加载中...
共找到 16,484 条相关资讯
Americans are again leaning more heavily on credit cards to finance everyday life. The Federal Reserve's latest G.19 consumer credit report showed consumer credit increased at a seasonally adjusted annual rate of 5.8% in March, a significant acceleration from February's 2.1% pace.
Plus, Elon Musk is summoned to France to face criminal charges, and no-display health trackers are—no kidding—popular.
The financial sector has been weak while the rest of the market rallies — something that happened before the last big bear markets.
The 30Y Treasury yield is at a critical 5% resistance; a breakout could trigger sharply higher yields and major macro consequences. US fiscal dominance, persistent deficits, and waning global demand for Treasuries are structurally driving real yields higher.
It's the trade of the year and it's still going. I'm talking about AI of course, but more specifically, I mean memory and storage stocks.
A federal panel says the president didn't meet legal criteria to impose 10% levy.
AI-driven profits and S&P 500 growth fuel bullish sentiment, but I see signs of irrational exuberance and extreme market concentration. Semiconductor valuations and Japanese/Korean indices appear stretched, with parabolic rises disconnected from real economic risks and cyclicality.
A panel of federal judges blocked President Trump from imposing the tariff on most imports.
The stock market keeps reaching record highs, buoyed by corporate earnings, the ultimate indicator of underlying economic strength — and jobs will follow.
May 7th, 2026 - Market Domination Stocks paused after hitting record highs yesterday. Yahoo Finance's Markets and Data Editor breaks down the latest market moves you should be aware of.
Strong quarterly reports limit the damage as S&P pulls back from record.
French cybercrime authorities have escalated an investigation of Elon Musk and his social network X to a criminal probe. The investigation began in 2025 and focuses on alleged algorithmic manipulation by X to interfere in French politics, and the spread of AI deepfake content on the social network.
For years now, Wall Street pundits have been talking about the “AI trade.” But exactly what they're referring to isn't always clear.
Paul Tudor Jones said the AI boom could have another one or two years to run and 40% more upside.
‘The Big Money Show' analyzes artificial intelligence momentum and optimism over potential U.S.-Iran nuclear deal negotiations.
Operator: Hello, and welcome, everyone joining today's Americold Realty Trust First Quarter 2026 Earnings Call. [Operator Instructions] Please note this call is being recorded. It is now my pleasure to turn the meeting over to Rich Leland. Please go ahead. Rich Leland: Hello, and thank you for joining us today for Americold Realty Trust's First Quarter 2026 Earnings Conference Call. In addition to the press release distributed this morning, we have filed a supplemental financial package with additional detail on our results. These materials are available on the Investor Relations section of our website at www.americold.com. This morning's conference call is hosted by Americold's Chief Executive Officer, Rob Chambers, along with Chris Papa, our Chief Financial Officer. Management will make some prepared comments, after which we'll open up the call to your questions. Before we begin, let me remind you that management's remarks today may contain forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties that may cause actual results to differ materially from those anticipated. These forward-looking statements are based on current expectations, assumptions and beliefs as well as information available to us at this time and speak only as of the date they are made. Management undertakes no obligation to update publicly any of these statements in light of new information or future events. During this call, we will also discuss certain non-GAAP financial measures, including NOI, core EBITDA and net debt to pro forma core EBITDA and AFFO, among others. The full definition of these non-GAAP financial measures and reconciliations to the comparable GAAP financial measures are contained in the supplemental financial package available on the company's website. Please note that all warehouse financial results are in constant currency and reflects the Q1 2026 same-store pool unless otherwise noted. Now I'll turn the call over to Rob for his prepared remarks. Robert Chambers: Thank you, Rich, and thank you all for joining our first quarter 2026 earnings conference call. Before we begin, I would like to formally welcome Chris Papa to the team as our Chief Financial Officer. Chris started with us in February and brings more than two decades of experience, leading investment-grade rated and publicly traded REITs. Since joining the team, Chris has been fully engaged, meeting with leaders across the business, spending time with our investors and our customers and touring our facilities. He brings a unique mix of qualifications and experiences and I look forward to his many future contributions to drive our business forward. Turning to our first quarter financial results. We delivered AFFO of $0.29 per share above analyst consensus. Chris will review the full detail in just a few minutes, but I was pleased that all key metrics materialized in line or slightly better than our original guidance. I'm particularly encouraged that our physical occupancy was flat year-over-year, further supporting relief that inventories levels have largely stabilized. These trends have continued in April, and we believe that we should see a return to more normalized seasonal trends as we progress throughout the year. Our pricing metrics in the quarter also marginally overperformed expectations. Our commercial teams continue to lead with our value proposition, which we call the Americold Advantage, consisting of best-in-class service, technology solutions and a suite of services rather than simply competing on price as you see from others in our industry. Our customer churn rate remains low at 2.5%, further validating our view that service remains a top priority to our customers when considering their cold chain partner. During the quarter, we also successfully renewed 34% and of the year's fixed committed contracts that were either month-to-month are set to