordering pattern, but it just seems more growth than we've seen in recent quarters. And just curious if there's anything else going on in terms of driving more volume perhaps in the approved indication in the market? And then the other question I just had on LOTIS-5, so great to hear that the data is still on track for this quarter. Could you just comment on how much of the result, you'll be able to disclose in the top line announcement? Will you be able to share things like median PFS or perhaps asset ratios, et cetera, in the top line release? Ameet Mallik: Yes. Thanks, Michael. So first, on sales, as you recall, Q3 was quite low and the Q4 was quite strong. So we had $16.8 million, the $22.3 million, now we're at $20 million. I think it's too soon to call a change in trend, to be honest right now. But I think what we're seeing is definitely very good execution. We're happy that we've been able to maintain our share despite a very competitive environment. And there is quarter-to-quarter variability as we saw in the Q3 was one of the lowest quarters in the Q4 is one of the higher quarters in the last couple of years. But I think after 2 quarters in that $20-plus million range, it's encouraging, but too soon to call the trend. So I think if this continues, that may cause us to sort of change where we think the range is going to be. But I think at this point, just given the variability that we've seen in the last couple of years, I think -- we think it's -- we're still in the range of normal demand within the content of custom order variability. With regards to LOTIS-5, we plan to share all the relevant information on the primary endpoints, of course, the median PFS, hazard ratio, any information that we have on key secondary endpoints as well as top line safety data. So we do want to make sure that the disclosure is clear with the information that we have and well understood what the result is. At the same time, a lot of sub analyses and other things that are typically less relevant for top line results, but critical for, let's say, a medical conference or publication. Those would be details that would come later in the year. Operator: Your next question comes from Eric Schmidt with Cantor. Eric Schmidt: A couple of questions for me also on LOTIS-5. First, with regard to procedures. Do I take that base comments to mean that you're now entering the quiet period? Is that starting after today? Ameet Mallik: We started actually a quiet period, we have to do earnings, of course, but we haven't been engaging with analyst or investors since April 1. So for the whole quarter until we disclose the data. Eric Schmidt: And then Ameet, on the information that you'll be able to disclose with regard to the top line data for LOTIS-5 this quarter. Will we get some thoughts on how survival is trending? I know the trial's primary endpoint is PFS and you're well powered there. But wondering if you'll be able to provide color on OS trends. And then if you know at this point, how many OS events or how mature the OS data might be at the time of the PFS top line look? Ameet Mallik: Yes. So in addition to TFS, which obviously will be mature, we will give the information that we have on overall survival. So whether it's mature or it's a trend, we will provide the information that we have on overall survival as well as the other key secondary endpoints as well like response rate, duration of response. So we plan to share all the information we have. I can't comment right now on how many events we have with regards to overall survival. But what I can tell you is it will be -- with whatever information we have, we will make a part of the disclosure. Eric Schmidt: And then maybe just one modeling it for Pepe. The change that we saw from personnel from R&D into cost of goods. Is that an ongoing transition? Are we expecting COGS to be inflated in subsequent quarters as well? Jose Carmona: It is going to continue throughout all quarters from now on. So it's a reallocation of those expenses into cost of goods, and we capitalize on time inventory, but the cost of goods are going to increase because of this fixed cost and now it's getting allocated. Operator: [Operator Instructions]. Your next question comes from Sudan Loganathan with Stephens. Sudan Loganathan: My first one, I wanted to ask what -- what you believe the immediate impacts post the LOTIS-5 top line results in the second quarter could be, for instance, if it is positive, good PFS readout, how this may change of ZYNLONTA is prescribed reviewed in the second half of this year, even prior to complete listing? And then secondly, I just wanted to ask, even push over to the IITs, how does that add some incremental value over the next year or 2? Ameet Mallik: Sure. Yes. So once we get to the top line readout, assuming it's positive, we then would work to kind of go down too fast. One is to prepare the sBLA submission that typically 4 to 5 months, we expect to have that certainly before the end of this year. And then that could lead to our approval thereafter next year. And then in addition, we plan to submit to a medical congress and publication by the end of this year. to share the full details as a result, that would be the basis that we would submit to compendia. So we expect that we could get compendia inclusion sometime in the first part of next year and then an approval sometime thereafter in 2027. So we don't expect any revenue impact this year. We expect this year to be largely in line with what the previous years are and only see revenue trajectory increase next year as we'll only start promoting the product once we have a formal approval sometime around the middle of next year. And your second question was around the IITs, correct? Sudan Loganathan: Yes. Yes. Ameet Mallik: Okay. So with the IITs, we have both marginal zone and follicular lymphoma IITs. Both of those -- let's call it the data on the full study will be disclosed sometime between the end of this year and the middle of next year. We expect publications to happen around that same time and then to be submitted for compendia inclusion after that. In addition, we're evaluating the regulatory approach for , but we would taking in lymphomas when we move forward in parallel. Operator: There are no further questions at this time. I will now turn the call over to Ameet Mallik for closing remarks. Ameet Mallik: Thank you all for joining the call today and for your continued support. We look forward to keeping you updated on our progress and look forward to speaking to you soon. Operator, you may now end the call. Thank you. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Operator: Good day, and thank you for standing by. Welcome to the ON Semiconductor Corporation First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. 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 speaker today, Parag Agarwal, Vice President of Investor Relations and Corporate Development. Please go ahead. Parag Agarwal: Good afternoon, and thank you for joining ON Semiconductor Corporation’s first quarter results conference call. I am joined today by Hassane El-Khoury, our President and CEO, and Thad Trent, our CFO. This call is being webcast on the Investor Relations section of our website at www.onsemi.com. A replay of this webcast, along with our first quarter earnings release, will be available on our website approximately one hour following this conference call, and the recorded webcast will be available for approximately 30 days following this conference call. Additional information is posted on the Investor Relations section of our website. Our earnings release and this presentation include certain non-GAAP financial measures. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures and a discussion of certain limitations when using non-GAAP financial measures are included in our earnings release, which is posted separately on our website in the Investor Relations section. During the course of this conference call, we will make projections or other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution that such statements are subject to risks and uncertainties that could cause actual events or results to differ materially from projections. Important factors that can affect our business, including factors that could cause actual results to differ materially from our forward-looking statements, are described in our most recent Form 10-K, Form 10-Q, and other filings with the Securities and Exchange Commission and in our earnings release for the first quarter. Our estimates or other forward-looking statements might change, and the company assumes no obligation to update forward-looking statements to reflect actual results, changed assumptions, or other events that may occur, except as required by law. Now let me turn it over to Hassane. Hassane El-Khoury: Thank you, Parag. Good afternoon to everyone on the call, and thank you for joining us. This quarter marks a clear inflection point for ON Semiconductor Corporation. Improving demand signals, accelerating AI data center growth, and sustained gross margin expansion demonstrate that the structural changes we made over the past several years are now translating into tangible financial results. We delivered revenue of $1.51 billion and non-GAAP diluted earnings per share of $0.64, both above the midpoint of guidance, driven by growth in AI data center. We expanded gross margin for the third consecutive quarter to 38.5% while returning meaningful capital to shareholders. As volumes recover and new products ramp, our focused portfolio and lean cost structure are driving the operating leverage we designed this model to deliver. Turning to the demand environment, we saw a clear improvement as the quarter progressed, with strengthening order patterns and an increase in short lead-time orders. Taken together, these signals give us confidence that this cycle has found its low point, and we are now on a path to recovery. On the new products front, our execution on Treo continues to accelerate as the platform moves from product proliferation into ramping revenue and design wins. In the first quarter, revenue increased more than 2.5 times sequentially, and we saw broader adoption across high-volume automotive, industrial, and AI applications, with Treo design wins supporting the transition to software-defined vehicles. Programs in our funnel include zonal architectures built on 10BASE-T1S paired with smart FETs; auto ADAS park-assist systems using ultrasonic sensing; power management for AI client platforms; and inductive position sensing for humanoids and advanced automation use cases. These wins reinforce Treo’s penetration as customers move to a more centralized compute model with zonal for a scalable software architecture and require a faster time to market. Our Treo-based driver ICs and inductive position sensing combined with our gallium nitride products deliver high power density, efficiency, and ease of use in humanoid applications, AI data centers, and automotive. Our overall GaN solutions design funnel, which includes vertical GaN, now exceeds $1.5 billion supported by a rich product portfolio spanning 40 to 1,200 volts. Ten products are already sampling with another 20 sampling in 2026. With a balanced model that combines internal GaN development and foundry partnerships, we have a differentiated roadmap and resilient supply chain that positions us to begin ramping in these markets with revenue starting in 2027. Diving deeper into automotive, in the first quarter we began production shipments of our Treo-based T1S Ethernet solutions for a leading North American customer’s next-generation zonal architecture. The platform integrates more than 30 Treo devices enabling end-zone connectivity. Higher energy costs are accelerating EV demand, with cost-optimized EV platforms driving increased adoption of IGBT-based traction inverter solutions. Our latest generation IGBTs deliver a compelling balance of performance, efficiency, and cost, complementing our silicon carbide wins, particularly in front-axle applications. During the quarter, we were awarded a new IGBT-based traction inverter program with a North American OEM that is transitioning to direct semiconductor sourcing. As the industry transitions to 900-volt EV architectures led by Chinese OEMs, we are the preferred power solution and are already in production at customers in their next generation EV platforms, enabling fast charging and higher efficiency for a longer drive range. Our China automotive revenue grew year over year in Q1 despite a decline in the China passenger vehicle market of 6% for the same period. Our silicon carbide share of new EV models deployed at the 2026 Beijing Auto Show in April is approximately 55%. Recent expanded collaborations with Geely and NIO highlight our role in enabling these customers to scale globally with their next-generation 900-volt platforms. The latest reports from the China Association of Automobile Manufacturers highlight continued strength in new energy vehicle exports in the first quarter, supporting our view that EV adoption is extending beyond the China domestic market. With ongoing fuel supply disruption and elevated energy costs, we expect demand for high-efficiency EV platforms and silicon carbide content to remain durable, supporting long-term growth opportunities for ON Semiconductor Corporation and automotive power globally. Turning to AI data centers, our revenue grew more than 30% quarter over quarter, nearly double our expected growth rate entering the quarter, driven by broader adoption across the PowerTree with multiple XPU vendors and all the leading hyperscalers. Looking ahead, we now expect our AI data center revenue to double year over year in 2026. As the only broad-based U.S. power semiconductor supplier, ON Semiconductor Corporation continues to build a leading position in AI data centers across the full set of power capabilities required to modernize the power tree, including high-voltage conversion, intelligent power stages, protection and control, and system-level integration from the grid to the processor. As policymakers push for greater transparency in U.S. data center energy use, it reinforces a trend we have been aligned with for some time. ON Semiconductor Corporation’s power portfolio helps hyperscalers overcome power density and efficiency constraints, reducing losses from the grid to the processor. We are engaged with all major power supply vendors serving every major AI hyperscaler. With FlexPower, for example, our partnership now spans more than 30 active programs across intermediate bus converters, power supplies, battery backup, supercapacitors, and next-generation 800-volt DC architectures. The AI halo effect continues to drive incremental demand in adjacent infrastructure markets, particularly energy storage systems, as rising energy costs and declining battery prices accelerate project economics. Driven by our differentiated SiC hybrid modules, we are seeing renewed growth in our string ESS and microgrid business globally, from China to North America. We now expect to outpace the power semiconductor growth for this market in 2026, with more than 40% revenue growth year over year and a market share approaching 60%, and are now ramping revenue for large U.S. OEMs’ microgrid deployment. Our announcement with Sungrow Electric highlights our hybrid power integrated modules combining EliteSiC technology and FS7 IGBTs, enabling higher efficiency and higher power density for utility-scale solar inverters and liquid-cooled energy storage platforms. These solutions deliver the best system-level electrical and thermal performance and reinforce our position as a technology partner of choice as customers scale next-generation renewable and storage deployments. Turning to sensing, we are delivering a multimodal sensing capability that customers can deploy across industrial autonomy, automotive sensing, and emerging robotics applications. We secured a meaningful design win with a leading global robotics platform where our high-resolution image sensor and indirect time-of-flight technology were selected to enable reliable depth perception and navigation in autonomous systems. Our roadmap spans complementary modalities including high-resolution imaging, depth, and other sensing approaches like SWIR that are designed to work together with automotive-grade reliability and long-lifetime performance. As we move forward, we are encouraged by improving market conditions and the momentum we are seeing across our highest-value applications. Our continued evolution towards a product- and solution-centric portfolio combined with disciplined investment decisions and our FabRight actions is strengthening our operating model and enhancing margin durability. We are executing a clear strategy with deeper customer intimacy and a portfolio aligned to the most important long-term power and sensing transitions. This positions us well to deliver sustainable growth, expanding profitability, and long-term value creation. I will now turn it over to Thad to give you more details on our results and guidance for the second quarter. Thad Trent: The improving market conditions are coming through in our financial results and outlook as demand visibility improves. This year, we expect the impact of the structural changes we have made to become increasingly visible in our results. With a leaner cost structure, a more focused portfolio, and differentiated power and sensing investments, we have built a model that delivers strong operating leverage, with incremental revenue driving expanded margins, earnings, and free cash flow. In the first quarter, order patterns and improving backlog visibility indicate that we are moving away from the bottom of the cycle and we are on a path to recovery. We delivered revenue of $1.51 billion, better than normal seasonality, and non-GAAP earnings per share of $0.64, both above the midpoint of our guidance. We expanded non-GAAP gross margin for the third consecutive quarter to 38.5%, and we expect sequential gross margin expansion throughout the year. We returned $346 million to shareholders through opportunistic share repurchases, representing nearly 160% of free cash flow. Q1 revenue was $1.51 billion, down 1% versus the fourth quarter and up 5% year over year. As expected, there was roughly $50 million of planned non-core exits in the quarter. Turning to the end markets, automotive revenue was $797 million in the first quarter, roughly flat quarter over quarter and up nearly 5% year over year, marking the first year-over-year growth after seven quarters of decline. We continue to see stabilization in the automotive market and we now believe we are shipping to natural demand. China electric vehicle programs continue to outperform other regions driven by a strong export market. Industrial revenue was $417 million, down 6% sequentially but ahead of our expectations. We saw broad-based strength across our traditional industrial business for the second consecutive quarter, partially offset by typical Chinese New Year seasonality. Our AI data center business is accelerating, with Q1 revenue growing more than 30% quarter over quarter and doubling year over year, reflecting platform ramps and expanding engagement across the PowerTree. We expect our 2026 AI data center revenue to double compared to full year 2025. For the first quarter, total revenue for the Other category was $299 million, an increase of 3% quarter over quarter due to AI data center strength. Looking at the first quarter split between the business units, revenue for the Power Solutions Group (PSG) was $737 million, an increase of 2% quarter over quarter and 14% year over year. Revenue for the Analog and Mixed-Signal Group (AMG) was $540 million, a decrease of 3% quarter over quarter and 5% year over year. Revenue for the Intelligent Sensing Group (ISG) was $256 million, a 5% decrease quarter over quarter and a 1% increase over the same quarter last year. Moving to gross margin, in the first quarter GAAP and non-GAAP gross margin of 38.5% increased sequentially in a seasonally down quarter. The improvement in gross margin is a result of the structural changes we have made over the last several years that have improved our manufacturing performance. Manufacturing utilization increased sequentially to 77% as we ramped production quickly to respond to stronger demand signals in the quarter. In Q2, we expect utilization to be flat to up slightly. Given the improving demand outlook and our ongoing FabRight actions, we expect sequential gross margin expansion throughout the year. GAAP operating expenses were $637 million, including $329 million in restructuring expenses. Non-GAAP operating expenses were $294 million, a decrease of 7% from Q1 2025 driven by cost optimization actions. GAAP operating margin for the quarter was negative 3.5%, and non-GAAP operating margin was 19.1%. Our GAAP tax rate was 26.2%, and our non-GAAP tax rate was 15%. Diluted GAAP loss per share was $0.08, and non-GAAP earnings per share was $0.64. GAAP diluted share count was 394 million shares, and non-GAAP diluted share count was 396 million shares. We opportunistically purchased $346 million of shares at an average price of $60.54. Turning to the balance sheet, cash and short-term investments were approximately $2.44 billion, with total liquidity of $3.9 billion, including $1.5 billion undrawn on our revolver. Cash from operations was $239 million, and free cash flow was $217 million. Capital expenditures were $22 million, or 1.4% of revenue. Inventory increased by $60 million to 201 days from 192 days in Q4. The sequential increase was a result of higher internal loadings and customer commitments as we continue to deplete the 75 days of strategic inventory, which is down from 76 days in Q4. We plan to deplete this inventory over the next two years. Excluding the strategic builds, our base inventory is at 126 days. Distribution inventory was flat at 10.8 weeks. Looking forward, let me provide the key elements of our non-GAAP guidance for Q2 2026. As a reminder, today’s press release contains a table detailing our GAAP and non-GAAP guidance. We anticipate Q2 revenue will be in the range of $1.535 billion to $1.635 billion. We expect to exit an incremental $30 million to $40 million of non-core revenue in the second quarter. Excluding these exits, our revenue is expected to increase approximately 7% at the midpoint and be above seasonal. Our non-GAAP gross margin is expected to be between 38% and 40%, which includes share-based compensation of $6 million. Non-GAAP operating expenses are expected to be between $287 million and $302 million, which includes share-based compensation of $28 million. We anticipate our non-GAAP other income to be a net benefit of $6 million, with our interest income exceeding interest expense. We expect our non-GAAP tax rate to be approximately 15%, and our non-GAAP diluted share count is expected to be approximately 194 million shares. This results in an anticipated non-GAAP earnings per share in the range of $0.65 to $0.77. We expect capital expenditures in the range of $25 million to $35 million. To wrap up, our first quarter results demonstrate continued execution and the operating leverage embedded in our model. I would like to thank our teams around the world for their commitment to excellence. Looking ahead, as our end markets continue to recover, we expect to deliver sequential gross and operating margin expansion throughout 2026. With that, I would like to turn the call back over to the operator to open it up for questions. Operator: As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. In the interest of time, we ask that you please limit yourself to one question and one follow-up. Our first question comes from Ross Clark Seymore with Deutsche Bank. Your line is open. Ross Clark Seymore: Hi, guys. Thanks for letting me ask a question. I guess for my first one, Hassane, one for you. Cyclical conditions are clearly getting better, but I think the structural and secular stuff is more important to investors when they think about ON Semiconductor Corporation. You rattled off a bunch in your preamble, whether it be the AI data center, the electric grid, the zonal. There is a whole bunch of them. How do you think those are really going to show through to investors, and when do those become the dominant driver of revenue that we can really see externally? And as my follow-up, a good segue to the gross margin side for Thad. Top line is significantly better. You talked about the loadings being better. Can you just update us on what the levers are on the gross margin side? People expect a little bit more stair-steps than kind of a slow linear ramp on the gross margin side. Is that something we should expect in the second half of the year? And if not, when will those larger steps start to be apparent? Hassane El-Khoury: Yes. I will take them one at a time. If you think about the AI data center, you are already seeing it in 2026. If you recall, we entered the year thinking we were going to be in the high-teens sequential growth for AI data center. We ended up at 30%. You see the strength is starting already to come in, and for the year, doubling our revenue from last year. So that is going to be a top-line growth driver. For the zonal, the 10BASE-T1S, and so on, that is all really related to the Treo traction that we have been talking about. That is already being seen in the revenue with the 2.5x increase that I talked about, but more importantly, that is going to start showing up in the top line as we progress in ’26, ’27, ’28 towards that $1 billion in 2030. More importantly, it is going to come with the margin