expire in 2026. This represents approximately $100 million of revenue and extends the weighted average duration of our future expirations. Importantly, we held our total rent and storage revenue from fixed committed contracts at 59%, very solid performance during a critical renewal period as customers continue to see the benefits of a fixed commitment structure. All of these metrics demonstrate our company-wide focus on commercial excellence as we navigate through the current market environment. Since stepping into the CEO role, I've been laser-focused on setting a strong foundation for future growth while ensuring that we deliver on our financial commitments. Despite a continued challenging macro environment, we've now delivered 3 straight quarters that either met or exceeded AFFO per share consensus. Beyond our financial performance, we also made significant progress this quarter on each of our 5 key strategic priorities. As a reminder, we launched these objectives late last year to strengthen the foundation of our organization and set us up for long-term success. They include delevering our balance sheet to maintain our investment-grade profile, actively managing our portfolio of real estate assets for maximum value, streamlining our operations and rightsizing our cost structure, identifying unique opportunities to drive occupancy growth across our network and selectively supporting our key customers and strategic partnerships. Perhaps the most foundational of these priorities are the strategic actions that we are taking to strengthen our balance sheet. Earlier this morning, we announced the formation of a new joint venture with EQT Partners, one of the largest purpose-driven real estate investors in the world. EQT is a sophisticated investor in the space as they own one of the largest cold storage providers in Europe. They will hold a 70% interest in the JV as part of their infrastructure portfolio with Americold contributing a seed pool of 12 properties across the U.S. worth over $1.3 billion. This represents a blended cap rate to the JV of approximately 7% for nearly $3,300 per pallet position. This is a significant premium to our public market valuation, which reflects the mission-critical nature of our assets. As part of the agreement, we will continue to operate the assets, providing continuity of service to our customers as well as providing ongoing asset management and development expertise to the JV. We anticipate closing the transaction in the third quarter at which point Americold will receive approximately $1.1 billion in proceeds, which we intend to use to pay down a portion of our outstanding debt. As many of you are aware, joint ventures are a common structure across the REIT industry, and I'm thrilled that EQT is a partner to help support our strategy. We expect to expand the platform in the future with additional development opportunities and we already have one exciting new project for consideration, which I will discuss in just a moment. As we look forward, our capital allocation priorities remain consistent, maintaining an investment-grade balance sheet, evaluating the portfolio for asset recycling opportunities and continuing our disciplined approach to new capital deployment. Our second priority is to actively manage our portfolio to address underperforming properties while pursuing the highest and best use of our geographically diverse network of real estate assets. During fourth quarter call, we indicated that we had identified 9 additional facilities to exit or idle in 2026. Two of these exits were completed in Q1. Both of these facilities were leased and we returned the keys to the owner at the end of the term after successfully shifting much of the customer inventory into our nearby facilities. These buildings will be torn down, removing over 62,000 pallet positions from the Atlanta market. Of the remaining facilities, the majority have been idled and are actively being marketed for sale. We'll continue to do our part to remove excess capacity from the industry, we continue to see smaller, less sophisticated operators remain under pressure. In the quarter, we've heard of several smaller operators and new market entrants either shutting their doors or struggling to meet their financial commitments. In many of those instances, we've been the beneficiary of volumes coming back to Americold, given our status as an industry leader. Beyond just exiting facilities, we are also pursuing attractive triple net leasing opportunities across the portfolio. During Q1, we identified one of these opportunities and purchased an existing leased facility at well below market value and subsequently entered into a 15-year triple net lease with a new tenant to fully occupy the space. By eliminating the rent expense and acquiring the property at a discount, we are able to achieve an approximate 10% return on investment. We also signed several other new deals in the quarter, and have increased our annualized leasing revenue by over $4 million or about 7%, which you can see reflected on Page 24 of the financial supplement. These are all great examples of the disciplined process we are taking to creatively ensure we are receiving the best value possible from our real estate assets. Our third priority is to rightsize our cost structure and drive efficiencies across our operation. Late last year, we identified $30 million in potential savings within indirect labor and SG&A, and I'm pleased to report that all initiatives were completed in Q1 as expected. We are exploring additional cost actions, and Chris will discuss the details in a moment. While we are taking cost out of the business, we are being extremely cautious to ensure that we retain the high level of customer service that Americold is known for in the industry. This quarter, I'm pleased to announce that our Fort Worth railhead site received the Warehouse of the Year award from Kraft Heinz. This award was measured by performance KPIs, like turn times, inventory accuracy, fill rates and others. It is a great example of our relentless pursuit of efficiency and high-quality service resulting in meaningful value to our customers. Congratulations to our team in Fort Worth. Our fourth priority is driving organic growth by leveraging our operational expertise, scale and mission-critical infrastructure