expansion that this product line will offer, not just the top line. If you recall, the margin range for the Treo product is 60% to 70% gross margin. You can think about it as both a top-line driver and a gross margin driver. That is going to be both in the AI data center and automotive with the zonal. Then other opportunities, as they progress for the AI halo effect that I talked about, you will see that in the industrial business. I already talked about that side of the business growing 40% year on year. As the rest of industrial starts to grow, you are going to start seeing that as a reflection of our overall industrial business. Overall, I would say investors are going to see a lot of the growth in the right markets and the right applications, both from a top line, but more importantly, the margin expansion. Even in ’26, Thad in his prepared remarks talked about margin expansion throughout 2026. So you are going to already start to see that shift, and that is all a lot of the portfolio rationalization and the manufacturing work that we have been doing starting to reflect. Thad Trent: Yes, look, we expect expansion throughout the year as we are seeing the favorability from our FabRight activities that we have been taking through 2025. As utilization improves, you will see that as well. We have also had some headwinds on input costs going up, and our pricing actions are now going to offset that as we think about later in this year. The puts and takes are similar to what we have talked about in the past. It is utilization, where every point of utilization is 25 to 30 basis points of gross margin improvement. We think longer term there is another 200 basis points of improvement from the FabRight initiatives that we are driving. Hassane just talked about favorable mix, and longer term you are going to see over 200 basis points impact to gross margin there. We divested the fabs back in 2022. I do not think we are going to see that here in ’26, but in ’27 you should start to see some impact from that, and longer term that is another 200 basis points. When you start to stack it up, you can get over 50% when you do the math. We expect expansion throughout the remainder of this year, and probably larger step functions than what you saw here in the first quarter. Operator: Our next question comes from Vivek Arya with Bank of America. Your line is open. Vivek Arya: Thanks for taking my question. For the first one, last year we saw the analog industry had a decent first half and then things started to get a little more muted in the second half. Do you think this year’s second half plays out differently than what we saw last year? What are you seeing in your customer discussions and demand visibility? Because you mentioned a lot of positive words, demand inflection and demand strengthening. Should we be expecting seasonal or better-than-seasonal trends in the second half? How should we think about the second half of this year? Hassane El-Khoury: I do not want to guide the outlook from a seasonality perspective, but let me give you how the year is laying out. The signals that I look at, whether it is book-to-bill, order patterns, lead times, etc., are all pointing in the right direction. We are expecting the second half to outgrow the first half. I am not talking about flattish; I am talking about a good outlook that we have based on all the customers. It is driven by programs that we started ramping already and will continue to ramp. You can think about it as we have gotten one quarter and then we are going to get the rest of the quarters as the ramp happens. Whether it is AI data center or automotive, driven primarily in China, those models that I referenced with 55% being ON Semiconductor Corporation silicon carbide just got released and will be in production in the second half. You can start seeing a lot of the leading indicators of a solid ordering pattern, and you can extend that to AI data center and industrial. All of these positive patterns started and will continue through the second half of the year. That was not the sentiment that I personally had last year. In contrast, we see a much better outlook than we did last year. Vivek Arya: Got it. And for my follow-up, on the AI data center, you mentioned that it grew 30% sequentially. How big is it for ON Semiconductor Corporation right now? Is it something like mid-single-digit percent of sales? There is a lot of interest in that segment, so if you could help give us some range on how large that segment is. And do you think you have the scale and the internal resources to become an important player in that segment, or do you think you will need some inorganic resources to help you become a more important player in the AI data center segment? Thank you. Hassane El-Khoury: Let me first tackle the first one. Last year, we talked about $250 million in AI revenue. We just mentioned that we will be doubling that this year. That is pretty healthy growth given where we started. We have all the power technologies from the wall to the core, both inside the data center, which is the revenue that we report, but also outside the data center, which we report under industrial. From a technology perspective, I feel very good. We have done some inorganic acquisitions in 2025 that are playing to our advantage. We talked about the Aurasemi acquisition, and we did the JFET silicon carbide acquisition. All of these are pieces of that puzzle that gave us a very well-rounded power technology platform that we can deliver. Treo is also a very big internal technology for the AI data center. Those together cover the technology. From a team perspective, you have seen our actions on OpEx, but both Thad and I have always said we are very focused on capital and R&D allocation in the areas of growth. That is where they are going. To answer your question directly, we absolutely have the focus that we need to be a major player in power for AI data center. Operator: Our next question comes from Analyst with Needham & Company, on behalf of Nathaniel Quinn Bolton. Your line is open. Analyst: Thank you for letting me ask the question. You talked about addressing the full AI data center power tree, from energy infrastructure, UPS, rack-level power, and point of load. As architectures move towards higher-voltage distribution, how should we think about the biggest incremental content opportunities for ON Semiconductor Corporation? Is the larger dollar opportunity still outside and at the rack, or is the VCORE point-of-load side becoming a more material contributor? And then I have a follow-up. Thank you. Hassane El-Khoury: If you think about it from the rack or 800-volt or HVDC all the way to the outlet, there are more incremental dollars for us, which is exactly where we play. Outside of the data center, you can think about a very large opportunity for us with solid-state transformers as well. That is forward-looking and incremental to the opportunity we have today. To break it down, there is more incremental opportunity from where we are today for the high voltage all the way to the infrastructure, if I include the solid-state transformers. But also within the rack, you cannot forget that today, at the rack, you can think about a 120-kilowatt rack at roughly $9,500 of content. At the 800-volt or high-voltage rack, we are thinking about roughly $115,000 of content. So although our content is almost 10x inside the rack, there is additional incremental content from the rack all the way to the grid that we also participate in, because this is all high voltage, which is exactly in our sweet spot. Analyst: Great, thanks. And then, you noted the company has moved beyond the cyclical trough for automotive, with inventory digestion largely behind you. As automotive begins to recover, how much of the improvement are you seeing is true unit demand normalization versus content growth from things like image sensors and zonal architectures? And beyond China, are you seeing any meaningful differences by region? Thanks. Hassane El-Khoury: Let me answer the regional question first. Obviously, very healthy automotive in China, followed by North America, followed by Europe if you think about it from a recovery and health standpoint. As far as your question about content, we absolutely leverage more content than SAAR. If you look at the global SAAR, it is flat, maybe slightly down or slightly up depending on the outlook you look at. To give you an example, in China specifically, Q1 is seasonally down. The number of passenger vehicles was down 6%. Our revenue was actually up. Therefore, that tells you it is a content story. In certain areas, it is a share gain story as well. We are both gaining share and gaining more and more content. I talked about 10BASE-T1S for zonal with an OEM in North America. That is net new content that did not exist about a year ago because zonal is new and Ethernet-based is new. That is content that we are adding to an existing SAAR as vehicles upgrade to a software-defined vehicle. We are more leveraged to content than SAAR, and in certain areas, we are gaining share. Operator: Our next question comes from Joshua Louis Buchalter with TD Cowen. Your line is open. Joshua Louis Buchalter: Hey, thanks for taking my question. Maybe following up on some of the previous ones about data center. When we think about the doubling this year, can you help us understand how much of that is from GaN, how much from silicon carbide, and are we at the point where we can expect any contribution from Treo in the data center? Or are some of those lower-voltage applications more of a 2027 and beyond story? Thank you. Hassane El-Khoury: We are not breaking it down to that level by product family, but I will tell you it is everywhere from low voltage all the way through high voltage. That includes mixed-signal analog on the GPU or XPU side—low voltage but high power—along with silicon carbide and silicon carbide JFET, and of course our medium- and high-voltage silicon anywhere in between. We keep focusing on ON Semiconductor Corporation as the only U.S.-based supplier with the breadth of power technologies that we can offer, and that is starting to come to bear. I gave the example of applications with FlexPower. That gives you an indication of the breadth of our approach. It is not just tied to a single XPU. It is with ASIC vendors as well as hyperscalers. The breadth is what we are leveraging. That is where the growth came in better than we expected as they proliferate, and why the 2026 outlook is to double. Joshua Louis Buchalter: Thank you for the color there. And then for a follow-up, I think entering the year, you gave us a sort of growth algorithm of taking whatever we think for the industry growth and subtracting 5% for the business exits. Is that still the right way to think about it? A few years ago when you were walking away from some of this business, it took you longer than anticipated because the pricing environment was better and your customers did not react as you expected them to. Any risk of that happening again this year, or has anything changed with that old growth algorithm overall? Thank you. Thad Trent: Josh, no change. As I said, we have exited approximately $50 million in Q1. There is another $30 million to $40 million here in Q2. If you annualize that, you roughly get to the $300 million that we planned on exiting. So we are done in 2026. Your algorithm is still true: take the market growth rate, take 5% off, and that would be our comparable. We have line of sight to that, and we are executing to those exits. I do not plan on that changing for the rest of this year. Operator: Our next question comes from Vijay Raghavan Rakesh with Mizuho. Your line is open. Vijay Raghavan Rakesh: Yes, hi. Thanks. Just a quick question on auto and industrial. Can you talk about how you see that progressing in June and into the back half? Thad Trent: Let me give the end-market view for Q2. Automotive in Q2 we think will be roughly flat. As I said, we think we are shipping to natural demand. We have not seen the full recovery or the replenishment cycle in automotive yet. If that were to happen later in the year, that would be a good thing. For our industrial business, we are looking up mid-single-digit percentage-wise. That will be driven by the broad industrial, our traditional market that has been growing the last two quarters sequentially. And our Other market, which includes our AI data center, will be up mid-teens quarter on quarter. Vijay Raghavan Rakesh: Got it. And then as you look at the gross margin into ’27, you mentioned the puts and takes. Any thoughts on how we should think about utilization improving? And are there any exits that are still left in the core business? Thank you. Thad Trent: There will not be further exits beyond ’26. On utilization, we are at 77%. We took utilization up quickly within the quarter to support the strong demand signals that we were getting, which is a good sign. If the market continues to recover, we will see some slight improvement over time. We are going to match our utilization to whatever the demand signal is for the remainder of this year. Utilization is the biggest factor in driving gross margin expansion, and that is why we are comfortable with incremental expansion through the remainder of the year. Operator: Our next question comes from Gary Wade Mobley with Loop Capital. Your line is open. Gary Wade Mobley: Hi, guys. Thanks for taking my question. Congratulations on the upturn in the cycle and the secular drivers as well. I wanted to ask about utilization. I assume it is going to be trending above 80% broadly across all your manufacturing assets exiting 2026. At what point do you need to take up your capital intensity above the 5% level you have been running at for a while now to support the growth in 2027 and 2028? Thad Trent: Gary, I do not anticipate any change to our capital intensity. I expect it to be in the mid-single-digit percentage of revenue for the foreseeable future, and that goes into 2027 as well. To get to fully utilized for us, which is just over 90%—call it low nineties—we would need revenue that is 25% to 30% higher than where we are today. Once we hit that, we start flexing to the outside as well. We actually have a lot of capacity here, and that is why, as we sit here today, we do not look at having to bring on capacity. Hassane El-Khoury: Just to give you an example, Treo is already ramping out of East Fishkill. That investment was made a few years ago. A lot of the investment we have made over the past two to three years is to build the capacity that we need for the new products that are ramping today, like Treo, the AI data center for silicon carbide, or the JFET, etc. It is not about adding more capacity. It is about utilizing capacity we already invested in, and that is the leverage in our model with the fall-through at mid-single-digit CapEx. Gary Wade Mobley: Actually helpful. Thanks, guys. And for my follow-up, I want to ask about pricing. You did mention passing along some inflationary pressures in your supply chain onto your customers. How pervasive are those pressures? Or asked differently, how pervasive are your pricing adjustments as we look forward over the next few quarters? Hassane El-Khoury: I would say a couple of things. Coming into the year, the pricing environment is better than we anticipated. There are commodities and energy costs that we are passing to customers as a matter of fact. In areas where we are fully constrained, those are more surgical based on the technologies that we are constrained on. It is not a one-size-fits-all. It is either a material cost offset or an allocation methodology that comes with the pricing adjustment. Those are more surgical than broad. Thad Trent: We are already seeing the impact of input costs being higher in the P&L, although we are not seeing the impact of the higher pricing yet. It just takes a while for that to become effective and hit the P&L. In the second half, we think you will start to see that pricing impact show through on the margin line. Operator: Our next question comes from Christopher Rolland with Susquehanna. Your line is open. Christopher Rolland: Thanks so much for the question. I think in the press release, you talked about some AI wins, both with chip guys as well as hyperscalers. I was wondering if perhaps you could elaborate a little bit more there. Is this like a vertical power delivery or VRMs or VCORE solutions? Or is it something else? And when you say the chip guys, are you talking about GPUs or merchant XPUs? Any other details here would be great. Hassane El-Khoury: Let me give you what our wins are and what the reference is for. The reference is across the XPU—whether it is GPU or CPU—the power delivery right at the GPU or XPU, in whatever form that is required, whether it is an SPS or anything else. Then if you keep going outside from that point, you go to the rest of the rack where you have the medium- and high-voltage discrete FETs and integrated analog mixed signal. When you get more on the power boxes, whether it is the UPS and so on, like I mentioned with Flex, FlexPower, those are across a multitude of technologies that we offer, whether it is silicon carbide MOSFET or silicon carbide JFET. It changes as you get from the low voltage, which is more integrated mixed-signal power, all the way to discrete or module-level high-voltage power as you get outside of the rack. It is across the board. We do not break it out by which one. It is across the PowerTree because of our broad portfolio. One more thing: when I talk about hyperscalers, a lot of it is in the power domain. In the power domain, a power rack or a UPS is architecturally defined with the hyperscaler. We work with the likes of FlexPower across all hyperscalers, but it is architecturally defined with the hyperscaler. That gives you a little bit on the breadth, but also the go-to-market. Christopher Rolland: Thanks for the clarity there, Hassane. Maybe secondly, just geographically, it looked like EU and Japan bounced back a little bit here. Maybe you could just talk about what you are seeing geographically and if there are any differences in the recovery? Hassane El-Khoury: It depends on the market and the geography. Automotive shows strength in China. We have industrial AI strength in North America. These days it is hard to talk about regional without talking about market specifics that drive the regions. It is more market-dependent. In Europe, the automotive market has not really recovered, so you can think about it as going sideways, and that matches what our customers, the OEMs, have been reporting. Industrial is better than we expected. In North America, AI is strong. Auto is better than we expected with certain names in North America. Industrial is doing well and starting the recovery. Looking forward, we are resuming aggressive growth in energy storage and renewable energy in industrial with 40% growth. That is going to be fueling the second half of the year as that comes back to recovery, primarily in North America and China. Operator: Tom, your line is open. Analyst: Hey, guys. Thanks for taking my question. I wanted to ask about the channel. The channel was flat into the quarter. When you look into the second half of the year, you are seeing some more robust trends in your business. Can you talk about your appetite to potentially expand the channel? And then the second one, around the direct customers, there was a time during the pandemic where we went from just-in-time to just-in-case. It feels like you have moved away from that as inventory has burned down. As you are seeing a recovery, are you seeing customers move more towards building backup inventory, or do you see that being something that you are going to have to carry on your balance sheet in the future? Thank you. Thad Trent: On the channel, we have been running nine to eleven weeks in our sweet spot. We were at 10.8 weeks last quarter, consistent with Q4. I expect it to remain at this level. The good news is we have been investing in inventory in the channel. We took it up early last year for the mass market, and what we have seen is that mass market revenue going through distribution grew quarter on quarter and year on year, and that is what we want to see. As a reminder, about half of the business through the distribution channel is fulfillment where we own that customer. We focus on where the distributors do demand creation, and we are seeing growth there. As we go through the year, we will watch the demand signals and match that. If it goes up, it is because we have to seed that market for a future revenue ramp. You have to have that inventory sitting out there. Right now, line of sight is to keep it in the ten to eleven weeks range. Hassane El-Khoury: As far as just-in-time versus just-in-case, at the end of the day, if you do not place your orders with enough visibility, you are not going to get your order. Some technologies are already on allocation. Automotive has not seen a recovery yet. Technology is technology, whether it goes in AI data center or automotive. We have been pushing for getting the backlog. Backlog is starting to layer in, and lead times are starting to extend. It is irrelevant what model the industry lands at. We are not going to carry all of it on our balance sheet. What we are carrying is our WIP on our balance sheet, and we will ship it as fast and as quickly as we get the orders. That is our view of just-in-time and just-in-case. Operator: Our next question comes from Joseph Moore with Morgan Stanley. Your line is open. Joseph Moore: Yeah, on the same lines, are you seeing any kind of lead time extensions or hotspots? And at our conference, you had talked about the automotive OEMs looking to take on some inventory because the tier ones were not. Anything around that and any anxiety that you see around the inventory situation? Thad Trent: Our lead times have stretched slightly. In Q4, we were around 23 weeks. In Q1, we are about 26 weeks. So it has gone out just slightly, and that is across the board on average. We are seeing a number of orders coming in inside of lead time and expedites. I think that is this market recovering faster than many had expected. Thus we took utilization up quickly, trying to match that as fast as we can. I will let Hassane comment on the inventory. Hassane El-Khoury: Some of the OEMs are starting to do directed or direct semiconductor sourcing. Whether they hold inventory or we have an agreement with them at a cost associated with it will be an operational decision. The anxiety is there. I am starting to get calls. We are on allocation in certain technologies. The strength is not yet shown in automotive, but it will come, and it will come with even stronger allocation in the automotive market given that AI data center has been showing a ton of strength. Operator: Thank you. Our next question comes from James Edward Schneider with Goldman Sachs. Your line is open. James Edward Schneider: Good evening. Thanks for taking my question. Maybe related to the last one, I was wondering if you could broadly characterize your customers’ willingness to take up their own internal inventory. Are we starting to see that already in the industrial sector but not yet in automotive? And are there any other areas where you start to see that behavior? Thank you. Hassane El-Khoury: I do not think you are already seeing that. In AI data center, there is no inventory; it is all going to end build-out. In industrial, it is a ramp. We can see the deployments, whether it is energy storage systems or standard industrial. That is not an inventory build; that is actual end-demand recovering. In automotive, as Thad talked about, we are shipping to natural demand. I do not believe there is inventory being built out. How they protect from shortages that we know are coming is a question for them—whether they want to put it on their balance sheet or wait in line. We will see how that plays out when automotive starts to show a little bit more strength. James Edward Schneider: Thanks. And then just as a follow-up about capital allocation, you have done a very good job of opportunistically buying back shares when the stock price is low. With the stock price having recovered quite nicely, how are you thinking about the calculus for incremental buybacks versus other things to do with the capital? Thank you. Thad Trent: Just as a reminder, capital allocation is after investing in our business—after making the R&D investments and the CapEx. We have been returning 100% of our free cash flow to our shareholders. Last quarter, it was 160%. Over time, our goal is to return 100%. You can see that we will flex up at times when we think there is a dislocation. As I noted, we were buying last quarter at an average share price of $60.54, so you saw us flex up. Over a longer period of time, you should think about 100% of our free cash flow being returned to shareholders. Operator: Thank you. Our final question comes from Harlan Sur with JPMorgan. Your line is open. Harlan Sur: For a while now, you have been giving us metrics on customer comps in your mass market business. It has been a good leading indicator of cyclical improvement dynamics. I recall a discussion a couple quarters ago—you reiterated today that mass market is roughly 25% of your distribution business, small to medium-sized customers. Your distribution business was strong this quarter, almost up 24% to 25% year over year. How much of this was mass market strength? And then for the mass market, are you targeting Treo for more general-purpose catalog for some of these customers as well? Thad Trent: The mass market, as highlighted earlier, was up quarter on quarter and year on year—about 35% growth. That is accelerating. A few quarters ago, we said it was about 30% growth. You can see that acceleration as we have been seeding the distribution channel with the right inventory for that mass market. Hassane El-Khoury: For Treo, absolutely. Treo is a very versatile platform. It is an analog mixed-signal platform upon which we build a lot of solutions and products. These are all application-specific products that are definitely for the mass market. We do not make ASICs or custom chips. We make chips to solve specific problems for customers, and we deploy those in the mass market through our distribution channel and network. So, absolutely, Treo is part of our broad mass market push. Harlan Sur: I appreciate that. During the downturn and stabilization period last year, you focused on building your portfolio across your power and mixed-signal analog portfolios. Two of those acquisitions—VCORE controllers and vertical GaN from NextGen—were targeted to have products into the market in the first half of this year for VCORE and sampling of your vertical GaN products. Is the team executing to this? And with VCORE, there is a sizable market opportunity, especially on the CPU side where we see new server CPU SKUs. Is the team seeing strong interest for your new multiphase controller and regulator products? Hassane El-Khoury: One hundred percent. We are fully focused on it. We have a dedicated team covering that not just from a go-to-market perspective, but from a product perspective as well. There is complete focus on it. It is a very large opportunity, and it is the same focus that we have across the company across the whole power tree. At the GPU level or on the board or blade level, there is a focus across all technologies. The vertical GaN is more on the high voltage. We are sampling vertical GaN and we are on track to continue to do that, with revenue starting in ’27. That is still on track as discussed previously. Operator: Thank you. This concludes the question-and-answer session. I would now like to turn it back to Hassane El-Khoury, President and CEO, for closing remarks. Hassane El-Khoury: Thank you for joining us on the call. Before we close, I would like to recognize the extraordinary efforts of our global teams. Over the past several quarters, they have navigated one of the most challenging cycles our industry has seen while continuing to execute, invest, and move the company forward. Their focus, resilience, and commitment are what have positioned ON Semiconductor Corporation to deliver consistently today and to perform even more strongly as conditions continue to improve. Thank you. Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
Ana Soro: Good afternoon. I'm Ana Soro from Palantir Technologies Inc.'s finance team, and I would like to welcome you to our first quarter 2026 earnings call. We will be discussing the results announced in our press release issued after the market closed and posted on our Investor Relations website. During the call, we will make statements regarding our business that may be considered forward-looking within applicable securities laws, including statements regarding our second quarter and fiscal 2026 results, management's expectations for our future financial and operational performance, and other statements regarding our plans, prospects, and expectations. These statements are not promises or guarantees and are subject to risks and uncertainties, which could cause them to differ materially from actual results. Information concerning those risks is available in our earnings press release distributed after the market closed today and in our SEC filings. We undertake no obligation to update forward-looking statements except as required by law. Further, during the course of today's call, we will refer to certain adjusted financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from GAAP measures. Additional information about these non-GAAP measures, including reconciliation of non-GAAP to comparable GAAP measures, is included in our press release and investor presentation provided today. Our press release, investor presentation, and other earnings materials are available on our Investor Relations website at investors.palantir.com. Over the course of the call, we will refer to various growth rates when discussing our business. These rates reflect year-over-year comparisons unless otherwise stated. Joining me on today's call are Alexander C. Karp, chief executive officer; Shyam Sankar, chief technology officer; David A. Glazer, chief financial officer; and Ryan Taylor, chief revenue officer and chief legal. I will now turn it over to Ryan Taylor to start the call. Ryan Taylor: The last three months have been some of the most exciting in the history of Palantir Technologies Inc. as we have watched the whole world begin to see the incredible promise of operational AI as well as the risks and perils of being beholden to models alone. We achieved 85% year-over-year revenue growth, our highest overall revenue growth rate as a public company, and 16% sequential growth. Our U.S. business, now 79% of total revenue, surpassed 100% year-over-year growth for the first time since our DPO, growing 104% year-over-year and 19% sequentially. Our Rule of 40 score climbed to 145, up from 127 last quarter, on absolute AIP dominance. AIP is the only platform that establishes a true AI no-slop zone, a necessary requisite to converting potential AI leverage into compounding real-world value without risking enterprise disaster. As the AIG CEO noted in their recent earnings call, they are deploying AIP to implement a multi-agentic underwriting and claims solution comprised of purpose-built agents ingesting submissions, evaluating risk, benchmarking pricing, and detecting fraud, all coordinated through the ontology. When you want AI to work in production, in a real enterprise, at real scale, where there is no room for slop, there is only one platform. Unknown Speaker: AIP. Ryan Taylor: It is not just the playbook of cutting costs and streamlining processes. AIP is the battle-tested platform that allows the wholesale redefinition of how companies compete within their industries. The depth of our customer commitments reflects that ambition. Referencing our work with Motor and Freedom Mortgage, where we are revamping the end-to-end mortgage process with AIP, the Motor chairman stated, quote, this strategic partnership will reshape the future of our industry. Together, we are building technology that can help improve affordability, lower borrowing costs, and expand access to homeownership for millions of Americans. Our U.S. commercial business grew at a pace that speaks to the compounding real value created for our customers. For example, on the back of a 26% increase in engine performance with AIP, GE Aerospace deepened their partnership with Palantir Technologies Inc. last quarter to deploy agentic AI-powered solutions across their production system and military aviation supply chain, with a shared mission of ensuring that more aircraft remain available to train America's next generation of U.S. Air Force pilots. Ondas and World View expanded their work with Palantir Technologies Inc. to bring AIP to the stratosphere and build the operational backbone required to scale their missions. They noted, quote, Palantir-powered workflows do not just make one launch faster, they make dozens or 100 simultaneous launches possible with the same operational efficiency. Load-bearing institutions upon which the West depends know, or will soon know, that our AI platforms are the indispensable means of delivering their must-win outcomes. An upshot of our transformational work across every domain: the foundation remains our deployment of Maven Smart System to empower our troops. As the chief digital and AI officer at the Department of War noted, quote, I care about one thing and one thing only: that the 18-, 19-, 20-year-old kid who had no choice in where he went or what threat he was facing—I want him to win and come home. That is why we do it. Palantir Technologies Inc. is very helpful in delivering this. Beyond Maven, Ship OS, in partnership with the Department of the Navy, has produced remarkable impact at several manufacturing industrial base suppliers already, including dropping manufacturing bill of materials approval time from 200 hours to 15 seconds, increasing speed of contract review cycles by 57% to 73%, and reducing monthly material planning time by 94%. Just as commercial organizations are reshaping their industries, Ship OS is the reinvention of America's maritime industrial base. This is just the start of how our support of manufacturing processes will transform existential programs for the U.S. government. In fact, we have already seen the government step in to transition and scale a successful private sector manufacturing program we are supporting. On the civil side, the USDA awarded Palantir Technologies Inc. a contract of up to $300 million last month to provide USDA with capabilities to support American farmers, secure farmland, enhance supply chain resilience, and shield agricultural programs from fraud, abuse, and foreign adversary influence. In government and commercial, Palantir Technologies Inc. is transforming how load-bearing institutions operate and how they win. I will now turn it over to Shyam. Shyam Sankar: Thanks, Ryan. For over two years now, we have been saying that while LLMs are improving, models are converging, and the cost per token continues to drop precipitously. GPT-4–equivalent performance that cost $20 per million tokens in early 2023 is now approximately a thousand times cheaper three years later. Because of this increased efficiency, use case demand for tokens is exploding. Our AIP workflows today utilize vastly more tokens—agents orchestrating across the ontology, chaining reasoning, tool use, retrieval, and execution—and it is growing. This is Jevons' paradox. It is the single most important dynamic in enterprise software right now. When the Victorians built more efficient steam engines, everyone assumed coal consumption would fall. Instead, it skyrocketed. Cheaper transport meant more demand for transport. Tokens are the new coal; AIP is the train. As inference gets cheaper, the number of tasks that you can economically assign to AI grows exponentially. Precisely because tokens are so much cheaper, agent flows, tools self-correct. But in practice, the number of tasks that you can trust to a model without the right harness exponentially declines. More tokens means more slop. And the more commodity cognition you consume, the more you need a system that can prevent the economic harm so you can harness the economic value. That system is AIP. That intermediary representation is the ontology. This is also why we are seeing the death of legacy software. AIP replaces static workflows not by replicating the playbook, but by eliminating the need for one. Thomas Cavanagh Construction—97% of their employees use Foundry every day—and every other piece of software must now justify its existence. And so far, they have not been able to. We are seeing this internally too. This quarter, we replaced our old, expensive CRM with an AI-first solution built on AIP in a few months that users absolutely love. Our customers are seeing the real value is not automating what you already do—it is doing what was previously impossible. A major telco set out to automate 10 million customer calls a year. The real insight was that the most dissatisfied customers never call; they churn silently. The reframe was counterintuitive: Do not use AI to reduce calls. Use it to generate them. An AI advocate that proactively calls on every customer's behalf. The point is simple: Use AI to do more work—work that was never economically feasible before AIP. For every agent action, our customers need to answer three questions. Who authorized this? What did it cost? Can I trust what it did? These questions need exact answers with precision. There is no tolerance for slop. We are building a platform-native agent engine SDK, a single set of primitives for building, persisting, governing, and operating ontology-native agents. A common layer that lets you visualize every agent in your enterprise and control it, regardless of how it was built. A true agent operating system. On top of that, unified cost attribution per agent, per session, per workflow, with administrative caps. Full provenance, so every ontology mutation traces back to the agent and reasoning chain that produced it. Security marking propagation from input data through agent sessions onto all output, with approval gates for any workflow that could reclassify information. That is how you get a CISO, a CFO, and a combat commander to say yes. AIP is the no-slop zone—the platform where every agent action is governed, attributed, and auditable. Turning to U.S. government. On the foxhole side, Maven met its moment across real-world events in Q1. Usage has doubled in the past four months through March and is now 4x over the past twelve months—across the services, the combatant commands, the Joint Staff, and the intelligence community. When the stakes are highest—when failure is measured in lives and readiness—this is where we are uniquely positioned. On the factory floor side, the demand on the defense industrial base to ramp production and sustainment has been so acute that we have surged resources from our commercial business. This is exactly what Warp Speed was built for—modernized American manufacturing. And we are doing just that where it counts the most. AIP is the default builder platform in the Department of [inaudible], with thousands of developers using AIFD, migrating legacy systems, standing up new capabilities, solving problems that used to require contractor teams and months of lead time. Our software is becoming the most malleable and responsive weapon system for the joint force. Finally, what is now clear is that Mythos and SPUD and even other current-generation models with AIP are capable of finding novel vulnerabilities in complex cyber kill chains. They have discovered thousands of zero days across major operating systems and browsers. This is the Sputnik moment in the AI arms race. The rate of vulnerability identification is about to skyrocket. Finding the bugs is no longer the limiting factor. Rapid-fire remediation with exact precision, immediacy, and absolute certainty is the new hard problem—knowing exactly what versions of what software are running where, and closing the remediation chain autonomously. Apollo was built for exactly this. We are shipping the next generation of Apollo as we help our customers reposture for this world. And note the Jevons' paradox dynamic here too: More AI means more code. More code means more slop. More slop means more attack surface. More attack surface means more vulnerabilities, and more vulnerabilities means more Apollo. I will turn it over to Dave. David A. Glazer: Thanks, Shyam. We had an outstanding first quarter delivering our strongest ever Q1 sequential growth rate of 16% and our highest ever reported year-over-year growth rate of 85%. Our revenue growth rate accelerated for the eleventh consecutive quarter, highlighting the durability of the growth of our business at scale. We expanded our Rule of 40 score by 18 points quarter over quarter, from 127 in Q4 to 145 in Q1. Our U.S. business achieved triple-digit growth for the first time, driven by accelerating demand for our AI platform. Revenue in our U.S. business grew 104% year-over-year and 19% sequentially in the first quarter. Our U.S. commercial business grew 133% year-over-year and 18% sequentially, and our U.S. government business grew 84% year-over-year and 21% sequentially. On the back of this continued strength in the U.S., we are raising our full-year 2026 revenue guidance midpoint to $7.656 billion, representing 71% growth year-over-year, a 10% increase over our full-year 2026 revenue guidance from last quarter, and our largest ever full-year revenue guidance raise. Turning to our global top-line results. First quarter revenue grew 85% year-over-year and 16% sequentially to $1.633 billion. First quarter U.S. revenue grew 104% year-over-year and 19% sequentially to $1.282 billion. Customer count grew 31% year-over-year and 6% sequentially, to 1,007 customers. Revenue from our largest customers continues to expand. First quarter trailing twelve-month revenue from our top 20 customers increased 55% year-over-year to $108 million per customer. Now moving to our commercial segment. First quarter commercial revenue grew 95% year-over-year and 14% sequentially, to $774 million. We closed $1.3 billion in commercial TCV bookings in the first quarter, representing 42% growth year-over-year. Our AI platform dominates U.S. markets as the only real choice for deploying AI models operationally in a way that actually works. First quarter U.S. commercial revenue grew 133% year-over-year and 18% sequentially to $595 million. This exceptional growth even understates our U.S. commercial momentum. As Ryan noted, we had a successful U.S. commercial customer program transition to a U.S. government customer. Absent this transition, U.S. commercial growth would have been 143% year-over-year and 22% sequentially. In Q1, we closed our third consecutive quarter of over $1 billion in U.S. commercial TCV bookings at $1.2 billion, representing growth of 45% year-over-year. Over the past twelve months, we closed $4.7 billion of U.S. commercial TCV bookings, a 115% increase from the prior twelve months, highlighting the accelerating demand for AI that creates real operational value. Total remaining deal value in our U.S. commercial business grew 112% year-over-year and 12% sequentially. Our U.S. commercial customer count grew to 615 customers, reflecting growth of 42% year-over-year and 8% sequentially. First quarter international commercial revenue grew 26% year-over-year and 5% sequentially to $179 million. Revenue from strategic commercial contracts was $3 million for the quarter, representing 0.2% of overall revenue. We expect revenue from these contracts to be less than $0.5 million each remaining quarter of this year. Shifting to our Government segment. First quarter Government revenue grew 76% year-over-year and 18% sequentially to $858 million. First quarter U.S. Government revenue grew 84% year-over-year and 21% sequentially to $687 million. This growth was driven by continued execution in existing programs and new awards reflecting the growing demand for our AI platform in government. First quarter international government revenue grew 51% year-over-year and 7% sequentially to $172 million. We closed $2.4 billion of TCV bookings, up 61% year-over-year. On a dollar-weighted duration basis, TCV bookings grew 135% year-over-year. Net dollar retention was 150%, an increase of 1,100 basis points from last quarter. The increase was driven both by expansions at existing customers and new customers acquired in Q1 of last year as load-bearing institutions continue to turn to Palantir Technologies Inc.'s battle-tested AI platform. As net dollar retention does not include revenue from new customers that were acquired in the past twelve months, it has not yet fully captured the acceleration and velocity in our U.S. business over the past year. We ended the first quarter with $11.8 billion in total remaining deal value, an increase of 98% year-over-year and 6% sequentially, and $4.5 billion in remaining performance obligations, an increase of 134% year-over-year and 9% sequentially. As a reminder, RPO is primarily comprised of our commercial business, as it does not take into account contracts with an initial term less than twelve months and contractual obligations that fall beyond termination-for-convenience clauses, both of which are common in most of our government business. Turning to margin and expense. Adjusted gross margin, which excludes stock-based compensation expense, was 88% for the quarter. Adjusted income from operations, which excludes stock-based compensation expense and related employer payroll taxes, was $984 million in the quarter, representing adjusted operating margin of 60%. Q1 adjusted expense was $649 million, up 7% sequentially and 32% year-over-year, primarily driven by the continued investment in our AI platform and technical hiring. We continue to expect expenses to ramp in 2026; we remain committed to investing in the product pipeline and the most elite technical talent, all while delivering on our goals of sustained GAAP profitability. GAAP net income was $871 million, representing a 53% margin. First quarter stock-based compensation expense was $[inaudible] and equity-related employer payroll tax expense was $28 million. First quarter GAAP earnings per share was $0.34. First quarter adjusted earnings per share was $0.33. Additionally, our combined revenue growth and adjusted operating margin accelerated to 145% in the first quarter, an 18% increase to our Rule of 40 score from the prior quarter, and our eleventh consecutive quarter of an expanding Rule of 40 score. With our 2026 revenue and adjusted operating income guidance, we are guiding to a Rule of 40 score of 129% for the full year. Turning to our cash flow. In the first quarter, we generated $899 million in cash from operations and $925 million in adjusted free cash flow, representing margins of 55% and 57%, respectively. We ended the quarter with $8 billion in cash, cash equivalents, and short-term U.S. Treasury securities. Now turning to our outlook. For Q2 2026, we expect revenue of between $1.797 billion and $1.801 billion and adjusted income from operations of between $1.063 billion and $1.067 billion. For full year 2026, we are raising our revenue guidance to between $7.65 billion and $7.662 billion. We are raising our U.S. Commercial revenue guidance to in excess of $3.224 billion, representing a growth rate of at least 120%. We are raising our Adjusted Income from Operations guidance to between $4.44 billion and $4.452 billion. We are raising our adjusted free cash flow guidance to between $4.2 billion and $4.4 billion. And we continue to expect GAAP operating income and net income in each quarter of this year. With that, I will turn it over to Alex for a few remarks, and then Ana will kick off the Q&A. Alexander C. Karp: Well, welcome to yet another exciting earnings call. With these numbers, the ones that leap out to everyone are the over 100% growth in the U.S., the Rule of 145, the 85% growth in the U.S., and guiding to 71%, and just the underlying dynamics of that. You would think that the most interesting thing is just the truly n-of-one nature of these numbers. And in fact, it is pretty fascinating, especially to people who doubted that we would get this far. But I think the most important thing about our earnings is it establishes beyond a doubt that while over the history of Palantir Technologies Inc., we focused on things that actually transform the world, the current environment is actually being transformed by the Palantir Technologies Inc. platform. And although there is a wide view out there in the world that AI slop is going to take over the world, our clients, especially lasting primordial infrastructure industries, know this is not the case. They buy our product despite the fact we have 70 salespeople. A normal company of our size would have 7,000. Only seven of our salespeople actually even really sell. We are doing what a normal company would do with 7,000 salespeople with seven people. We are doubling the U.S. We are dominating on the battlefield. Shyam will talk about this later, but the way opposed and in contradistinction to both allies and friends and enemies is being done in our platform from beginning to end across the U.S. The reality that we will be able to drive 100% growth in the U.S. is being driven by the fact that our customers either know or will know that you need actual results. Those results require granularity, specificity, actual relationship to facts. The appearance of software working is not software working. And the slop that is getting a lot of attention is not only dangerous in terms of the hyperbolic rhetoric that it also—like, there will be no jobs because of the slop—nothing will work. We will have a godlike figure in the name of AI, when in fact, what actually does work is a platform built by a motley crew of highly technical people who over twenty years have been maligned for being right about the nature of having to build Foundry, the nature of having to build Apollo, the nature of an FDE, and the demand for this is once in a lifetime. And that demand is actually driving these financials, meaning growing 71% goal for the year. What did we miss? Okay. In any case, I hope you all got that. This is like being on stage. So with that, maybe we will go to questions. But the unique way in which this company is being run, the unique way in which we built the products, the unique way in which we are willing to be non-mimetic. When the whole world said software had to be worthless, we built platforms that worked. When the whole world said you could not extend it with FDEs, we went and built FDEs. When the whole world is saying AI slop without an ontology that allows you to put true statements and truths into the ontology and therefore produce actual results, we stuck to our guns. And what did we get? We got these results. And I think if you just look at the results—how can a company grow 100% in the U.S. with, functionally, a nonexistent sales force, with the same number of people? Our free cash flow this quarter is larger than our revenue a year ago in the same quarter. Think about that. Same