in adjacent and underpenetrated sectors. Late last year, we announced our initial win with On the Run in South Australia, one of the nation's most well-known convenience and petrol providers. And in February, we announced the expansion of our relationship to support their national network in Australia. As a reminder, we are providing tri-temperature warehousing services to replenish every product in the store and have expanded our coverage to 600 of their locations. Additionally, I am very pleased that we recently renewed our contract with KFC in Australia for an additional 10 years. Americold has been working with KFC stores for the last 30 years, and we will continue to support their restaurant network of approximately 500 stores on the East Coast of Australia for the next decade, providing tri-temperature warehousing and distributing all of their food and nonfood materials. Additionally, as part of this extension, we are implementing a technology solution that will generate restaurant-level sales forecast recommend replenishment orders and proactively optimize inventory positioning across the network. This technology will serve as the backbone of our store support solutions and is a great example of a Americold's differentiated offering and the value we can provide to our QSR multiunit customers. In North America, we successfully closed on a handful of new pet food and floral deals this quarter, expanding our presence in nonfood categories. Additionally, our initial outreach into pharmaceutical space resulted in a new storage commitment for probiotic products. While these floral pet food and pharma deals will not be material to our results this year, they remain a great example of our ability to capture business in multiple new markets, while the food industry remains under pressure. One area that we're particularly excited about is our e-commerce business. which has been growing at a double-digit rate. We're currently onboarding 3 new accounts and shipped over 1 million package last year. We've expanded our capabilities to 5 sites across the country and have the ability to cover 99.5% of the U.S. population in 2 days or less. Similar to our retail and QSR customers, e-commerce is operationally intensive which gives us an advantage in pursuing new business given our experience in the area and the strength of the Americold operating system. On to our fifth priority. From a development perspective, our expansions in Sydney, Australia and Christchurch, New Zealand were both delivered on time and on budget during the quarter. Both expansions are dedicated to large grocery retailers and add critical capacity to both markets where our existing facilities are nearly full. These facilities are great examples of the opportunity to strategically invest in markets that have not seen the level of speculative activity that has occurred in the U.S. Finally, as I mentioned earlier, one of the important benefits of our new partnership with EQT is the ability to pursue new development opportunities through the joint venture. While we have significantly narrowed our development pipeline and refined our internal requirements for capital allocation, there are certain customer-driven projects where it makes sense to support our key relationships. A great example of this is a new customer dedicated project that we're kicking off with the McCain Foods and [indiscernible]. McCain is a top 5 customer for Americold with a nearly 35-year relationship. We have an existing plant advantage facility that is located adjacent to their manufacturing plant [indiscernible] they want to consolidate portions of their cold storage network with an additional 56,000 pallet positions at the site. The project is backed by a 20-year fixed commitment agreement from McCain and given the attractive profile of the project, we believe that this is a type of project that could fit well in the joint venture. This is truly a win-win transaction for all the parties involved and we're honored that McCain chose us for this opportunity, and we look forward to servicing them for many more years to come. This win also highlights the importance of having a diverse network at every node in the supply chain. Customers evaluate their future networks, we continue to see large food manufacturers looking to consolidate significant piles of inventory back closer to production. This is an area where Americold is a clear industry leader, and we're positioned to take advantage of this trend, given our long-standing relationships and solutioning expertise. I am proud of our progress in each of our 5 key strategic priorities this quarter with the joint venture representing a meaningful step towards our long-term leverage goal. As we continue to relentlessly pursue cost savings, portfolio management and see our developments continue to come online, we're confident that our current playbook will build a strong foundation for future success. With that, I'll turn the call over to Chris to provide some additional details on our performance in the quarter. as well as some of the anticipated impacts to our financial statements for the new joint venture. Chris? Christopher Papa: Thanks, Rob, and good morning, everyone. I'm excited to participate this morning on my first call as Americold's Chief Financial Officer. As Rob mentioned, since joining, I have met with our leaders, investors, customers and towards several of our facilities. I have been impressed by the capability and discipline and service our teams bring every day. I believe the scale, diversity and mission critical nature of our assets, when coupled with our operational expertise, creates a compelling value proposition that is difficult to replicate. I look forward to helping unlock this value for our shareholders. One of my first priorities when I arrived was to fully engage in the strategic capital raise initiative that our management team and Board have been diligently pursuing for the past several months. I am very familiar with real estate joint ventures and the partnership with EQT not only strengthens Americold's balance sheet by funding debt repayment, improving liquidity and reducing future development risk, but also allows us to preserve operational control and cash flow from the assets. As Rob mentioned, we expect the transaction to close in the