company, same people, extended products—it is all being extended. And then look at the impact on the battlefield in the Middle East, on every government institution, on demand of our product, and in U.S. commercial. This is all the result of being right about product, right about execution, and standing in the headwinds of people who are certain they are right—now the new version is AI slop—and proving that they are wrong with our results. This is an incredible quarter, and I am very proud of this. Ana Soro: Aiden G. asks, how does Palantir Technologies Inc. expect to navigate an environment where AI is pressuring software companies' capabilities? Shyam Sankar: Well, thanks, Aiden, for the question. It is a massive tailwind for us. We have always been counter-positioned against this sort of legacy thin software that was built by and executes a playbook that is built around rent extraction and no outcome delivery. We, on the other hand, have been focused entirely on building software that is focused on alpha and not beta. We are not trying to make you the same as every other person. We are trying to figure out what makes you different, how we express your business strategy through the software platforms and products we build. So that part is probably obvious—that counter-positioning—but the other counter-positioning is against AI slop. We are focused on enterprise autonomy, not on dazzling demos. We have, in the ontology, the no-slop zone. The ontology is the body to the AI brains. You cannot actually interact with the enterprise or affect the world; your agents can go nowhere without ontology. And you are seeing that with our customers. In government, we are the platform that you build applications and agents on. In the commercial world, people are replacing legacy software at a lightning-fast pace, as I mentioned in my remarks, and we see that even internally at Palantir Technologies Inc., where we have gotten rid of legacy software like CRM and built it very quickly on top of our platform to a user experience that our users love. Alexander C. Karp: Can I just—almost every single highlighted example of AI that actually is producing results in the U.S. is actually Palantir Technologies Inc. by Palantir Technologies Inc. And one of the ways to pen test what we are saying is just dig into the examples of AI actually transforming an enterprise. Call the client. Talk to them. I am not saying every single one is, but almost every single one is. And it is because the theory of how you do AI and the practice in the enterprise are just radically different. And they look the same to nontechnical people, but they do not look the same to practitioners—whether you are on the battlefield, or whether you are an insurance company, or whether you are a hospital, or whether you are a manufacturer—what they discover is the reality of doing this requires a platform like ontology, and currently executed on top of Foundry with FDEs. And currently, that combination is available from one company, and that is us. Ana Soro: Thank you. Please, please, test. Our next question is from Dan with Wedbush. Dan, please turn on your camera, and then you will receive a prompt to unmute your line. Daniel Ives: Yeah. I mean, you said—yep, thank you. Well, great quarter yet again. My question is, how do we balance between going after government deals and then commercial deals? Because, obviously, you are in a unique position, just like we saw with that deal this quarter. Can you just talk about that balance? Because, obviously, there is more demand than supply in terms of relative in terms of Palantir Technologies Inc. Thanks. Alexander C. Karp: Yeah, and then I will give this to Ryan. The reality of how Palantir Technologies Inc. works is we always prioritize the U.S. warfighters over everything else. And when we believe or know—because of our proximity—that the U.S. warfighter is in danger, we put the whole company against it. And it is not always the way in which one should do this, but it is how we do it. And we have done this from the beginning and we are doing it now. And so in the current context, we take opportunities that look the same from a business perspective, and we 100% prioritize this nation's security over any other variable. Now, that also, interestingly, gives us leverage, because we go to the government and we will—and one thing people do not believe is—we are like, look, this does not work the way you think. Or this kind of execution will not lead to success, and you are actually asking us to take money out of our pocket to do it, which we will do. But we cannot sign up to do something that will not work, that will not advance the warfighter, that will not advance munitions, that will not help this country have better unit economics, while deprioritizing another client. By the way, we tell commercial clients this. I tell commercial clients this all the time. We are highly monogamous in the way we work. We are not trying to make you into a commodity. The only thing we will put above you is U.S. national security. And we are more than willing to do this when it is unpopular or when it is popular. And if you look at the retention and the full alignment inside Palantir Technologies Inc., the benefit of this is we attract and retain people that understand there is a higher value than just running the business as a business. That said, our biggest problem currently in the U.S.—and why I believe we have 100% growth in the U.S.—is that we just cannot meet demand. Again, the advantage here is we can go to commercial and government clients and say, look, this does not make sense. If you want slop, you can go here. If you want old-school software that actually does not work and probably will disappear, there are a lot of names. If you want us, we need to do it in a way that will make sense. And that gives us a lot of leverage. But we are very upfront with people, just like with our customers and just like we are internally. And we are also doing this abroad. One of the reasons why we are intolerant of software and AI or some kind of witchcraft dance you have in some parts of continental Europe is, we have no time for it. We literally have no time or energy for the waste-of-time machine. Probably, I should be on TV explaining to people why the models are actually only useful on a platform, why the use cases platform companies are talking about are actually in Palantir Technologies Inc., why the total cost and token reduction price is exactly what we predicted, why our clients actually are asking, can I have a cheaper model since they seem pretty similar? But we also do not have a lot of time for that. Ryan, would you like to add to this? Ryan Taylor: What we are seeing across our customers, and what is driving the U.S. generally, is those that understand the load-bearing context. In order to apply AI in that context, you need to be able to deploy it with precision, without slop. You see the AIG CEO talking about the agentic underwriting and claims process being coordinated through the ontology. These are all really massive undertakings. We are going deep with our customers, and we are having that level of impact. And that is what really is driving us. Ana Soro: Thank you. Next question is from Mariana with Bank of America. Mariana, please turn on your camera, and you will receive a prompt to unmute your line. Mariana Perez Mora: Afternoon, everyone. Hope you can hear me. I do not know if you are going to be able to see me, but I am going to start as a follow-up. I am going to do three questions today. Number one, when AI started, you had some customers that wanted to do it their way. What is happening right now with the AI labs getting into enterprise? How many customers understand that value, or how many are the niche customers that understand it and are actually advancing faster? But you also have some that are still trying with just Anthropic, Gemini, OpenAI; they all have enterprise solutions now. Alex, you mentioned talent. How easy or hard is it actually to get the right engineers to keep being able to incorporate all that to the outcomes that you are looking for? And the second one on defense, because it is where my heart is always: You got a good callout on Maven. In the presidential budget request, Maven is one of the two pillars for DoD C2, Titan is moving to production, and that is amazing news. But this is an election year. How much of that growth depends on that budget being appropriated, and how much can actually keep growing if we were to see an extended continuing resolution? Alexander C. Karp: The talent question—Palantir Technologies Inc. is famous for having the best talent over a very long period of time. Look, it is a super-competitive environment. The whole world wants to either work at Palantir Technologies Inc. or at a lab. The advantage that we have at Palantir Technologies Inc. is if you come here, you learn how to build something that is truly unique. And quite frankly, if you want to leave Palantir Technologies Inc., you can have any job in the world. And so I think that talent race is going to continue. Being at Palantir Technologies Inc. is a very high-pressure, very unique environment where we need people who are willing to do things that are different than anyone else. And where, although nine-tenths of the world loves us, one-tenth of the world professionally hates us. So someone on your social graph is definitely going to call you up and say, how can you do all this important work in or for the Department of War or other places—even though we have powered every administration basically since our existence, not at the scale, obviously. So that is an ongoing thing. I am pretty confident that we will continue to attract and retain some of the best talent in the world, and we are seeing a ramp-up in that. I am now personally sitting across recruiting. I am particularly interested in neurodivergent people of all kinds—people who are neurodivergent enough that they get up, come to this country, and do important, valuable work. We see a lot of allies who have chosen to come to America and chosen to come to Palantir Technologies Inc. We like that. But it is an ongoing battle. There really are a couple options in the world that make sense. Palantir Technologies Inc. is obviously one of them, and we are very, very unique. I would also say the more we produce these numbers and the more we have actual experience on the battlefield and in enterprise, one of the things we are going to do an increasingly frontal job of doing is: You can join this startup that probably is not going anywhere—everyone on the inside knows venture is kind of not doing well—or you could come to Palantir Technologies Inc. But it is an ongoing, everyday battle. Everybody wants a Palantirian. When we started this, a couple of years ago, I was saying Palantir Technologies Inc. is the most important degree in the world. The problem for us is it is the most important degree in the world—and everyone knows it now. Thanks also because we got fair coverage and because, you know, I mean, we probably are, because of our domination here, somewhat undervalued. But people know that we actually are changing the world, and we are probably somewhat undervalued. So it is a great place to go. On the defense side, I will leave it to Shyam to talk. Shyam Sankar: On the defense side, it has been a very active period. It is not just Maven and Titan. There is also the work that we are doing on production across major weapon systems for the department, and work around the Sputnik moment right now. So there is a lot going on that one should be pretty excited about. The department is pulling as much of that into 2026 as possible. History would suggest, of course, we are going to be in a continuing resolution, because for most of the time since Palantir Technologies Inc. has existed, there has always been a CR. So there are certain things that are outside of our control, but I feel very good that the role we are playing—the stakes are very high. What we are providing is existential to moving the department forward, and we will realize that value. On the AI lab side, the enterprise side here, I think one of the privileged positions we live in is at the limits of what the models can do. One of the challenges for the labs is that all they see are the limitless potential, as opposed to living at the edge of where it translates into economic value. You see that with attempts to build out deploy code—it is essentially, how do I take Palantir Technologies Inc. and try to replicate that. What we do is very unique based on how we have organized ourselves and the tension between FDE and product development. We have these out-of-body experiences: there are at least two labs we can think about where they were talking to different customers that they are working with and how it has transformed X or Y—yeah, it did, in AIP. We did that. Alexander C. Karp: I would just add to that point. The best thing that can happen to this company—and maybe this country—is, of course, they should go out and flirt with all this slop. Mostly they come home to Palantir Technologies Inc. They do not have to all come home to Palantir Technologies Inc. We have limits. But go test it out. Go see how easy it is to make these things work. Great. And then compare what you are delivering to what we have delivered. And you know what? We do not have to have all the market. We are at our limit doing 100% this year, which I am going to drive the company to. And maybe we can do 100% next year in the U.S. That is all we can do. And they can just expose the market to their beautiful, shiny appearances. And we will just expose the market to how we will transform your enterprise. That is how it is going to go down. And by the way, I am always telling people inside the company, everybody wants to be you. You just may not know it. They are all trying Duploico, Stoico, Disco. It is because, at the end of the day, they need to have growth with profit. But you cannot have profit if you are not changing the dynamics of the partner you work with—meaning your customer. It is downstream from the value you create. That is how Palantir Technologies Inc. is. We are very comfortable in that zone. Now, I do think we are going to end up with a different term for software. You cannot lump what we are doing into “software.” We are really providing infrastructure and installation of AI infrastructure. If your company is largely running around and offering steak dinners with something that someone can hack and rebuild in a week, yes, you are going to have a huge problem. Business models that do not make sense are under huge pressure. And that is one of the reasons we are at the forefront—can you believe we are at the forefront of almost every discussion in the world? And it is simply because we are powering almost everything that works. Not everything—there are some other great companies out there. Many of them are not well known, and we should help publicize them—but we are at the forefront. And that is what these numbers show. You do not have to believe us. Believe your non-lying eyes. Ana Soro: Thank you. Alex, as always, we have a lot of individual investors on the line. Is there anything you would like to say before we end the call? Alexander C. Karp: Well, to individual investors and Palantirians who are also individual investors, being on the front line of important things is painful. You get yelled at occasionally. Many of the people yelling at you have no clue what they are saying. Some of the people do have a clue what they are saying and just disagree with the West being strong and more efficient and more moral and having better unit economics. We value your support, and we value your defense of us. We are defending you every day, and that is in great part what drives these results. And we are having some fun doing it too, just so you know. And hopefully, you will have some fun. Thank you for your support. And we will see you next quarter. Ana Soro: Thank you. That concludes Q&A for today's call.
Operator: Greetings. Welcome to the Firefly Aerospace Inc. First Quarter 2026 Financial Results Conference Call. At this time, participants are in a listen-only mode. A question-and-answer session will follow the formal remarks. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please note, this conference call is being recorded. I will now turn the conference over to Michael Sheetz, Firefly Aerospace Inc.'s Director of Investor Relations. Michael, you may begin. Thank you, Operator. Michael Sheetz: Hello there, and may the fourth be with you. I am Michael Sheetz, and welcome to Firefly Aerospace Inc.'s first quarter financial results call. I am pleased to be joined on the call by CEO, Jason Kim, and CFO, Darren Ma, as we report for the period ending 03/31/2026. Today’s call will include forward-looking statements, including, but not limited to, statements the company will make about future financial and operating performance, growth strategy, and market outlook. Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause the actual results and trends to differ materially are set forth in our annual and quarterly reports filed with the SEC. Firefly Aerospace Inc. assumes no obligation to update any forward-looking statements, which speak only as of their respective dates. Also, on this call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in the first quarter 2026 earnings release. Unless otherwise stated, financial information referenced in this call will be non-GAAP. Our earnings press release, SEC filings, and a replay of today’s call can be found on our investor website at investors.firefliespace.com. I will now turn the call over to Jason. Jason Kim: Thank you, Michael, and welcome to our first quarter 2026 earnings call. Firefly Aerospace Inc. opened the year with strong execution and increasing momentum driven by major government programs that align directly with our core capabilities. We delivered record quarterly revenue of $81 million. The acceleration of the ARTEMIS program combined with NASA’s Moon Base Initiative calls for monthly robotic lunar landings and reinforces the demand signals we have been building toward. Our early investments to scale Blue Ghost production and our milestone as the first commercial company to land on the Moon successfully position us to be a critical commercial partner as NASA expands lunar operations. With three additional missions ahead, we are already executing toward the goal. We also advanced our ocular lunar imaging service through a new partnership with NVIDIA, enabling on-orbit processing for faster, more actionable data in cislunar space. On the national security front, Firefly Aerospace Inc. subsidiary, SciTech, secured an agreement with the U.S. Space Force to support the space-based program under Golden Dome. We are concurrently delivering and proving the value of our AI-enabled data processing through the U.S. Space Force’s operational FORGE missile defense system. Within launch, the capacity-constrained market is driving increased demand for Alpha following its successful return to flight. We also completed the Victus DM responsive launch demonstration and made steady progress on our reusable Eclipse rocket in the first quarter. The pace of change in the space economy is accelerating, and Firefly Aerospace Inc. is scaling up our existing revenue-generating capabilities to meet the demand across every line of business. For those new to Firefly Aerospace Inc., we are a space and defense company delivering innovative hardware and software to perform the hardest missions in space for national security, exploration, and commercial technology. Our hardware is represented by four revenue-generating products: our Blue Ghost lunar landers, ELECTRA satellite orbiters, small-lift Alpha rockets, and medium-lift Eclipse rockets. Firefly Aerospace Inc.’s software portfolio falls under our SciTech AI-enabled defense systems, which are proven in national security operations. The industry tailwinds behind artificial intelligence and data centers are fueling operational realities for our company as we deliver crucial no-fail systems in support of the U.S. and our allies. We are meeting the U.S. government’s call for commercial investment, speed, and scale in defense and exploration. Our advanced technology products and funding of infrastructure include upgrades and expansion of Firefly Aerospace Inc.’s co-located spacecraft and rocket factories, clean rooms, and test stands, as well as our data centers and classified facilities. Now turning to our business updates. In the first quarter, we completed new milestones across each of our product lines and services. The lunar opportunity is here. Recent milestones, including the NASA Moon Base event, Artemis II successful lunar orbit, and our Blue Ghost Moon landing and surface operations, ignited the industry and the world. The Moon is now a permanent destination. NASA’s Moon Base plan represents a dramatic acceleration of the ARTEMIS program, with a detailed pathway to a regular cadence of missions to the surface and persistent support from satellites in lunar orbit. Our prior growth strategy was to extend from one Moon landing a year to multiple a year, and now we have an amplified demand signal from NASA. The agency’s objective is to provide multiple robotic landings on the Moon’s surface starting next year, as well as larger lander missions to support the required lunar infrastructure for a permanent presence. The first two phases of the NASA Moon Base architecture taking place over the next seven years represent a $20 billion program with multiple shots-on-goal opportunities for Firefly Aerospace Inc. When you combine Blue Ghost, the only commercial lander to operate successfully, with our ELECTRA spacecraft, we provide the ideal system to deliver and support many of the payloads and capabilities needed, such as navigation, orgo communications, surface observation, power infrastructure, exploration drones, rovers, cargo, and support systems for humans on the Moon. The Moon is a vastly untapped resource, and Firefly Aerospace Inc. is the tip of the spear in the routine deliveries and services that NASA needs to support a permanent presence on the Moon. Last week, we heard NASA Administrator Isaac Minh’s request at a congressional hearing to template Blue Ghost and launch with frequency. As stated earlier, we are already building towards this. In the first quarter, we made significant progress on our new clean room, which is four times the size of our existing clean room. This enables a production line of lunar landers for frequent missions. We are leveraging our vertical integration to scale up while also investing in our Blue Ghost supply chain. We are working closely with each major supplier to ensure they are ramping up with us through long-term agreements and strategic inventory in place to ensure quality, schedule, and quantities of delivery. Meanwhile, assembly of our Blue Ghost lander and ELECTRA orbiter is well underway for Blue Ghost Mission 2, and we are on track to complete assembly and payload integration this summer. We named Blue Ghost Mission 2 Riders to the Dark, as our team charges toward another historic milestone conducting the first American landing on the Moon’s far side carrying both NASA and commercial payloads. We are making progress on our additional lander contracts. With the Blue Ghost Mission 3 preliminary design review complete, which verifies the vehicle’s design to deliver payloads to the Moon’s Gruithuisen Domes, the team is now preparing to complete the critical design review for Mission 3 while also getting ready to complete the preliminary design review for Blue Ghost Mission 4 to the Moon’s South Pole. Moving to ELECTRA, we are pleased to add NVIDIA as another Firefly Aerospace Inc. partner, with our first collaboration included as part of our ocular lunar imaging service. NVIDIA’s Jetson module was embedded in the high-resolution Lawrence Livermore National Laboratory telescopes and delivered to Firefly Aerospace Inc.’s spacecraft facility for integration on our ELECTRA orbital vehicle. ELECTRA will first serve as a transfer vehicle and communications relay for Blue Ghost, and then begin our Oculus service to support advanced lunar surface mapping, mineral detection, and reconnaissance for five years in lunar orbit. Our ocular data will be rapidly processed onboard ELECTRA and autonomously transmitted back to Earth utilizing the NVIDIA Jetson module combined with Firefly Aerospace Inc.’s SciTech-enabled AI software. This allows Firefly Aerospace Inc. to mitigate downlink constraints from the Moon by processing data on orbit before it is transmitted to Earth as real-time actionable insights for government and commercial customers. Firefly Aerospace Inc.’s AI software will further enable advanced space domain awareness. Our AI algorithms and data fusion technologies are already proven in critical national security missions in Earth orbit. Our software will enable ELECTRA to leverage multiple data feeds onboard to more accurately track objects and provide timely situational awareness to space operations occurring in the cislunar domain. These capabilities are transferable to ELECTRA’s upcoming space domain awareness mission for the Defense Innovation Unit’s Sinaquon project. This mission also incorporates high-resolution Lawrence Livermore National Laboratory telescopes, just like the ones enabling our Oculus service. After completing the critical design review for the mission, the team has begun building and testing ELECTRA flight hardware. Additionally, in the first quarter, Firefly Aerospace Inc. completed critical ELECTRA test milestones for Blue Ghost Mission 2, including separation testing to demonstrate ELECTRA’s mechanisms that will deploy the European Space Agency’s Lunar Pathfinder satellite following separation from our Blue Ghost lander. This further highlights ELECTRA’s ability to operate and deploy critical high-mass payloads across cislunar space. The team also completed the initial interoperability test to ensure our ELECTRA orbiter communicates with Blue Ghost on the Moon’s far side and acts as a backup communications relay for NASA’s Lucy Knight payload. This enables NASA’s radio telescope to operate for up to two years on the surface even without direct line of sight to Earth. This relay service on ELECTRA is the pathway to our commercial offering, delivering alternative communications options that reduce blackout periods and strengthen connectivity for multiple future lunar missions for Firefly Aerospace Inc. and our customers. As we saw at the recent Space Symposium event, there is growing demand for ELECTRA’s robust capabilities combined with our AI-powered software to support dynamic space operations for national security, space exploration, and international missions. The demand includes space maneuverability to novel orbits, deorbit services for multiple spacecraft, and long-haul communications. At the symposium, U.S. Space Force Major General Purdy further emphasized the need for enhanced national security capabilities in cislunar space, including transportation, communications, and navigation systems beyond Earth orbit. Once deployed, those assets require protection and continuous monitoring, which is best done from the Moon as the ultimate high ground. Our ELECTRA vehicles are well positioned to enable these missions with high-thrust precision Spectra engines, ample fuel and payload capacity, and AI software. As General Salzman said in his April 30 congressional testimony, speed, scale, and clear demand signals are critical, and ELECTRA positions us to capture that with responsive on-orbit capability. We will continue to scale up our ELECTRA production line as demand steadily increases. Moving to our SciTech software offerings under our spacecraft business, we are pleased to be selected by the U.S. Space Force to support the space-based program under Golden Dome. In a Space Force press release just a week ago, this program was announced to develop a space-based missile defense interceptor system that will demonstrate capability integrated into the Golden Dome architecture by 2028. Space Force awarded a select group of companies, including Firefly Aerospace Inc.’s subsidiary, SciTech, with contracts totaling up to $3.2 billion. This critical program will enable next-generation space-based tracking and advanced interceptors integrated with artificial intelligence to counter the speed, maneuverability, and lethality of threats. As the prime contractor, we continue to execute on the operational U.S. Space Force FORGE system, providing a modernized AI-enabled missile warning and tracking architecture. We are rapidly processing vast amounts of data from satellites across all orbits, from LEO to MEO to GEO, to deliver high-quality mission-critical information to our warfighters to defend against threats. After the Space Force operationally accepted our FORGE system last year, in the first quarter we were awarded a $109 million engineering change proposal to accelerate and expand data center delivery. This critical system processed thousands of threats in the first 30 days of the Iran conflict to help protect the warfighters. The team further completed the interim ground readiness review for the Space Development Agency as part of our role in delivering the mission and data fusion ground components for the Proliferated Warfighter Space Architecture satellite constellation Tranche 1 Tracking Layer. More recently, the Air Force Research Laboratory awarded us a contract to support development of the advanced algorithm R&D and verification architecture by implementing deep learning and advanced AI algorithms on small size, weight, and power processors. This capability supports enhanced target detection, tracking, and custody and is conducive to future on-orbit processing missions. Last week, we also heard Chairman of the Joint Chiefs of Staff General Kane underscore in a congressional hearing the urgent need for critical investments in space-based command and control, artificial intelligence, advanced surveillance, and reconnaissance. This capability counters modern multi-domain threats, where operations are coordinated and synchronized across air, land, sea, space, and cyber domains. Our proven AI software and on-orbit processing capabilities are well positioned to support these multi-domain operations. Shifting to launch, in March Alpha Flight 7 successfully returned to flight and completed all mission objectives after deploying a Lockheed Martin demonstrator payload and validating key Block 2 subsystems. Additionally, in the first quarter, Firefly Aerospace Inc. supported Lockheed Martin on the U.S. Space Force’s Victus DM mission, performing two responsive space exercises to practice advanced emergency launch protocols required in a real threat scenario. Victus DM marks the second tactically responsive space effort that Firefly Aerospace Inc. completed to date after our record-setting Victus Nox mission, which launched with a 24-hour notice. The first Victus DM exercise included a rapid payload process demonstration where spacecraft arrival, operations checkouts, mating, and encapsulation were completed in under 12 hours. The second exercise included a 36-hour rapid launch simulation to practice and advance emergency launch protocols required to execute tactically responsive space missions in a real threat scenario. We are now focused on delivering our first Block 2 vehicle, which will debut on Flight 8 that is targeted to launch late this summer. Block 2 is designed to expand Alpha’s deployable launch capabilities for critical responsive space missions, such as hypersonic testing, national security missions, and commercial satellite launches for domestic and international customers. Firefly Aerospace Inc. completed qualification testing for the first- and second-stage tanks for Flight 8 and moved into the integration and test phase as we progress toward launch. The significant improvements across Alpha from Block 2 focus on enhancing reliability and production rate as part of our company culture of safety, quality, and reliability. And we are working ahead. We have structures and engines in build for Flights 9, 10, and beyond, rolling off our automated fiber placement machine and into assembly, as we continue to target three more Alpha launches in 2026. For our 2027 manifest and beyond, we talked to both new and repeat customers at Space Symposium this year and see strong interest in Alpha on the heels of our successful Flight 7 launch. As we look to the future, we are pleased to see the recent Swedish defense budget allocating tens of millions to invest in orbital launch infrastructure. Our international partners want to bring Alpha to market in Sweden, as well as other allied countries. To meet the growing demand for satellite launch capabilities around the globe, this approach allows us to not only increase our launch cadence, but also open new markets, add resiliency to our launch sites, and provide a national security advantage. Firefly Aerospace Inc. also recently signed an agreement with Seagate Space to collaborate on the development of an offshore launch platform that enables responsive sea-based Alpha launches. Together, we will work to mature the design of an integrated offshore launch system capable of supporting the unique requirements of liquid-fueled orbital rockets. These capabilities are in alignment with the Space Force demands for flexible infrastructure to accommodate responsive small launchers and eliminate single points of failure. In the Spaceport of the Future report, they have called for flexible manifesting, rapid integration, and launch-to-orbit timelines of 24 hours or less for designated payloads, which we have proven on Victus Nox. Everything we learned from building, testing, and launching our Alpha rockets allows us to improve and reduce risk for Eclipse. Our reusable medium-lift vehicle is marching towards its debut, while the need for more launch capacity from more providers is growing. All the major flight articles for our first Eclipse vehicles are in build and test, including our Miranda flight engines. In the first quarter, we completed qualification of the Eclipse interstage, a critical primary structure that connects the first stage to the second stage, as well as the liquid oxygen transfer line and the composite overwrap pressure vessels. More recently, we are progressing through the test campaign on Eclipse’s first-stage tanks, which tower nearly 100 feet tall. This risk-reduction testing allows us to push the tanks beyond their limits to verify flight margins. With that business summary, I will turn it over to Darren for a review of the first quarter financials. Darren Ma: Thank you, Jason, and good afternoon, everyone. We delivered record Q1 revenue driven by strong business fundamentals. As Jason highlighted, we have multiple growth drivers in place, which gives us confidence in achieving our long-term objectives. On today’s call, I am going to review the financial results of first quarter 2026 before handing the call back to Jason for closing remarks. For listeners new to Firefly Aerospace Inc., I want to reemphasize that key operational metrics drive our financial performance. In our spacecraft solutions business, we generally recognize revenue over time under each contract as we complete milestones. This adds a more predictable, recurring revenue component alongside the more event-driven launch business. For the launch business, we focus on the number of launches; for example, revenue for our operational Alpha vehicle is recognized at a point in time when the launch occurs. For Eclipse, while in development, we recognize revenue as a percentage of completion based on program milestones as part of the Northrop Grumman partnership. Once the Eclipse vehicle is operational, we will recognize revenue in the same manner as Alpha, when launches occur. Now turning to our first quarter results. We delivered the highest quarter of revenue in the company’s history, at $80.9 million. This compares with $57.7 million in the fourth quarter and $55.9 million in the same quarter a year ago. The sequential revenue growth was driven by the ramp of the FORGE and Golden Dome space-based interceptor programs, a full quarter of SciTech, and the successful Alpha launch. Within our total revenue, spacecraft solutions accounted for $67.6 million, and launch was $13.3 million. We ended the first quarter with a total backlog of approximately $1.3 billion, relatively flat from last quarter, reflecting the conversion of backlog to revenue and timing of new awards. As Jason mentioned earlier, we are excited about the industry tailwinds, including NASA opportunities for Blue Ghost, customer demand for Alpha, additional missions for ELECTRA, and increasing demand for our AI software solutions. Our position in the market and these sector catalysts provide Firefly Aerospace Inc. with confidence in our long-term revenue growth trajectory. First quarter GAAP gross margin was 21.6%, compared with 27.7% in the prior quarter. The change was primarily due to a higher mix of cost-plus program contracts driving revenue. GAAP operating expenses for the first quarter were $113.1 million, compared with $101.6 million in the fourth quarter. The increase was primarily from the inclusion of SciTech’s operating expenses for the full quarter and our continued R&D investments. For operating expenses, the primary differences between GAAP and non-GAAP measures are stock-based compensation expense, one-time transaction-related expenses, and the amortization of intangibles. Non-GAAP operating expenses for the first quarter were $93.7 million, compared with $80.5 million in the fourth quarter. The sequential increase was driven by our continued R&D investments to support Alpha Block 2 production ramp and Eclipse development. GAAP operating loss was $95.7 million, compared with a loss of $85.6 million in the fourth quarter. Non-GAAP operating loss was $76.2 million, compared with a loss of $64.5 million in the fourth quarter. GAAP net loss in the first quarter was $96.7 million, compared with a loss of $41.1 million in the fourth quarter. As a reminder, we recognized a one-time $37.1 million tax benefit related to the SciTech acquisition and a one-time $8.4 million gain on settlement of contingent liabilities in Q4. Our non-GAAP net loss in the first quarter was $74 million. This compares with a net loss of $58.5 million in the prior quarter. GAAP basic and diluted net loss per share was $0.61, compared with a loss of $0.26 last quarter. Non-GAAP basic and diluted net loss per share for the first quarter was $0.46, compared with a loss of $0.38 last quarter. We exited Q1 with a share count of 160.1 million shares. We expect our total share count to increase by about 1 million shares per quarter. Stock-based compensation expense was $12.5 million in the first quarter, compared to $12.6 million in the prior quarter. Adjusted EBITDA in the first quarter was a loss of $64.7 million, compared with a loss of $57.3 million in the fourth quarter. Turning to our balance sheet, we ended the quarter with total liquidity of $811.6 million, consisting of $551.6 million in cash, cash equivalents, and short-term investments and $260 million of available capacity from our revolving credit facility. After the close of the quarter, we upsized the capacity of our credit facility to $305 million, which remains undrawn. Capital expenditures in the first quarter were $16.3 million, compared with $12.1 million in the fourth quarter. The sequential increase was driven by test and upgrades to support Alpha Block 2 production and spacecraft manufacturing expansion that positions us to support NASA’s accelerated lunar opportunities. Free cash flow was an outflow of $78.9 million, compared with an outflow of $79.3 million in the fourth quarter. As a reminder, in the second quarter, we will have the final SciTech acquisition-related payment of approximately $24 million reflected in our cash flow. Now turning to our revenue outlook for 2026. With continued strength across our business, we remain confident in our trajectory to achieve significant annual revenue growth this year and are reiterating our outlook of $420 million to $450 million, consistent with what we gave on the March call. Thank you for your interest in Firefly Aerospace Inc. With that, I will turn the call back to Jason for his closing remarks. Jason Kim: Thank you, Darren. The first quarter proved what we have been building toward: Firefly Aerospace Inc. is not just participating in the space economy, we are shaping it. This is a defining moment in our industry. From our Moon landing to missile defense systems, from responsive launch to AI-powered space domain awareness, we are delivering the integrated capabilities that define the future of space exploration and defense operations. NASA is accelerating. The Space Force is investing. Our allies are mobilizing. Firefly Aerospace Inc. stands ready, with mission-proven hardware in production, battle-tested software in operation, and our team of Fireflies innovating and executing at pace. We stand at the threshold of a new era, where what was once impossible becomes inevitable. Firefly Aerospace Inc. has the end-to-end ecosystem to make it happen. Thank you for joining today’s call. Michael Sheetz: Thank you, Jason. Operator, we are ready to take questions. We will now open the call for questions. Operator: Thank you so much. Please press 11 and wait for your name to be announced. To remove yourself, press 11 again. One moment for our first question. It comes from the line of Sheila Kahyaoglu with Jefferies. Please proceed. Sheila Kahyaoglu: Good afternoon, and thank you so much for the time. This morning, you announced SciTech won a key position among 12 total companies on Space Force’s space-based interceptor program. Can you maybe elaborate on that win a little bit more, your positioning there, and how SciTech accelerates the growth profile of Firefly Aerospace Inc.? Jason Kim: Thanks, Sheila. I will go back to what we have said before on previous earnings calls: Firefly Aerospace Inc. had multiple shots on goal for Golden Dome. We have referenced that a lot of the capabilities that SciTech has in battle-tested AI development on the FORGE program, which went operational last September, have seen a lot in real operations, particularly in Iran. A lot of the battle-tested algorithms are very transferable to other programs like Golden Dome. And if you remember what General Gulmein has said before, one of the hardest parts of such an architecture of this magnitude and complexity is the command and control and the fire control, the ground processing. Because SciTech is battle-tested and has exercised AI in no-fail missions in real-world operations, all those algorithms are transferable to Golden Dome as well. And then, as you know, our Alpha rocket is able to take 1 ton to orbit as well as 2 tons to suborbital, so it makes it really right-sized to launch hypersonic tests, potentially targets, for things like space-based interceptor. So there are multiple shots that we have on goal. Sheila Kahyaoglu: Great. Thank you for that. And maybe, Jason, you called out in the slides you expect a $20 billion opportunity for the initial phases of the Artemis Moon Base Program over the next seven years, based on monthly missions and large landers. What are you hearing from the customer on that, and can you talk about your operational readiness in support of that type of cadence? Jason Kim: Yes. The bold thinking that we heard from NASA Administrator Jared Isaacman recently since he released the Moon Base plans by NASA is the exact type of thinking that we embrace at Firefly Aerospace Inc. We were already thinking ahead and already building out our clean rooms and our production line capabilities to support not just one lunar lander a year, but multiple. This just further validates or amplifies the demand signal. When you look at having a permanent presence on the Moon, you have to validate a lot of technologies to understand the Moon better, to support human environmental control life support systems on the Moon, take cargo to the Moon, as well as have mobility such as rovers and light terrain vehicles. All those things are what we are working on with landers that can be templated into production-line landers so that we can address the frequency that is being demanded by NASA to take those types of technologies. One of the things that we are doing is we have quadrupled our clean room space compared to our existing clean room. That floor space and footprint help us with the rate. With our new Chief Operating Officer, Ramon Sanchez, who came in the fourth quarter of last year, he has brought a lot of best practices and expertise of production flow and labor and equipment utilization. That is helping us with ramping up production lines. We are vertically integrated as well, so one of the things that is important for rating up lunar landers is having the hardware put together and having the components. We build the avionics, we build the harnesses, carbon composites, and structures. We also are investing in some of our supply chain of our critical components. We are working closely with our supply chain in terms of having their dedicated support as well as strategic inventory and quality. Safety, quality, and reliability are really important to us. That is our focus as well. At the end of the day, it is about increasing the frequency of launch of these lunar landers, also building bigger lunar landers that we have designs for, and ensuring the probability of mission success just like we did on Blue Ghost Mission 1. Operator: Thank you. Our next question comes from the line of Seth Seifman with JPMorgan. Please proceed. Seth Seifman: Hey, thanks very much, and good afternoon. I wanted to follow up quickly on the space-based interceptor award for SciTech and just understand in terms of how they fit in, how you see the ground station role ramping up. What specifically does the infrastructure that SciTech has now— is that what would be used to support a space-based interceptor as part of Golden Dome? Is it something that would require the build-out of new infrastructure? If you can help us think in a little bit more detailed way what that involves, and where we saw there were several contracts that went out to different companies to work on it, are there other competitors who are potentially playing the same role here? Jason Kim: Hey, Seth. I think I mentioned in the fourth quarter of last year that SciTech, the acquisition of SciTech, was strategic, and it truly is. It really bolstered Firefly Aerospace Inc.’s entrance into national security, and in particular SciTech is the prime contractor on FORGE. That is a multi-hundred-million-dollar program of record. It is doing AI today in real-world operations. If you remember what General Gutlein said about Golden Dome, he is looking to defeat or stay ahead of the threats that have speed and maneuverability as well as lethality. One of the things that counters that is AI and the use of AI. Because SciTech has that capability as well as a rich history of 45 years of algorithms that also have been used to support the Space Force and the Air Force and the Missile Defense Agency, all of those battle-tested operational algorithms are also brought to bear for things like Golden Dome ground processing. With the AI processing, you can speed up the timelines because the threats are very advanced. In terms of the capabilities that SciTech has, they can mix and match a lot of those algorithms together to apply to this mission. Seth Seifman: And then just in terms of the overall contribution that they had in the quarter, is that something that you guys can disclose? Darren Ma: We have not broken it out separately, but FORGE and Golden Dome space-based have had revenue ramp up in Q1 this quarter. Seth Seifman: Very good. Thanks very much. Operator: Our next question comes from the line of Kristine Liwag with Morgan Stanley. Please proceed. Kristine Liwag: I wanted to follow up on your comments about Alpha after Flight 7’s success. You called out stronger customer demand, but backlog is relatively flat in the quarter. Does that mean that you anticipate orders that occurred after the quarter closed? And how should we think about the order trends for the year? Jason Kim: Hi, Kristine. Yes, we are seeing strong interest in Alpha on the heels of the successful Alpha Flight 7 Stairway to Seven mission. We completed all the post-data; everything was nominal. I was in the Mission Control Room with our team, and it was a flawless launch. It was with a Lockheed Martin demonstrator as well. We were able to insert that into the proper orbit. We even had our relight of the second stage. A lot of the transition to Block 2—a lot of the components and technologies that are going to help us with manufacturability and reliability on Block 2—were tested on Flight 7, to include the in-house avionics, the in-house batteries, and some temperature protection systems. We are very happy with those results. Because of that, at Space Symposium there was a lot of interest with existing customers as well as new customers. It is a matter of timing. A lot of our government customers, as you know, are going through some timing with their funding, as well as we had a lot of interactions with new customers as well. I will pass it on to Darren in terms of any additional color. Darren Ma: I think you covered it, Jason. Also keep in mind, we burned down the backlog this quarter with the record revenue quarter as well. Kristine Liwag: Great. Super helpful. And if I could pivot to the Moon opportunities. With NASA potentially skipping Artemis and going straight to the Moon, Blue Ghost’s capability set is really unique there with your successful landing as the first commercial company to have done so. But as you start seeing other companies accelerate their human landing systems capabilities and a much higher volume of potential payload that could reach the Moon, how do you think about where Blue Ghost lives in the construct when you have higher volume available too? Where does it live in that ecosystem, and how do we think about the longer-term opportunity for Blue Ghost? I think, Jason, you called out that you are also looking at a higher payload lander in the future. Jason Kim: Yes. In terms of our Blue Ghost line, we have designs for larger landers. A lot of the underlying technologies that made us successfully land and perform the 14 days of surface operations on Blue Ghost Mission 1 are transferable to our larger lander designs as well. If you go back to the NASA budgets, the CLPS 1.0 program, which is a highly successful program, has increased its budget from $2.6 billion to $4.2 billion. The anticipated CLPS 2.0 program is going to be around $6 billion. When you look at post-2030 landings, there are at least three 500-kilogram-to-lunar-surface CLPS missions, then there are twelve 3-ton mass-to-lunar-surface missions as well, and the remaining 15 are around 8 tons of mass to the lunar surface. Those are all in our roadmap. In fact, our larger lunar lander designs are scalable to meet that demand. It is not just the frequency of launch cadence of these lunar landers that NASA is asking for; it is also the magnitude, or the size, of these lunar landers that are increasing. Because we have a lot of capabilities that share common vertically integrated components such as carbon composites and engine technology as well as avionics—we build big things at this company. Our Alpha rocket is 100 feet tall, and our Eclipse rocket is 200 feet tall. So building a larger lander is right up our alley. Kristine Liwag: Great. Super helpful. And when do you think you could see these demand signals firm up into contracts? Jason Kim: We are seeing a lot of requests already, Kristine. There are things like CLPS 2, Moonfall, and CS-8, and CLPS 2.0. The majority of these are already solicitations that are out. If NASA stays on schedule, performers can get on contract as early as the third quarter of this year for some of these. Kristine Liwag: Great. Thank you for the color. Operator: Our next question comes from Edison Yu with Deutsche Bank. Please proceed. Edison Yu: Hey. This is Laura on for Edison. Thanks for taking our question. I want to ask about more broadly how we should think about the role of AI across your business today. Given your recently announced NVIDIA collaboration and also the R&D contract you were awarded, should we be thinking AI is primarily supporting SciTech’s software, or do you also see it becoming increasingly important for the spacecraft, autonomy, etc.? Jason Kim: You are exactly right, Laura, that we see AI as critically important to space. One of the visions that we have is we want to deploy on-orbit processing more and more. That is what makes the SciTech acquisition so strategic in the fourth quarter last year: we were thinking ahead, and SciTech’s software is operational on the ground today with big data centers to do no-fail Space Force missions and programs of record. They also have experience operationally performing on-orbit processing in space. That is one of the things that we envision at Firefly Aerospace Inc.