third quarter, at which point we will receive approximately $1.1 billion in cash proceeds. We plan to use these proceeds to repay all of our 2026, 2027 and a portion of our 2028 U.S. dollar-denominated debt maturities. We will continue to operate these warehouses and receive a management fee of approximately $15 million to $20 million each year. We will also receive 30% of the NOI generated by venture, which will be recorded on our P&L under the line item titled Income Loss from investments in partially owned entities. These 12 properties represent approximately $231 million in revenue and [ $103 million ] in NOI for fiscal 2025. At the end of Q1, our net debt to pro forma core EBITDA was 7.1x, and this transaction on a pro forma basis would reduce this by about 3/4 of a turn. This reflects significant progress toward our goal of 6x or less. We believe this joint venture, along with our portfolio optimization, ongoing cost actions and stabilizing industry fundamentals is a strong confidence in our ability to achieve this goal and we remain committed to maintaining our investment-grade profile. While we don't know the exact timing of when the transaction will close, we estimate that the JV could be a full year headwind to AFFO of approximately $0.10 per share or roughly $0.06 per share for the second half of 2026. The ultimate impact will depend on when the deal closes. Since the business is currently performing in line to slightly ahead of our expectations, we believe that we will be able to offset most, if not all, of this impact. We are proud of our ability to preserve our AFFO guide for the year and simultaneously executed a strategic transaction to reduce leverage and significantly improve our balance sheet position. We will provide more granular updates to our individual guidance components as the deal nears completion. Beyond the joint venture, I want to discuss our first quarter results, where we delivered AFFO per share of $0.29, exceeding analyst consensus. We were encouraged to see same-store physical occupancy stabilize with economic occupancy contracting slightly less than anticipated. While we are not updating our full year occupancy and pricing assumptions, this is certainly encouraging performance. Outside of the U.S., we were pleased to see throughput in both Europe and Asia Pacific increased from the prior year and Europe's physical occupancy increased by over 800 basis points in the quarter. This is very strong performance and reflects the positive impact of the new business that was won by the international team over the past couple of quarters. Our Q1 warehouse NOI decreased 4.5% as expected, driven by the ongoing pricing pressure in the storage market and lower throughput and as well as a modest $2 million headwind from energy costs this quarter. As a reminder, almost all of our customer contracts have the ability to pass through abnormal cost increases. In addition to the power surcharge mechanism, we also lock in power rates in deregulated states, which represents about 25% of our portfolio. We have pursued energy-saving best practices for many years and we are also leveraging AI to strategically pull power from the grid during nonpeak outers. As a reminder, power expense is only about 6% of our same-store warehouse costs and we plan to leverage all available mitigation strategies to continue managing these costs closely and minimize future P&L impacts. As Rob mentioned, one of our key priorities for the year is to optimize our cost structure. We were pleased to see core SG&A for the quarter came in relatively flat year-over-year, absent the impact of certain accruals that can fluctuate in Q1 and and served to offset the typical wage rate inflation across the business. Late last year, we identified $30 million in savings between both indirect labor and SG&A. We are pleased to report that these were fully executed and we reduced indirectly by over 400 positions in Q1. Additionally, we recently commenced the second phase of this project to identify further cost savings opportunities in other parts of our business as well as to explore ways to enhance efficiency within our organizational structure. Our goal is not only to reduce expenses but also to optimize how our teams operate and collaborate across the company. I look forward to sharing the outcome of this broader analysis with you on next quarter's call. Additionally, as Rob mentioned earlier, we have made great progress with our portfolio management initiative, which is another one of our 5 key priorities for the year. As a reminder, when a site has no customers and minimal operating costs or otherwise meets the held-for-sale accounting criteria. We moved their expenses to transactions, strategic initiatives and other costs on our P&L. You can see on Page 22 of the supplement that we have included additional detail regarding these costs, which have decreased substantially versus the prior year. we exit sites, we are often able to terminate the lease or find an interested buyer in a fairly short period of time. Proceeds from the sale of our own properties will assist with delevering our balance sheet. Additionally, since I joined the company, we have asked the team to do a review of our expansion and development projects to reassess our assumptions around the timing of stabilization dates, cash flows and expected yields given the duration of the current macro environment. While certain of these projects have been impacted more than others, many of them have, in some way, felt the effects of the soft market conditions that are impacting our industry. We will update you on the results of this review in the coming quarters. In the short time I have been with Americold, I have been impressed by the team's focus on delivering the strategic priorities for the year. I believe these priorities are the best blueprint to building a strong foundation for the future and that this team can bring that vision to life. I'd rather be part of such a talented group of people and look forward to leveraging my expertise to further unlock this company's potential. Now I would like to turn the call back over to Rob for some closing comments. Rob? Robert Chambers: Thanks, Chris. I'm very pleased with our results this quarter and remain confident in the long-term direction of our business. In my