—we have the whole ecosystem to launch satellites, build the satellites, operate the satellites with processing onboard with the SciTech algorithms to perform AI and processing with low latency, because a lot of these missions that we are going after, especially in national security, have very short timelines to be effective. Our recent partnership news with NVIDIA around the Moon on our Oculus service to do space domain awareness more quickly using AI and SciTech algorithms is a perfect example of taking things that work on the ground or in low Earth orbit and deploying them to the Moon because the Moon is the ultimate high ground. We see more and more deployment of AI on orbit. In addition, AI is being used across the company to increase productivity. We see it not only in the products that we provide but also in how we do work as well. Operator: As a reminder, to ask a question, simply press 11. Our next question comes from the line of Sujeeva De Silva with ROTH Capital. Please proceed. Sujeeva De Silva: Hi, Jason. Hi, Darren. Congratulations on the progress here. Following up on the Alpha discussions you have had at Space Symposium and others, given your strong government defense relationships, do we expect the launches in the future manifest to remain primarily government, or do you think you will diversify into civil or commercial? Obviously, there is strong demand from government, but wondering if it will be an effort on your part to diversify that or that should not be the expectation. Jason Kim: Hi, Sujeeva. Demand is not the problem with Alpha. We are steadily increasing rate year to year because there is so much demand from national security as well as commercial and civil. In terms of the benefits of the Alpha rocket—being a 1-ton-to-orbit capability and a 2-ton-to-suborbital capability, as well as having the responsive launch capability like we demonstrated on Victus Nox and recently with Victus DM—that really is very fit for national security purposes. If you think about national security, if there was a conflict, especially a near-peer conflict, one of the things that would be vulnerable are our launch sites. We have a deployable Alpha capability that we would like to field. With that capability, you could get resiliency through having a deployed capability in case any of the U.S. launch capabilities are inoperable. We are opening up a launch pad in Sweden, and that is the first time that we are going to take Alpha global. With our deployable launch system, we could take it to other places. Having the resiliency tied to the 1-ton capability that is right-sized to counter threats that U.S. adversaries might put into low Earth orbit, in addition to the 24-hour response timeline that we demonstrated on Victus Nox, is a combination that really supports national security very well. Sujeeva De Silva: Great. Thanks, Jason. And then my other question is on ELECTRA. With the first launch of the lunar satellite with the second Blue Ghost, can you remind us of the revenue model framework for ELECTRA—whether you can start revenue with that launch—and does the NVIDIA partnership enhance your pricing or revenue opportunity above and beyond what it was before? Darren Ma: Hey, Sujeeva. The ELECTRA that is on Blue Ghost Mission 2 is recognized as part of the entire contract. Blue Ghost Mission 2, we won it for $130 million. We have a number of commercial payloads on there, including a rover from the UAE and a couple of other commercial payloads that are add-ons on top of that. The Oculus imaging service is another add-on on top of that as well. That is all being recognized over time, as we discussed on the call. Sujeeva De Silva: Great. And, Darren, does the NVIDIA partnership enhance your ability to capture revenue in Oculus? Jason Kim: That is definitely part of the Oculus imaging service. The way to look at this is Oculus on Blue Ghost Mission 2—we are going to be able to experiment and try out different modes. Not only are we going to be able to send the raw data from doing lunar mapping and surveying, as well as sending space domain awareness data down to the ground to get processed even more, we are going to be able to demonstrate and experiment with AI on our NVIDIA module that is on the Oculus sensor using SciTech algorithms. There is going to be a lot of new discovery, and those are the kinds of things that the Department of Defense as well as NASA are looking for more of. There is more to come there. Operator: Our last question comes from Analyst with KeyBanc Capital Markets. Please proceed. Analyst: Hey, thanks for taking my question. It is Liam on for Mike today. I wanted to ask more broadly about NASA’s lunar plans and building a base on the Moon. What do you think would be the most feasible type of power generation to power the grid for lunar operations? What type of role could Firefly Aerospace Inc. play in powering the lunar grid? Jason Kim: I will go back to Blue Ghost Mission 1. When we successfully landed, we performed the 14 days of surface operations, which is the longest of any commercial mission on the surface of the Moon. We also had an engineering change proposal to look at operating slightly into the lunar night. Using our in-house batteries, we were able to operate five hours into the lunar night and still gather data from that. One of the things we can do in the future is add more batteries as we collect solar energy from our solar arrays. That will allow us to keep heating critical components like avionics and instruments on the lunar lander to last longer into the lunar night. We could also scale our solar energy as well. That is something that we have proven with Blue Ghost Mission 1. There are other opportunities like radioisotope heater units (RHUs). As you remember from the Mars missions, there are also other types of RTGs that can be used. Nuclear-powered plants can be used as well. Those are all things that NASA will want to explore more of because the essential things that you need to have a permanent presence on the Moon are things like power, communications, and navigation, and those are all things that Firefly Aerospace Inc. envisions continuing to support NASA with. Analyst: Thanks. And then lastly, on Blue Ghost, given NASA’s increased appetite for landers versus three months ago, how should we think about segment gross margins once mission cadence ramps up? Has there been any change to your view on Blue Ghost margins? Darren Ma: We have not— the only thing that has really changed there is in the program. Previously, we were planning to win multiple shots on goal each year, but now that has really accelerated. Our views on gross margin there have not really changed. We do not break out the spacecraft gross margin. Spacecraft solutions include Blue Ghost, ELECTRA, and also our software solutions business. Operator: Thank you. This will conclude our Q&A session. I will pass the call back to Michael for closing comments. Michael Sheetz: Thank you, everyone, for attending today’s call. We look forward to speaking with you again when we report our next quarter’s financial results. Thanks all. Operator: This concludes our conference. Thank you for participating, and you may now disconnect.
Operator: Good afternoon. My name is Krista and I will be your conference operator today. I would like to welcome everyone to Paramount Skydance Corporation Class B Common Stock's First Quarter 2026 Earnings Conference Call. At this time, all lines have been muted to prevent any background noise. After the speakers' remarks, there will be a question and answer session. To ask a question, please press star followed by the number 1 on your telephone keypad. To withdraw your question, please press star 1 again. I would now like to turn the call over to Kevin Creighton, Paramount Skydance Corporation Class B Common Stock's EVP of Corporate Finance and Investor Relations. You may now begin your conference call. Kevin Creighton: Good afternoon and thank you for taking the time to join us for the Paramount Skydance Corporation Class B Common Stock Q1 2026 earnings call. I am Kevin Creighton, EVP of Corporate Finance and Investor Relations. Joining me today is our Chairman and Chief Executive Officer, David Ellison, our Chief Financial Officer, Dennis Cinelli, and our Chief Strategy and Operating Officer, Andrew Gordon. As a reminder, we will be making forward-looking statements today that involve risks and uncertainties. Our remarks will also include non-GAAP financial measures. Reconciliations of these measures can be found in our earnings letter or in our trending schedules which contain supplemental information. These can be found on our Investor Relations website. I will now turn it over to David for a few brief remarks before we take analyst questions. David Ellison: Good afternoon, everyone. As you have seen in our first quarter results and most recent shareholder letter, we are off to a strong start in our first full year at Paramount Skydance Corporation Class B Common Stock. The progress we have made in just nine months is a testament to the amazing team we have assembled that has worked tirelessly and with great conviction to deliver on all areas of our business. We are executing deliberately against our priorities and seeing tangible results: attracting top creative talent, nearly doubling our film slate, delivering shows audiences love, and greenlighting dozens of new and returning series while achieving our financial goals. At the same time, we are transforming how we operate, unifying platforms, data, and workflows, and embedding advanced technology to drive efficiency, better serve our partners, and elevate the overall consumer experience. Across the business, we are getting things done, and it is translating into real momentum. As a storytelling company, our top priority is and always will be delivering great films and television series from the world’s leading creators that resonate with broad global audiences. Recent highlights include Scream 7, which became the highest-grossing installment in the franchise’s 30-year history, Landman, now the most-watched series in Paramount Plus history, and the continued strength of CBS, which has 13 of the top 20 primetime series including all four of the top new series, an achievement no broadcast network has matched since the early 1990s. On streaming and sports, engagement remained strong, with more than 10 million households watching over 100 million hours of UFC programming on Paramount Plus, and CBS Sports delivering the most-watched final round of The Masters in over a decade. These are just a few examples of the progress and growth taking place companywide. We are also making meaningful strides improving our products to deliver more dynamic, personalized experiences and superior monetization. New features such as enhanced mobile experiences, short-form video, and more advanced recommendations are helping us better serve consumers. We are leveraging AI-powered capabilities across the businesses, including our agentic data warehouse and Precision Plus, our targeting and optimization platform, to move faster and operate with greater effectiveness in support of our advertising partners. While there is still significant work ahead, we remain confident in our strategy and the trajectory we are on. Finally, we continue to make steady progress towards completing the Warner Bros. Discovery transaction, which we believe will accelerate our transformation, strengthen our competitive position, and enhance our ability to help shape the next era of entertainment. To date, we have satisfied our U.S. HSR obligations and there are no statutory impediments remaining, and we continue to advance through European and other international regulatory approvals, several of which have already been secured. Earlier in April, we announced a broad syndication of the PIPE equity commitment to strategic investors, underscoring continued investor confidence, secured $10 billion in permanent financing, and syndicated the remaining $49 billion of our bridge to a group of leading banks and institutional lenders. Additionally, on April 23, WBD shareholders voted to approve the transaction. We are pleased with the momentum and will continue to take the necessary steps to bring this deal to completion. At every stage, we remain guided by our strong conviction that the combination of these two iconic companies and their extraordinary teams will create a leading global media and entertainment company, powered by storytelling and accelerated by technology, that strengthens competition, better serves the creative community, and delivers even more compelling stories to audiences worldwide. We are excited for all that is ahead and look forward to the opportunities it will create. And with that, I will turn it back over to Kevin for your questions. Kevin Creighton: Thanks, David. Just a quick note before we open the line: given the pending transaction for WBD, we will not be taking questions on the deal today beyond what we wrote in the shareholder letter. We will now open the call for questions. Krista, please open the line. Operator: Thank you. For any additional questions, please re-queue. Your first question comes from Sean Diffely with Morgan Stanley. Please go ahead. Sean Diffely: Great, thanks very much. I was hoping you could comment on business transformation early learnings as you converge your tech stacks between Paramount Plus and Pluto. Any things that you could apply to a larger asset base? And then broadly, how you see AI transforming the business? You mentioned on the ad tech front, but anything else that you think is notable to call out? David Ellison: Yes, absolutely. On early learnings, what I would highlight is our ability to execute and move quickly. We are on track, as discussed previously, to consolidate our three streaming services into one unified platform by the middle of this year. Those learnings will be crucial as we progress. We have had strong execution on cost saves and efficiencies and have been delivering against our plan. With respect to the pending transaction, as Kevin said, we are going to stay away from specifics while the process is ongoing. I will turn it over to Andrew to add more on the product side. Andrew Gordon: As we integrate BET Plus, Pluto, and Paramount Plus into one tech stack, it is going to accelerate our ability to do the same upon closing with WBD. When you see the consumer product that comes out this summer, we think you will be pleased with how they function together and create a better experience both for free consumers in the FAST channel business of Pluto and for the paid subscription tiers of Paramount Plus, both ad-supported and ad-free. We remain on track for convergence, which has significant benefits across personalization and recommendations. On the front end, we are modernizing the consumer-facing technology to create more dynamic, personalized experiences. As of April, you can see short-form video clips surfacing trailers, sports highlights, and library content in a curated, personalized feed. We are working on enhanced personalization across discovery, including AI-driven artwork, and building other mobile-optimized experiences like live stats for live sports, all designed to deepen engagement across the platform. This summer, Pluto is getting the most significant update since the inception of the platform. Across our tech and product org, approximately 80% of our engineering organization is using code-assisted technology, which is driving meaningful productivity gains and cutting approval times by more than half. These investments accelerate how we work across the business, support our long-term DTC growth, and are foundational to where we are taking the business. Dennis Cinelli: Around AI transformation, we are spinning up pods to pursue AI-based workflows in the back office—finance, HR, and operational functions. We are enabling these both on the Paramount Skydance Corporation Class B Common Stock side and, we believe, setting ourselves up for the combination, to drive meaningful efficiencies. That will benefit us today and in the future as well. One more point on Oracle Fusion, our ERP system: we achieved a major milestone in the first quarter, with the remainder of the transformation to the Oracle Fusion system for Paramount Skydance Corporation Class B Common Stock standalone targeted by early 2027. That puts us in a much better spot as part of closing with Warner Bros. Discovery as well. David Ellison: Great. Thanks, Sean. We appreciate the question. Kevin Creighton: Krista, next question, please. Operator: Your next question comes from the line of Jessica Reif Cohen with Bank of America Securities. Please go ahead. Jessica Reif Cohen: With WBD, you will undoubtedly have some of the best industry assets and libraries. But you really do need to integrate and execute. Are there any changes in how you are thinking about allocating capital or management attention as you integrate for the second time in two years? And then on films, you seem committed to having 30 films once you combine. Why that many, and how do you think about the marketing and distribution needs? What will it do to elevate Paramount Skydance Corporation Class B Common Stock and the combined company? Kevin Creighton: Thanks, Jessica. Before we jump in, we want to focus most of the call on our results for the quarter and the outlook for the business. With that, I will kick it over to David. David Ellison: Thanks, Jessica. Zooming out, we view our pending acquisition of Warner Bros. Discovery as a powerful accelerant to our strategy. It expands reach, enhances our ability to create the world’s most compelling stories and experiences, and positions us to build a next-generation media and technology company. Across three pillars: production, DTC, and linear. On production, we will be the premier destination for leading creative voices. We are firmly committed to 30 theatrical films per year. We have 15 films on the calendar to release this year, up from eight last year, nearly doubling Paramount’s output. WBD also has 15 films on its calendar this year, so together the companies are already making 30 films to date, supported by beloved franchises like Harry Potter, Top Gun, Star Trek, Looney Tunes, Game of Thrones, and Yellowstone. On DTC, the combination creates a scaled competitor, with over 200 million DTC subscribers across more than 100 countries, positioning us to compete with the leading streaming services. On linear, we would have a presence in over 200 countries and a portfolio of cable and free-to-air networks, such as CBS, CNN, TBS, TNT, and Food Network. Operationally, we are pleased with our execution at Paramount Skydance Corporation Class B Common Stock and believe we can deliver at WBD as well. Strategically, we could not be more excited. We remain on track to complete by September. With respect, we need to stay away from further WBD specifics and focus on the company we are operating today. Operator: Your next question comes from the line of Robert Fishman with MoffettNathanson. Please go ahead. Robert Fishman: Hi, good afternoon. Is the current plan to allocate more of your overall company programming budget toward higher-quality content like NFL, UFC, and blockbuster Paramount movies, or do you prefer to spread your budget out to a more volume-based approach going forward? And then on a related note, after launching short videos and clips in Paramount Plus, is the goal to compete for short-form ad dollars with YouTube and TikTok, or is it primarily to drive engagement and extend the premium ad dollars you already get from your networks? David Ellison: I will take the first half. A core theme for us is that quality is the best business plan—aim high and do not stop working until you get there. In today’s competitive landscape, that is essential creatively. CBS Sports has focused on big events that matter, delivering a record-setting NFL season, and one of the most successful Masters finals. We emphasize quality and aiming high across our film and television studios as well as streaming. At the same time, we have increased our content investment this year. We have roughly doubled the output of the film studio year-over-year and nearly doubled the output of original series greenlit in DTC. We believe we can maintain the quality bar while scaling, which is essential to our growth goals. Dennis Cinelli: Think about the content portfolio across our segments. In TV Media, the CBS team is managing linear declines by rightsizing programming while hitting creatively with a strong primetime lineup—13 of the top 20 shows in primetime. In DTC, this is a multiyear journey to build a portfolio that drives growth and engagement, and you are seeing that come through in Q1: Paramount Plus revenue was up 17% through a combination of delivering on the January price increase and healthy underlying subscriber growth. We added nearly 2 million underlying subscribers in the quarter. In the studio, overall studio revenue was up 11% in Q1, driven by films like Scream and continued progress building our third-party TV studio. We are spending a lot of time on content ROI analysis to ensure every investment is underwritten with rigor. On clips, we know audiences watch on multiple screens. A vertical short-form product deepens engagement, keeps people more involved, and increases time spent with our content. We view this as a beta test, but early engagement is high, with viewers moving from clips into news, sports, and entertainment. We are excited about what that means for the future, and there is incredible momentum as we take a test-and-learn, fast-iteration approach. Metrics are encouraging, but it is still early days. Operator: Your next question comes from the line of Richard Greenfield with LightShed Partners. Please go ahead. Richard Greenfield: Thanks for taking the question. David, you have very large D2C ambitions. As you think about your engagement goals for Paramount Plus in 2026 and 2027, given the size of investments since taking control, how fast can you move the goalposts on engagement, and how does the UI/tech stack rebuild this summer play into that step-change? And what is your view on channel stores, given Paramount Plus has used them aggressively historically—use them or not long term? David Ellison: Great questions. In summary, it is a combination of increased content investments and increased tech investments. To achieve our streaming goals, we need more content on platform. In 2026, we have new seasons of The Agency, Star Trek, Lioness, 1923: The Mob, and Tulsa King. Dutton Ranch is coming this summer from Taylor Sheridan. On sports, UFC is year-round; we have the NFL, March Madness, UEFA Champions League, and a new partnership with the WNBA. We have also greenlit significant new series from our studios, such as Discretion with Nicole Kidman and Elle Fanning, Nine Twelve with Jeremy Strong, and Fear Not with Anne Hathaway. On tech, we are on track to accomplish convergence by midyear. You will see significant improvements once we roll that out, but that gets us to the starting line of becoming best-in-class. We are hiring engineering and AI talent to compete with industry leaders; it is the combination of art and technology that drives growth, engagement, and scaled business metrics. The pending transaction serves as an accelerant toward that goal. On channel stores, it is case by case. We evaluate partnerships looking for win-wins across the board and will continue with that philosophy. Andrew Gordon: On engagement, we are focused on high-quality, high-calorie engagement. UFC viewers, for example, are averaging 15 years younger and staying on the platform longer. On Pluto, we are shifting to VOD, with VOD up 60% per user. These are higher-quality engagement metrics that help monetization. As we continue to invest in ads monetization, fill rates were up in Paramount Plus and Pluto. We are pursuing engagement that translates into better monetization. Operator: Next question comes from the line of Steven Cahall with Wells Fargo. Please go ahead. Steven Cahall: Thank you. A couple of questions on DTC. Paramount Plus grew around 17% in the quarter, strong for sure. I know it slowed a little the last couple of quarters even with the addition of UFC. Your guidance has revenue growth second-half weighted. How should we think about the underlying drivers of growth at Paramount Plus and the acceleration in the back half? And then on DTC EBITDA, I think there was a programming amortization benefit, maybe a change in accounting from Skydance. How does that impact adjusted EBITDA going forward, and is there any comparability we should be aware of? Dennis Cinelli: For context on the quarter, we came in at the high end on revenue and beat on adjusted EBITDA. Expenses were a bit lighter than planned, primarily around slower pacing of hiring and some timing shifts in content. We generally view overall expenses for the year, including DTC, as on track with expectations. On DTC EBITDA, you will see some margin pressure in the back half as the slate launches in Q3 and Q4. On Paramount Plus, we feel good about the trajectory: revenue up 17% year over year, driven by a 14% increase in ARPU from the January price increase and continued improvement in the subscriber mix. Headline net adds were approximately 700 thousand, but underneath that we added about 2 million underlying subscribers and exited a little over 1 million international hard-bundle subscribers; for context, those hard bundles have ARPU of less than $1, so they are uneconomic. Growth for the rest of the year will be driven by healthy underlying subscriber adds as the content slate fills in, as well as continued improvement in ad monetization. On the content amortization benefit, as noted, there was some timing in the quarter and we do have benefit from the Skydance transaction that flows through this year and steps down next year. We are not getting into specifics, but we recast the financials and you will see that in the recast. We will call out anything material each quarter. Operator: Your next question comes from the line of Peter Supino with Wolfe Research. Please go ahead. Peter Supino: Good afternoon. Can you talk about the programming cost environment generally? You and others seem focused on targeted but increasingly aggressive investing—are you seeing that in unit programming costs? And on ad sales, now that you have owned the assets for almost a year, any fresh ideas about how Paramount Skydance Corporation Class B Common Stock should be selling advertising, especially in DTC? Dennis Cinelli: On programming, we are competitive through our greenlight process. In TV Media, especially at CBS, the team is managing linear decline by rightsizing programming while delivering creatively with the slate. Across the studio, we are not seeing notable pressure on budgets or creative costs that we would call out as a trend. David Ellison: On advertising, particularly ad tech, this is a major focus and opportunity we identified early on. We are retooling go-to-market, consolidating national sales into a single client-centric structure under unified leadership, and have brought in new talent from leading digital platforms like Amazon, Google, Hulu, and Roku. We are making platform investments. On ad tech, Precision Plus—our AI-powered ad product combining first- and third-party data—is generating positive early feedback and driving performance above benchmarks. Our format innovation pod is creating new ad experiences, including streaming fixed units and sports DAI, and we are scaling for UFC. We are also using AI-driven QA. We just completed our first upfront under the new structure and feedback has been incredibly positive. Momentum is building, there is work to do, but we are pleased with the acceleration. Dennis Cinelli: In terms of results, Q1 overall ads declined 3%, but DTC ad revenue returned to growth and improved versus Q4. For the rest of the year, we expect total company ad revenue to return to growth in the back half, driven by DTC accelerating and more than offsetting declines in TV Media. Operator: We have time for one more question, and that question comes from Michael Morris with Guggenheim Securities. Please go ahead. Michael Morris: Thank you. First, can you share more detail on UFC and how it has performed in the first several months now that you have had about 10 events? How is it benefiting the broader business, and are there more things to come this year as you use that property? Second, in the letter, you noted several studio titles in production that will be released on Netflix and on Prime Video. Why is it important for the studio to sell content to services that are also competitors for engagement and subscriptions? David Ellison: We could not be more pleased with our seven-year UFC partnership; it has exceeded our early expectations across the board. More than 10 million households have watched UFC programming on Paramount Plus, with over 100 million hours viewed. Average UFC viewership across our platform is more than 15 times the average pay-per-view event over the past two years. New UFC subscribers are, on average, 15 years younger than the average Paramount Plus viewer and they come in for UFC and then engage with our broader offering, including series like South Park, spending more time overall. On CBS, main fight cards like UFC 326 and 327 averaged 2.8 million viewers, nearly 50% higher than ABC’s NBA primetime game on the same night. Advertising demand has exceeded expectations and meaningfully contributed to Q1 advertising. We are under a year into a seven-year journey and we are very excited about how UFC is driving the business. On selling to third parties, we do not believe in a one-size-fits-all approach. Content licensing is an important part of our business and will continue to be. Some series should remain exclusive to our owned-and-operated platforms; others make sense to sell to third parties, and often those series see increased viewership when they later return to our platforms. On originals, our goal is to be the number one home for top talent. Being able to place projects on our platforms or sell to third parties when appropriate makes us a more desirable home for creators. We own those shows and they generate revenue for us. We evaluate these decisions case by case and that approach has served us well. Operator: Thank you. I will now turn the call back over to Kevin for closing comments. Kevin Creighton: Thanks, Krista, and thank you to everyone for taking the time to join today. Andrew Gordon: We appreciate the questions, and please reach out if you have any follow-ups. Dennis Cinelli: Thanks all. Operator: This concludes today’s conference call. Thank you all for joining and you may now disconnect.
Operator: Please stand by. Welcome, ladies and gentlemen, to the First Quarter 2026 Earnings Call for Tactile Systems Technology, Inc. At this time, all participants have been placed in a listen-only mode. At the end of the company's prepared remarks, we will conduct a question and answer session. Please note that this conference call is being recorded and will be available on the company's website for replay shortly. I would now like to turn the call over to Sam Bentzinger, Investor Relations at Gilmartin Group, for a few introductory comments. Please go ahead. Sam Bentzinger: Good afternoon, and thank you for joining the call today. With me from Tactile Systems Technology, Inc.’s management team are Sheri Louise Dodd, Chief Executive, and Elaine M. Birkemeyer, Chief Financial Officer. Before we begin, I would like to remind everyone that our remarks and responses to your questions today may contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties. These could cause actual results to differ materially from those indicated, including those identified in the risk factors section of our Annual Report on Form 10-Ks as well as our most recent 10-Q filing to be filed with the Securities and Exchange Commission. Such factors may be updated from time to time in our filings with the SEC, which are available on our website. We undertake no obligation to publicly update or revise our forward-looking statements as a result of new information, future events, or otherwise. This call will also include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles, or GAAP. We generally refer to these as non-GAAP financial measures. Reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investor Relations portion of our website. With that, I will now turn the call over to Sheri. Sheri Louise Dodd: Thanks, Sam. Good afternoon, everyone, and welcome to our first quarter 2026 earnings call. Here with me is Elaine M. Birkemeyer, our Chief Financial Officer. We are pleased to report a strong start to 2026, with first quarter results reflecting focused execution of our three strategic priorities, continued strength and durability of our commercial action plan, and operational excellence including preparing for recent changes regarding the introduction of prior authorization for fee-for-service patients. Specifically, in Q1, we delivered total revenue of $75.3 million, representing growth of 23% year over year. By business line, lymphedema revenue grew 23% year over year to $62.2 million, and airway clearance revenue increased 22% year over year to $13.0 million. Q1 results include a minimal contribution from our recent acquisition, Lymphotech. Our revenue performance reflects continued strategy and execution against key revenue drivers: our phased technology and people go-to-market investments, which drive referrals and market share; NCD-related tailwinds, which drive favorable advanced pump product mix; depth and breadth of our DME relationships, which drive market expansion and share; and, not to be understated, disciplined operational execution across the enterprise. Further, top-line strength drove meaningful margin expansion, gross margins increased 250 basis points to 76.5%, and adjusted EBITDA increased $4 million year over year to $3.7 million. We ended the first quarter with approximately $75 million in cash, maintaining substantial financial flexibility as we continue to invest for long-term growth. For 2026, we are updating our full-year revenue guidance to a range of $360 million to $368 million. This update reflects the inclusion of Lymphotech and our increased confidence in commercial execution while maintaining a disciplined approach as prior authorization outcomes under new Medicare requirements for our category continue to mature. For the remainder of the call, I will review our Q1 performance by business line and then provide updates on our ongoing strategic priorities. Elaine will follow with a review of our first quarter financial results and an update on our outlook for 2026. Turning first to lymphedema. Revenue grew 23% year over year in Q1. We are pleased to see the significant growth compared to last year, which was expected given the momentum of our field and back-office strategy execution. Our go-to-market investments are delivering. Our sales organization is fully resourced with broad geographic coverage and a well-balanced staffing model of one account manager for every product specialist. With those resources in place, we are shifting our focus from capacity investment and onboarding to productivity and operating leverage. Territory productivity increased meaningfully in Q1 year over year. Robust CRM utilization, combined with continued enhancements including workflow tools, is increasingly supporting referral management prioritization and account development, and we expect continued territory optimization and sustained productivity gains over time. From a products perspective, overall lymphedema growth in the quarter was supported by both Nimble and Flexitouch, with Flexitouch growth outpacing Nimble. As expected, this dynamic was largely tied to our decision in October 2025 to align our advanced pump documentation criteria with the Medicare NCD. While this alignment had always been planned, the timing reflected our increasing confidence that the MAC administration of the NCD had stabilized. Importantly, the NCD has created a more direct and clinically aligned pathway for patients who require advanced pump therapy compared to the prior LCD policy. This will continue to be a tailwind for Flexitouch as we continue to educate providers on the policy change and drive the right patient, right pump messaging. Notably, the NCD policy language also allows for advanced pump coverage for patients with head and neck lymphedema, and we are pleased to see increasing clinical adoption for these underserved patients who have no other pneumatic or nonpneumatic compression device options. This NCD-driven Flexitouch strength was also evident in our Q1 payer mix with sales in our Medicare channel growing 40% year over year. To a smaller extent, Medicare strength also reflects some order acceleration ahead of the April 13 effective date for the new prior authorization requirements for PCDs billed under traditional Medicare fee-for-service. Importantly, underlying demand remains healthy, and as the new prior authorization process settles, we expect quarterly ordering patterns to normalize. As a reminder, the inclusion of the prior authorization process for basic and advanced PCDs for Medicare patients was announced in January 2026 and aligns with prior authorization decisions in other growing DME categories. During our Q4 call, we discussed our expectation that this new requirement will add additional steps to the order process, such as assembling and submitting a prior authorization documentation packet and checking the status of each submission in order to process the claim. Additionally, these new requirements require patients to have a face-to-face clinical visit with a treating physician, not just a therapist, to establish and document medical necessity. To be ready for the go-live date, we accelerated the prior authorization module in our AI portfolio, which had originally been planned for launch in 2027. In the weeks leading up to April 13, we demonstrated operational agility in validating the technology and systems, training and staffing our team, and successfully deploying a new process on schedule. The Medicare PCD prior authorization requirement has been in place for just three weeks. We are actively managing early transition dynamics as both we and the MACs adjust our respective processes. As the industry leader and a DME provider with extensive experience operating in other prior authorization environments across Medicare Advantage and commercial plans, we believe we are well positioned to support patients through this transition. Turning to our other payer channels, our commercial business remains healthy and is demonstrating quarter-over-quarter consistency. In the VA channel, performance reflects a different operating and growth profile than Medicare and commercial. Unlike those channels where reimbursement policies are more dynamic and have driven more pronounced year-over-year comparisons, the VA reimbursement environment is notably more stable, which naturally results in less quarter-to-quarter volatility. From a commercial execution standpoint, the VA call points span a diverse set of specialties, including vascular, oncology, and therapy practices, with success driven by sustained relationship-based engagement and navigation of local VA systems. As our recently expanded field organization continues to deepen engagement, establish workflows, and build trusted relationships within these accounts, we expect the VA to become a more meaningful contributor over time. We view the VA as a strategic long term opportunity that is well aligned with our evolving portfolio and an incremental growth contributor alongside our Medicare and commercial channels, with growth unfolding in a deliberate and durable manner. Turning now to airway clearance. Sales of AffloVest increased 22% year over year in the first quarter. The key drivers of our robust performance remain consistent with what I have shared previously. Our relationships with the top respiratory DMEs remain strong, including at the C-suite, and AffloVest continues to be well placed across these accounts. There are additional opportunities to deepen engagement within our top 10 DME partners, given the breadth and scale of their national footprints and alignment of individual branch performance goals. We are committed to delivering high-quality medical education and training for providers and DME staff, supporting sales skills of AffloVest and airway clearance therapies at the DME national and area sales meetings, manufacturing a superior airway clearance product, and providing AffloVest account manager continuity to our DME partners, all of which we believe are critical inputs to driving consistent growth and valued partner status. As the market leader in airway clearance therapy, we remain focused on serving the millions of diagnosed and undiagnosed bronchiectasis patients in the U.S. We expect our commercial strategy, clinical education efforts, and strong DME partnerships to continue driving growth throughout the year, in addition to the launch of our next-generation AffloVest product, which I will touch on shortly. We are committed to evolving our lymphedema strategy for growth from that of a product company to an integrated solutions leader for lymphatic dysfunction, and the acquisition of Lymphotech is an important milestone in this exciting evolution. Lymphotech sits squarely within our strategy to support patients across the full continuum of care, which begins with getting an accurate, timely, and objective lymphedema diagnosis. Lymphotech’s 3D measurement and monitoring addresses this need directly, replacing traditional manual measurement methods that are time consuming, highly variable, and dependent on clinician technique. Currently, the Lymphotech platform is FDA cleared and commercially available as a SaaS-based solution. As we shared last quarter, a key element of this acquisition is broadening our R&D capabilities to support next-generation approaches to disease assessment and treatment, and we look forward to sharing updates on our progress in the quarters ahead. The integration is progressing as planned since closing in February. The Lymphotech cofounders and team are actively contributing to both the go-to-market commercialization strategy as well as helping to identify the capabilities and integration points across the diagnostic and therapy product development road maps. We are being deliberate and strategic in our approach to maximizing the provider, clinician, and patient experience. Beyond the team and the technology, Lymphotech also earned selection as a funding recipient under a new federal research program focused on lymphatic disease. Specifically, the Advanced Research Projects Agency for Health recently announced two landmark programs, LIGHT and GUIDE, committing a combined more than $290 million across all awardees over five years to advance lymphatic diagnosis and therapeutics. Lymphotech was selected as one of seven GUIDE funding recipients and is focusing its research on the development of a new responsive garment using bioimpedance feedback to deliver adaptive compression with Bluetooth-enabled remote monitoring. We believe this program has the potential to extend personalized treatment to millions of diagnosed patients. Along with the first U.S. clinical practice guidelines for lower extremity lymphedema presented in March, which validated PCD therapy, we believe awareness of lymphatic disease and evidence-supported therapies is reaching a historic inflection point for the category. As the industry leader, Tactile Systems Technology, Inc. is well positioned at the center of this momentum, further bolstered by our three ongoing strategic priorities focused on improving access to care, expanding treatment options, and enhancing lifetime patient value. Let me now provide a few updates on each of these. Beginning with improving access to care, where we are focused on several internal- and external-facing initiatives. Internally, we continue to transform each step of the order process with new technology infrastructure and more efficient workflows. AI-enabled technology is playing an increasingly meaningful role in our back-office transformation. Over the past several months, we have been leveraging AI capabilities in our order intake processes and parts of our medical record review and have been pleased with both the technology performance and the enhanced workflow efficiencies it is enabling. As I shared earlier, this quarter we successfully accelerated and launched the prior authorization component of our AI platform for Medicare fee-for-service orders ahead of the April 13 deadline. Looking ahead, we remain on track to further expand the use of AI capabilities across the entire order process, including patient eligibility and benefits verification, and full medical record review. With the rollout of these expanded features, we believe we will accelerate speed of therapy, reduce revenue-impacting human errors, and improve operational efficiency, each of which should support margin expansion over time. Externally, improving market access conditions is supported by clinical evidence generation, guideline dissemination, and engagement with government and commercial payers. For commercial payers, we continue to make steady progress on head and neck coverage and are working to align certain commercial policies to the NCD rather than their current alignment to the retired LCD. As part of that work, our head and neck clinical evidence program continues to advance with data progressing through the peer-reviewed and publication process. Payer engagement is a continued patient advocacy commitment we make for all patients, operationalized through payer education, appealing denials, and activating clinical support with medical directors as needed. Next, on expanding treatment options. We are excited to share we recently received FDA 510(k) clearance for our next-generation AffloVest product. Key enhancements with this next-generation device are focused on improving the patient experience and include further weight reduction, new digital connectivity, and improved size adjustability to allow for a more customized fit. Additionally, the clearance maintains our indication for use across the full patient age spectrum, from pediatrics through geriatric populations, reinforcing AffloVest’s position as a solution for bronchiectasis patients at every stage of life. We remain on track for commercial launch this year to ensure the product is available for the 2026 to 2027 winter respiratory season, and we look forward to sharing more updates with respect to timing as we get closer. Our second innovation area is focused on the advanced pump category. As we shared last quarter, our product roadmap includes the introduction of incremental features and product enhancements for Flexitouch focused on the patient experience. These include a new controller, reduced external hosing, and remote control functionality through our Kylie patient engagement application. We anticipate go-to-market readiness in 2027 for these features. Beyond these innovation updates, we are also focused on identifying integration points across the combined Lymphotech and Tactile product development portfolios. While it is too early to share specific details of a Lymphotech-integrated product portfolio, we are excited by the expansion of diagnostic and therapy delivery opportunities. Finally, our third strategic priority of enhancing the lifetime patient value encompasses more efficient and personalized engagement before, during, and after the order and delivery process. As we shared last quarter, we are continuing to focus on targeted care navigation pilots designed to provide clearer guidance to patients earlier in the process and reduce administrative friction. Results to date continue to support our thesis that patients value clear communication and guidance earlier in the process. We are refining these pilots to optimize touchpoints, and we are evaluating how to expand their impact in a measured and scalable way. We believe this work will reduce patient leakage, enhance the patient experience, and over time decrease the need for sales representative involvement in the order process, supporting both growth and operating leverage. Taken together, our progress across these strategic priorities reinforces our confidence in the durability of our commercial momentum. Our Q1 results reflect strong execution across both business lines, meaningful progress and agility in our operation transformation initiatives, and the expected return on our go-to-market people and technology investments. Intentionality and discipline are key constructs in the way we are operationalizing our strategy; as a result, the business performance is there. This approach is supported by a strong balance sheet and a thoughtful capital allocation strategy that balances growth investments with shareholder returns. We are confident in the trajectory of our business and the multiple catalysts ahead as we move through 2026 and beyond. With that, I will now have Elaine review our Q1 financial results in more detail and provide an update on our outlook for 2026. Elaine M. Birkemeyer: Thanks, Sheri. Unless