discussions with customers over the past several months, they remain cautious with their outlook for the year. However, they are increasingly mentioning investments in innovation as well as increased marketing and promotional spend, all with a focus on consumer value. These actions are intended to help drive organic volume growth. And in fact, we've seen this reflected in their earnings releases over the past several months with several customers regarding sales growth in the first quarter of the year. I hope to see this continue to gain traction as we navigate through the balance of the year. As I've mentioned in the past, this is not a team that is standing still and waiting for a rebound in demand. I'm very proud of the significant progress that we are making across all 5 of our key priorities while also delivering on our financial commitments. The formation of the joint venture is a significant accomplishment, strengthening the balance sheet, illuminating the disconnect between public and private markets and supporting future development. It is also a testament to this team and this organization's ability to execute as well as the Board's focus on unlocking shareholder value. With disciplined capital allocation, a sharpened focus on operational excellence and unwavering dedication to customer service, I believe we are well equipped to create meaningful growth over time. I want to thank our associates around the world for their continued hard work and our shareholders for their ongoing trust and support. Operator, we're now ready to open the call for questions. Operator: [Operator Instructions] We will take our first question from Michael Griffin with Evercore ISI. Michael Griffin: I wondered if you could give a little bit more color on the facilities being contributed to the JV? Where they are along the cold chain, the age, customer mix, kind of anything that might have stood out for these assets? And then would you say it's indicative of the portfolio quality overall of that, call it, [ 7 ] transaction cap rate? And then lastly, I know you mentioned the cap rate in the prepared remarks, how should we think about this deal on sort of the EV to EBITDA multiple basis? Robert Chambers: Thanks, Michael. So let me start with the portfolio that we're contributing to the joint venture. I think what you said is right. I mean the facilities are a good representation of the broader North American portfolio. So what we see would be facilities that are geographically diverse, facilities that are across each of the node in the supply chain along with some conventional and automation as well. So, we think it's a very good mix of facilities. It's one that EQT was certainly excited about being part of a joint venture. And from our perspective, we're also very excited that we'll continue to have a meaningful ownership stake in those facilities and be able to operate them and provide the level of continuity to our customers that they would expect. So, it's a significant accomplishment out of the gate here, and we're very excited about it. Operator: We'll go to our next question, Brendan Lynch with Barclays. Brendan Lynch: Maybe just on the physical occupancy growth that you saw in the quarter, can you disaggregate that between consolidation to fewer facilities versus just the industry improving? Robert Chambers: Yes. There's really essentially nominal to no impact on the consolidation of the facilities because we adjusted that same-store pool at the end of last year. So the impact of physical occupancy in Q1 was a result of of industry stabilization, along with a combination of new business wins coming in, some market share gains that we've seen as we've seen some of the the volumes that have previously been with some of the small providers come back in. So I think when you look at the overall impact of the the physical occupancy being flat to slightly up, it was driven by industry fundamentals, new business wins and some market share gains. Operator: We will come next to Viktor Fediv with Scotiabank. Viktor Fediv: I have a follow-up on this JV financials. So it looks like EQT will be retaining 70% and you will be getting $1.1 billion in cash proceeds, which kind of implies $1.6 billion of total value? Just trying to understand puts and takes here and what is involved. Christopher Papa: Well, I mean, the total transaction size is $1.3 billion. given the debt we're putting on the project and our equity contributed to the venture, we think we'll be able to pull out about $1.1 billion of proceeds from the venture. Operator: And we'll take our next question from Craig Mailman with Citi. Craig Mailman: I think Bert had asked earlier about the EBITDA multiple, I don't think I heard an answer on that. Does the 7 cap equate the [indiscernible] a 9% to 10% EBITDA multiple? Maybe give us some guide rails there. Then, Chris, to your commentary that you guys are putting debt in the JVs, is that [ 0.75 ] term reduction on debt to EBITDA? Is that on a look-through basis, like if you assume the JV debt, do you still get that 3 quarters of return reduction pro forma that? Christopher Papa: Sure. So I'll answer that -- the second question first. Yes, the 3 quarters in turn we talked about includes picking up our share of the debt from the JV. So we'd be picking up our [indiscernible] portion of that debt as well as the EBITDA. I'll let Scott address the EV to EBITDA question. Scott Henderson: Craig, if you think about the math around this point, $1.3 billion enterprise value for the JV, an NOI strip before fee of roughly $110 million. And then with a fee of around $17 million to get to a net NOI strip of below 90s and that gets you to the 7% cap rate that we quoted. So hopefully, those parts help back to answer the question on a yield basis, which you convert to a multiple. And when you think about the fee strip in this business, given the operational intensive nature and the amount of work that goes into, it looks a little bit different than I'd say your traditional industrial business. Christopher Papa: And Craig, I'd add that if you look at it on an EV to EBITDA basis, is this valuation implies a couple of hundred basis point increase over where the stock is currently tripping. Operator: And we'll go next to Michael Goldsmith with UBS. Michael Goldsmith: It seems like you were active on the renewals of fixed committed contracts during the quarter. So maybe can you talk a little bit about the negotiations with your tenants, what was the feedback from them? What was their ability to absorb pricing or they're asking for concessions? Just trying to get a sense of what you're hearing from your content base and how that ties to your overall pricing power? Robert Chambers: Yes. Thanks, Michael. I mean, I think the work that we did in the quarter on fixed commitments is one of the -- that's certainly one of the highlights of the quarter. As we mentioned in our prepared remarks, we were able to work through 34% of all VIX commitment contracts that were month-to-month or had expirations in 2026. We said now for several quarters, just as a reminder that these contracts tend to be relatively ratable throughout the year, meaning there's not a whole lot of outsized renewals in one quarter or another. So that 34% represents great progress in a single quarter. We continue to be very pleased by the conversations that we're having that we think are extremely constructive given the fact that our customers recognize the value of having that fixed commitment structure. So despite the fact that we recognize and acknowledge that there's more capacity in the industry than there has been historically. We've been able to maintain that 59% of our total rent and storage revenue being derived from these fixed commitment contracts. So I think the metrics speak for themselves. It's playing out probably slightly better than what we had planned in our guide. You saw that our economic occupancy was down slightly while our physical occupancy was flat. That's exactly what we assumed would have in a slight contraction, but it is less of a decrease in terms of economic occupancy than what we had planned. So very, very encouraged to see that. On the pricing side of the equation, our pricing metrics are marginally better than what we had guided to. Storage on a constant currency basis was down slightly year-over-year. that does tend to be -- the storage side of the business does tend to be the side of the business that gets discounted a little bit more than the handling just given the margin profile. So we're making sure we're being thoughtful. We're making sure we're market competitive on the pricing and that we're responding to the current environment. But at the same time, we continue to lead with our value proposition. And I think as this environment has played out longer. Really what customers are seeing is that customer service is the most important decision-making factor and who they partner with and price is important. But if your product isn't showing up on time and in full and if you can't invest in your customer base and you can't grow with them and you don't have the technology solutions and your only value proposition is price, you eventually return back to the industry leaders. And so that's exactly what we're seeing constructive conversation and I think great progress this quarter. Operator: We'll take our next question from Michael Carroll with RBC Capital Markets. Michael Carroll: Rob, is there a specific mandate for the new joint venture as and does Cold need to contribute future investments or development opportunities in the JV? Or does this need to be agreed upon by both parties to be able to do it similar to like the McCain development that you talked about in your prepared remarks? Robert Chambers: Yes. Yes. Look, I mean, we want to scale this venture. And so we're -- we'll be working to provide first looks of development opportunities to the joint venture. There's no mandate that if the venture passes on those that we can't do those on our own accord. So we'll be providing some first looks related to development projects to the venture. We think that's the best path forward given the opportunity to do some off-balance sheet development to ensure that it doesn't -- there's less volatility to earnings there. Outside of that, no mandate to contribute other stabilized assets. So, this is going to be a great partnership. We think we're confident we found the right partner in EQT given the level of sophistication in the space and the alignment of our mission and our values. So a big step for both parties. Operator: We'll take the next question from Nick Thillman, with Baird. Nicholas Thillman: Maybe you wanted to touch a little bit more on just the joint venture assets being contributed and the profile of them. As we think of it relative to your fixed commitment contracts, is it similar to that [ 60% ] of that revenue associated with those assets is similar in mix and then what the average duration of those contracts are on those assets being contributed? And then maybe secondly, just a point of clarification on the $110 million of NOI, does that include the handling and services NOI contribution as well? Robert Chambers: Yes. On the NOI, it does. It's both the storage and handling NOI. I'd say the portfolio is very representative of the broader Americold pool. So again, these sites are geographically diverse. There's some conventional, there's some automation, they are customer dedicated. They're a multi-tenant. They're fixed commitments, they are transactional agreements. So be thinking about it as very similar to the broader portfolio, the Americold wholly owned portfolio will look very similar pre and post and that's exactly what EQT was looking for, and that's exactly what we felt like was the right path to see the JV. Operator: And we'll take question from Mike Mueller with JPMorgan. Michael Mueller: I think this is a kind of a dumb clarification question. But the release says that EQT isn't baked into guidance. But Chris, we were talking about the transaction in your comments, you mentioned that you're kind of proud to maintain guidance, while this is kind of going on simultaneously. So I guess, is it in guidance? Or is it not guidance? Robert Chambers: Yes. Let me start and then Chris can jump in. I mean -- so look, I mean, we're sitting here on May 7. And as we look at the trajectory of the business and we look at the fact that the metrics were coming in line to above our expectations, absent the joint venture, we would be thinking about the business trending towards the higher end of our original guide. And now that we have this joint venture