noted otherwise, all references to first quarter financial results are on a GAAP and year-over-year basis. Total revenue in the first quarter increased by $14 million, or 23%, to $75.3 million. By product line, sales and rentals of lymphedema products, which includes our Flexitouch, Entre, Nimble, and Lymphatex systems, increased $11.7 million, or 23%, to $62.2 million, and sales of our airway clearance products, which includes our AffloVest system, increased $2.3 million, or 22%, to $13.0 million. Growth was broad based and reflected strength across both volume and revenue per unit, including higher shipments, strong collections, and a favorable mix across payer and product category. Continuing down the P&L, gross margin was 76.5% of revenue, compared to 74% in 2025. The increase in gross margin was attributable primarily to lower manufacturing costs, stronger collections, and favorable product and payer mix reflected in our revenue. Importantly, these improvements reflect structural enhancements in the business rather than temporary cost actions. First quarter operating expenses increased $9.3 million, or 19%, to $59.1 million. The change in GAAP operating expenses reflected a $5.2 million increase in sales and marketing expenses, a $1.0 million increase in research and development expenses, and a $3.0 million increase in reimbursement, general, and administrative expenses. As we discussed previously, we are annualizing investments made in 2025 while continuing to invest in IT infrastructure and automation to support long-term growth. Despite these ongoing investments, operating loss decreased $3.0 million, or 66%, to $1.5 million. Interest income decreased $200,000, or 26%, to $700,000 due to our decreased cash position. Interest expense decreased $400,000, or 93%, to $28,000. Income tax expense was $900,000 compared to an income tax benefit of $1.1 million. Net loss decreased $1.2 million, or 41%, to $1.8 million, or $0.08 per diluted share, compared to $3.0 million, or $0.13 per diluted share. Adjusted EBITDA increased to $3.7 million compared to an adjusted EBITDA loss of $300,000 in the prior year, with margin expanding to 4.9% from negative 0.4%, reflecting a meaningful improvement in operating leverage. With respect to our balance sheet, we had $75 million in cash and cash equivalents and no outstanding borrowings at quarter end. This compares to $83.4 million in cash and no outstanding borrowings as of 12/31/2025. The change in cash during the quarter primarily reflects the Lymphotech acquisition, share repurchases, and normal seasonal items such as bonus payments. We continue to see improvement in working capital, including a meaningful reduction in days sales outstanding. Turning to a review of our 2026 outlook. For the full year 2026, we are raising our guidance and now expect total revenue in the range of $360 million to $368 million, representing growth of approximately 9% to 12% year over year. This guidance assumes both our lymphedema and airway clearance businesses will grow in a similar overall range, with airway clearance growing modestly faster. The increase in guidance is driven by three primary factors. First, we continue to expect strength in the commercial execution across the business. Second, we have included the contribution from Lymphotech. Third, we have incremental early confidence in how the MACs are navigating the new prior authorization requirements we discussed on our last call. More broadly, we believe underlying demand remains durable, and our tools and processes designed to support prior authorizations are tracking well against plans. While prior authorization approval data is still early and continuing to take shape, our outlook appropriately reflects discipline until we have a longer track record of consistent outcomes. For modeling purposes, for the full year 2026, we expect our GAAP gross margins to be 76% to 77%, our GAAP operating expenses to increase 10% to 12% year over year, the increase relative to our prior outlook reflects one-time acquisition and legal related costs, net interest income of approximately $3 million, a tax rate of 28%, and a fully diluted weighted average share count of approximately 22 to 23 million shares. We continue to expect to generate adjusted EBITDA of $49 million to $51 million in 2026. This outlook reflects the annualization of 2025 investments and continued strategic investments in 2026, which we believe are important to support long-term growth and operating leverage. Our adjusted EBITDA expectation assumes certain noncash items, including a stock compensation expense of approximately $9 million, intangible amortization of approximately $3.6 million, depreciation expense of approximately $3.2 million, litigation-related expenses of approximately $1 million, and one-time acquisition-related and integration costs of $1.3 million. With that, I will turn the call back to Sheri for some closing remarks. Sheri Louise Dodd: Thank you, Elaine. We are encouraged by a strong, balanced start to the year and the trajectory of our business. Our Q1 results demonstrated broad-based performance and reflect disciplined execution, improving productivity from a fully built commercial organization, and the increasing benefits from investments we have made in technology and infrastructure. As we look ahead, our focus remains on the fundamentals that matter most: expanding access to care, innovating across our product portfolio, and enhancing lifetime patient value. While we remain mindful of near-term adjustments related to Medicare prior authorization, ultimately, we believe this change reinforces our emphasis on clinical rigor, access durability, and long-term reimbursement stability, and we are well positioned to navigate it. We are operating from a position of strength supported by a resilient balance sheet, multiple growth levers in motion, and a clear strategy to translate consistent execution into sustained growth over time. With that, operator, we will now open the call for questions. Operator: Thank you. We will now be conducting a question and answer session. Sheri Louise Dodd: You may press 2 if you would like to remove your question from the queue. Again, that is 1 to ask a question. Operator: And our first question will come from Ryan Zimmerman with BTIG. Ryan Benjamin Zimmerman: Good afternoon, and congrats on a nice start to the year here. I want to ask about some of the dynamics that are starting to occur in the second quarter. Sheri, I think you called out some pull-forward dynamic with, you know, lymphedema sales ahead of February. And so, you know, one, I think if I look at the beat versus kind of where you are raising guidance, came in, you know, there is about a $1.7 million difference there. I just want to understand if that was the pull-forward effect, and then just anecdotally, kind of what you are seeing with the MACs in February, you know, how they are responding to this, how physicians are responding to this, and, you know, the cadence of sales we should think about. I apologize, there is a lot here. The cadence of sales we should think about over the balance of the year because you have historically seen, you know, kind of 2Q step up from 1Q. So, you know, is there a bit of a pause or dynamic in the market we need to think about for 2Q? Sorry for the multipart question there. Sheri Louise Dodd: No, it is okay. Let us take it layer by layer here. So what I will first say is I want to kind of reorient this concept of a pull-forward, because it was not really a pull-forward. What we did is we had patients whose orders were in process, and if they were not all the way completed by that date, they would have been exposed to an overall denial. And so what we did is a little bit of an acceleration of that, but I would not characterize it as pulling orders, if you will, from Q2 and shipments from Q2 into Q1. What we have been doing and what we have been seeing truly is great on our side in terms of our systems and our processes are working. We are really pleased. We accelerated what we were going to do next year and got it all in place by that go-live date, so very pleased with that. So what you are seeing in terms of our positioning on the prior authorization does not have anything to do with our readiness. It really has to do with some early variability that we are seeing within the MACs, and, again, Ryan, we are only three weeks into this entire process, so it is still new. Orders are flowing through; we are seeing what those denial and approval rates are, but we are seeing some differences between the MACs. And so there should not be variability between the MACs. If you are in one state, you are a Medicare patient, and you have the exact same criteria, you should not be denied based on where you live. And so we are seeing a little bit of variability. This is not uncommon because MACs are trying to make sure their interpretation is the same, how the data and information is rolling through on their side, training and education. So everything we are seeing, we do not think is anything other than administrative, and we are going to have an opportunity to talk to the MACs about this. We also do not see any of this being long standing. We believe we are going to be able to adjust, and with more experience in the prior authorization, we believe that our confidence in what that true process time is as well as those approval rates will increase. From a guidance standpoint, we did pull through what would be the Lymphotech revenue into there as well as some of our overall business delivery confidence, and then we are going to hold a little bit until we have a few more weeks—it is not going to be the full year—until we start to see what that prior auth process looks like, again, more from the MACs’ side than on our side. Elaine M. Birkemeyer: You did a great job. Ryan, I think the only other question you had was a little bit on sequencing and kind of Q2 and Q3. So, you know, we do continue to expect to see growth in Q2 over Q1 like we always have. I will say the Q2, Q3 this year will look a little bit different, I think. Together, those two quarters will be the same, but I would say we will see a little bit of a lighter step up in Q2 than some of the years past and probably a bigger step up in Q3 as it starts to normalize. Just as that went into effect, it created a little bit of a delay as that prior auth made a way for those responses and for this whole new process to get going. So I would say collectively, the two quarters are going to be the same, but there will be a little bit of a difference between the two. Ryan Benjamin Zimmerman: Okay. Very helpful. And then I am going to sneak one more, and I will get back in queue, because I probably have asked too many now. But just on the Lymphotech contribution, so I appreciate you guys calling that out. When do you expect that to be, you know, meaningful in the year, number one? So how should we think about when it really starts to deteriorate? And then two, you know, as we think about kind of what it can do over time, you know, how are you thinking about what Lymphotech can offer in terms of a contribution to the business as we look out further into 2027 and beyond? Thanks for taking the question. Sheri Louise Dodd: You bet. So on Lymphotech, the grants that we discussed—super excited about the LIGHT and the GUIDE grants—actually come through as revenue, which is why now it is in the overall guidance that we put forward. But prior to that, when we did our original guidance, we did not see any real growth happening from Lymphotech or any big contribution. So what you are seeing now is really a result of the grant coming through as revenue. Where we are most excited about Lymphotech is not going to materially impact this year. I mean, we did the acquisition on multiple fronts, but that ability and the R&D capabilities that Lymphotech brings will be a big part of how we are thinking about our go forward, not just as a Flexitouch next gen, but if you think about therapy in general. And when you see the details—as I described the details of that GUIDE—actually looking at garments that are using bioimpedance and delivering on personalized care, we are very excited about that. I just cannot share any timelines on what that R&D portfolio looks like right now, but we will be able to share that much more in the quarters to come as that gets further defined in our overall strategy for therapy delivery. On the diagnostic side, one of the big drivers we know for Lymphotech is actually getting the FDA approval for more of that diagnostic indication and then getting through the CPT codes that actually enable a payment for the diagnostic. So that is going to take a little bit of time, but on the here and now, we are super excited to have the federally funded government grants helping support the R&D efforts that we know are going to fit directly into our future portfolio. Sheri Louise Dodd: Hey, Ryan, the last thing I will say—you had a great question, but I kind of want to bookend it about, you know, the guidance and the flow through. Again, we said it is only three weeks in. We saw and we held on the NCD when it converted from the LCD to the NCD because we knew there were going to be changes in interpretation and time needed to get progressing before we felt super confident about what we could do to lean into that. And so everything we are doing now is really based on precedent and what we have done before, and it worked well. We are confident that these administrative pieces in the early days of the prior auth will flow through, and we are in the best position to handle it. So it is a real thing, but we do not sit here with a lot of concern. We just want more time to be able to fully articulate what that benefit will be. So the question you did not ask, but I wanted to bookend it based on the questions that you did ask. Ryan Benjamin Zimmerman: Thank you. Sheri Louise Dodd: Yep. Thanks. Operator: And our next question comes from Brandon Vazquez with William Blair. Brandon Vazquez: Congrats on a nice quarter. I hate to do this, but can we stick for a second on this concept of the pull-forward versus accelerated? I am not sure I fully understand it, and I want to make sure it is clear because I think it will be important to understand, one, the strength in the quarter and, two, the sequential changes from here. So maybe just spend a second specifically on the nuances between why a pull-forward is—or sorry—why accelerated sales is not necessarily a pull-forward of sales from Q2? Sheri Louise Dodd: We did the order acceleration for patient benefit, not to cover revenue. Typically, a pull-forward is because you are trying to cover revenue—you are trying to accelerate what you would have received in revenue in the next quarter and bring it into this quarter. When we talk about order acceleration, we really did this for the patient benefit. Those patients that had an order in process, if they did not clear the order by that April 13 date, it would have had to go all the way back and be resubmitted into a prior auth. So we had some orders—this is not a material amount—that were going to fall on that date of April 13. We put extra resources to help make sure that that order went through, but we were not taking an order from Q2 to book the revenue into Q1. Brandon Vazquez: Okay. Got it. That is clear. Thank you. Maybe a follow-up here, a little bit of a broader picture. A lot of commercial investments you guys have that have gone through 2025 and are ramping into this year. Maybe help characterize where some of these are in terms of maturing. Should the benefits still be growing? Are we reaching maturity for some of them, like the commercial team, things like that? So maybe just talk to us about what inning we are in for some of these more meaningful commercial investments. Thanks. Sheri Louise Dodd: Certainly. We are really pleased with where we sit right now in terms of our headcount, and as I stated in the prepared remarks, we are moving from capacity building and onboarding to true productivity. We are at a place where we have a fully resourced sales organization with that one-to-one ratio of our territory managers to our account specialists, so we feel in a really good place. As far as our CRM tool, our reps are continuing to use that tool, including workflow tools that really help support their activities—that is also going very well—and we expect that revenue per rep year-on-year growth to turn positive as we progress throughout the year. Net-net, we are certainly transitioning from build-and-bring-the-tool to actually having a fully resourced field organization that is stepping up and continues to step up. We are seeing that increase in overall referrals per rep and feel in a really good place with that. Operator: And as a reminder, that is star one if you would like to ask a question. We will go next to Adam Nader with Piper Sandler. Kyle Edward Winborne: Yes, hi, this is Kyle on for Adam. Thanks for taking the questions, and congrats on a good start to the year. Maybe I will ask on the EBITDA guidance. The Q1 result beat expectations and then you raised revenue guidance. So just trying to help understand—or maybe you could help us unpack—keeping the EBITDA guidance kind of where it is. I know you mentioned some of the acquisition costs and some of the one-time expenses there, and I noticed the uplift in OpEx spend for the year. Should we understand a lot of that as kind of part of this acquisition, or is it more of this robust R&D pipeline? Can you just help us a little bit there? Elaine M. Birkemeyer: In terms of that, I think there are probably two factors. One is a portion of the increase is due to Lymphotech. As Sheri mentioned, that is really related to the grant work we are doing, where it is really service-based work that is on the lower-margin side. Again, this is not the broader business model, but happens to be in our revenue this year. And so that is one of the reasons why. Then secondarily, as you said, we did have some in-period one-time costs in our OpEx as well. But I would say the biggest driver is really just the type of revenue lift that is coming from Lymphotech and the nature of that revenue. Kyle Edward Winborne: Okay. Got it. That is helpful. And then, congrats on the clearance for the next-gen AffloVest. I know that was exciting to get through. Just wanted to ask on that specifically. It sounds like you will be able to have this launched for this winter season as you discussed. How should we think about that in terms of the growth with that product—with the next-gen system with the advanced features? And then is there very much of that baked into the guidance for the full year, maybe just a little bit towards the end of the year? Is it kind of just an upside lever at this point? Sheri Louise Dodd: Yes, thanks for the question, and we are super excited to have gotten the FDA approval for this product and really excited to have these features that are going to help drive that patient experience. Just as a reminder, the reimbursement is exactly the same for our current generation as well as the next-generation AffloVest, so there is no additional reimbursement in place for that, and it definitely will be available. We are currently working with our DMEs on the timing to make sure that they wind down the inventory that they currently have on the Gen 5 and that training and education are all done in time for that respiratory season at the end of this year and into next year. From an overall guidance standpoint, our guidance assumes both lymphedema and airway clearance are going to grow in a similar overall range, with airway clearance growing slightly faster, and that is already built into our guide. We anticipated having the product this year and, again, with no incremental dollars out there on the reimbursement. It is simply a better patient experience, and we will continue to drive penetration and adoption within our DMEs. Operator: And moving next to Ben Haynor with Lake Street Capital. Benjamin Haynor: Good afternoon. Thanks for taking the questions. First off for me, wondering on the guidelines for lower limb—any more color you can share on what the initial reaction has been from clinicians? And then just maybe some commentary overall on mix of the lymphedema market—is 52% of cases lower limb? Any color you can provide for investors there would be helpful. Sheri Louise Dodd: Sure. On the guideline standpoint, we are really pleased to have the guidelines presented at AVS in February, and it is anticipated that those guidelines will be published this summer. As always, it is great to have the guidelines. In terms of the dissemination of the guidelines and training clinicians, that is something that our teams are going to be prepared for and help with the overall education. We are really pleased that the guidelines specifically called out pneumatic compression devices as being part of guideline-based care, which is differentiating from non-PCD products. So we are excited to have us positioned well with the overall evidence-based care guidelines, and we will roll that out and help communicate that. Elaine M. Birkemeyer: And then in terms of kind of mix of what is lower versus upper extremity, I think the best way to think about this is really what causes lymphedema for patients. We have said about a third of patients get lymphedema due to cancer, while the remainder are different other causes, with a big one being CVI. Cancer often can be upper body—if you think about breast cancer, head and neck cancer. There could still be some lower extremities with any type of pelvic cancer, but that is where you tend to see upper extremity, whereas the other drivers, typically CVI, happen to be lower extremities. So that probably gives you a little bit of a sense of it, but it really has to do with what is the underlying cause or driver, which is what determines where the area of lymphedema is in the body. Benjamin Haynor: That is definitely helpful. And would you expect additional clinical guidelines to be forthcoming for, you know, upper extremities or upper areas of the body? Sheri Louise Dodd: There certainly is, as Elaine said, that is largely in the oncology area. So there are definitely some white papers positioned in this area, and that could definitely transpire. I am not aware of anything specifically that is in the works on the upper extremity side, but we are really pleased at how well positioned and adopted pneumatic compression therapy is in upper extremity patients, particularly with therapists, and in oncology it is well understood, whereas lymphedema in the lower extremity can be almost a process of elimination. Certainly, with patients that have cancer, you know that you have removed a lymph node or you know that you have done something with the lymphatic system during a surgical procedure—different than lower extremity. So we tend to see that in the oncology space, and with lymphedema therapists there is more understanding of the lymphatic disruption that has happened with the specific oncology intervention. So guidelines could be helpful, but there is not as much of a disconnect as we have seen in the lower extremity. Benjamin Haynor: So numerically, you have not only more patients but less penetration, if you will, amongst that group. So it is kind of a double whammy theoretically for you guys. Sheri Louise Dodd: What you said is accurate. Elaine M. Birkemeyer: I think it is accurate that the lower extremity is the larger population. I think what Sheri is highlighting is that the guidelines are more meaningful for that population because there is not an obvious trigger to the lymphatic disruption, and so these guidelines really help it get discovered earlier. Versus upper extremity, there is an obvious trigger, and so patients and clinicians are more likely to watch out for it in the absence of guidelines. Benjamin Haynor: Okay. I think we are on the same page. Perfect. And then lastly for me, if I could sneak in one more. Is there any color you can provide on, you know, this new pharmaceutical out there for bronchiectasis? Has there been any impact that you find notable on the airway clearance side of things? Sheri Louise Dodd: Certainly. We have said and believe that the introduction of the pharmaceutical product specifically for patients with bronchiectasis is helping awareness for the broader category, so it has been a nice category lift. The airway clearance, though—and they call it the vicious vortex—is that you have issues of inflammation, and you have got mucus, and then you have infection. The pharmaceutical product helps support inflammation, but inflammation is just one part of this whole vicious vortex associated with bronchiectasis. There is still going to be inflammation, and with inflammation you are still going to have mucus, and with mucus you are still going to have opportunities for infection. So that need to actually clear the airway is still very relevant for this patient population. This is what we are hearing from our clinicians, and the positioning of the product as well is not to say it replaces airway clearance. It is actually alongside—could be used alongside and adjacent to it—but it is not one versus the other. We are happy that it is helping grow awareness and creating education around the disease of bronchiectasis, but we are not seeing this change the actual care pathway for these patients; it is just an option to be used alongside an airway clearance product. Benjamin Haynor: Makes sense. Thanks for taking the questions, and congrats on the quarter. Operator: Thank you. And 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: Thank you.