that is still subject to traditional closing conditions, and we don't have the final date of when the JV will be -- will close. When we look at it on a pro forma basis, what we can sit here today and tell you is when we factor in the closing of a joint venture assumed during the third quarter that we'll be able to absorb the impact of that JV and maintain our original guide. So as we get a little bit closer to the closing of the JV, we'll be able to provide more specific details around each one of the guidance parameters. But the punchline here is we're maintaining our guide inclusive of the impacts of the joint venture in 2026. Christopher Papa: And then just to be more specific about the guidance, the original guidance that we had given obviously did not include the JV, but it also did not include any incremental cost optimization initiatives. So those two things going, obviously in different directions, coupled with, as Rob said, our business performing slightly ahead of expectations, gave us confidence to keep it in that [ $120 million to $130 million ] range from an AFFO perspective. But we'll come back with more details in the second quarter as we get as the JV and the cost optimization materialize. Operator: And we'll go next to Alexander Goldfarb with Piper. Unknown Analyst: So question, as you guys were doing the strategic review, and I'm guessing that it's not done, how does exiting regions, there's discussion in the press that perhaps maybe certain regions overseas to exit or larger outright sales? Just trying to see, is the JV -- is this -- you're done? I mean you have 2 activists as part of the company. So is this JV done or there are other potential strategic initiatives and work that could include exiting, whether it's regions or larger parts, larger portfolios? Robert Chambers: Yes. Let me maybe just take a step back, so I can answer the question holistically. I mean, since I took the role in September, one of my first priorities was to sit down with the Board and really develop what our key strategic initiatives we're going to be for 2026. And top of the list was strengthening the foundation and delevering the balance sheet. And so knowing that, that was a priority, we started a process, right, then there to evaluate multiple different options to get there. And we've looked at different geographies, portfolio management, this joint venture opportunity. And during that review process, it was very clear that there was tremendous interest from institutional investors, not just in this asset class, but also to have a continuing partnership with Americold. And so as we started down the path of evaluating this option specifically, we felt like it met all of our objectives. This option obviously strengthens our balance sheet, it gives us the opportunity to pay down debt materially and then lower leverage. This transaction highlights the lower gap between public and private valuations in the space. Again, these facilities are being contributed $3,300 per pallet position. We trade at $1,500 per pallet position right now. So a significant premium. This supports our ability to do development with our key strategic comers in a customer-dedicated manner and it allows us to continue to have a meaningful ownership percentage in these facilities and provide the level of continuity to our customers that we expect and do it all with a partner that we really feel has the right level of sophistication, experience and is aligned from a values perspective. So this is to the right deal. We're confident in that. We certainly are always open to options that create shareholder value. I think we're doing within our priority list. Several other key initiatives, the portfolio optimization and management with the 19 sites over the last 2 years that we're idling and/or exiting as having a meaningful impact on our results. The great things that we're doing to grow this business organically, you can see in our occupancy and our pricing. So I think this puts us on a trajectory to get to our long-term leverage goal, but we're always open to continue to evaluate opportunities on a go-forward basis. Christopher Papa: And Alex, if you think about it from a balance sheet perspective, we talked about in our prepared remarks that this transaction, we expect to have an impact of reducing our debt to EBITDA of about 3/4 of return. It's a meaningful contribution toward our deleveraging but it also allows us to start thinking about things on a go-forward basis on a more targeted basis, continuing to do more targeted capital recycling plus the cost optimization initiatives that are underway. We'll continue to also move the needle on deleveraging down toward that 6x or less target. So I think we could be more surgical on a go-forward basis, but certainly, we're considering options as we continue to manage the business. Operator: And we'll take a follow-up question from Mike Mueller with JPMorgan. Michael Mueller: Real quick on a prior question about JVs, the JV and development. I think you said we're going to provide some first looks to the JV. So is it -- you have the choice to provide a first look on development to the JV? Or you kind of have to do all U.S. development first looks to the JV? Scott Henderson: Mike, it's Scott. Yes, we've given EQT, our exclusive partner to look at those joint ventures and then there's optionality. After that, if that does not go into the joint venture, but hopefully, that answers the question. And it's targeted to North America, Mike, and we'll be focusing on some potential expansion opportunities in the pool as well as things like build-to-suits like the project, Rob highlighted on the call. Robert Chambers: And I think as we wrap up here, I just want to highlight again, as we move forward and sitting here today in May, we've got very clear priorities. This team is now a track record of demonstrating our ability on executing against those priorities and delivering on our guide and our financial commitments. And so I thank all of our associates for helping us support that and delivering every day and look forward to continuing that track record. Operator: And that does bring us to the end of our question-and-answer session. We'd like to thank everybody for joining today's call. We appreciate your time and participation. You may now disconnect.
Operator: Thank you for standing by. My name is Danica, and I will be your conference operator today. At this time I would like to welcome everyone to the Insmed First Quarter 2026 Financial Results and Conference Call. [Operator Instructions] I would now like to turn the call over to Bryan Dunn, Head of Investor Relations. Please go ahead. Bryan Dunn: Thank you, Danica. Good day, everyone, everyone, and welcome to today's conference call to discuss Insmed's First Quarter 2026 Financial Results and provide an update on our business. Before we begin, please note that today's call will include forward-looking statements. These statements represent our judgment as of today and inherently involve risks and uncertainties that may cause actual results to differ materially from the projections discussed. Please refer to our filings with the Securities and Exchange Commission for more information. The information we will discuss on today's call is meant for the benefit of the investment community. It is not intended for promotional purposes, and it is not sufficient for prescribing decisions. Today's call will feature prepared comments by Will Lewis, Chair and Chief Executive Officer; and Sara Bonstein, Chief Financial Officer. After their comments, they will be joined by Martina Flammer, Chief Medical Officer, for the Q&A session. I will now turn the call over to Will. William Lewis: Thank you, Bryan. Good morning, everyone, and thank you for joining for joining us. Insmed's business is off to a strong start in 2026. Commercially, BRINSUPRI delivered strong sequential growth and continues to outpace all past specialty respiratory launch analogs while establishing a new playbook for excellence for a commercial launch. And once again, ARIKAYCE grew year-over-year, which is especially impressive given it is in its eighth year since launch. Both products remain firmly on track to achieve their respective revenue guidance for the year. Clinically, we made meaningful progress, highlighted by clearly positive and potentially practice-changing results for ARIKAYCE in our Phase IIIb ENCORE study. Additionally, we continue to make steady progress on TPIP's Phase III development with PH-ILD and PAH trials now underway and trial designs for our PPF and IPF studies nearing finalization. As we look ahead, we will continue to focus on maximizing the impact of BRINSUPRI in patients with a current bronchiectasis diagnosis while also working to increase awareness and proper diagnosis of patients with COPD and asthma who may also be bronchiectatic. In parallel, we are moving quickly to submit the ENCORE data to regulatory authorities in the U.S. and Japan, which we believe have the potential to support an expanded label for ARIKAYCE in the first half of 2027 and a $1 billion-plus peak sales opportunity for that brand. TPIP will remain a central priority for us as well as we execute on our 4 Phase III trials while also generating long-term data from our Phase II open-label extension studies. Supplementing all these initiatives is our early-stage pipeline, which we expect will continue to produce an average of 1 to 2 INDs per year. We also intend to supplement our pipeline with select business development efforts. Financially, we are well resourced to execute on all of these initiatives as we advance toward cash flow positivity next year. Let's turn now to discuss BRINSUPRI's progress in more detail. BRINSUPRI's launch continues to exceed our expectations, delivering 44% sequential growth off of an already strong prior quarter baseline. We were particularly pleased by the strength of this growth because it occurred in the calendar first quarter, which tends to demonstrate slower growth for medicines given plan changes, out-of-pocket cost resets and reauthorization dynamics. In fact, when you look at the basket of strong respiratory launches that we have cited in the past, sequential growth for those products slowed significantly during their first calendar Q1, delivering only around 9% sequential growth on average. Of course, those past analog launches were impacted by the Medicare coverage gap, which was eliminated beginning in 2025 under the Inflation Reduction Act. But if you expand this analog analysis to include comparably strong launches since the coverage gap was removed, you've noticed that BRINSUPRI's sequential growth rate is actually higher than those of WINREVAIR and Rezdiffra, which in the first calendar Q1 of their respective launches generated between 30% and 40% sequential growth versus Q4. Notably, we did not raise the price of BRINSUPRI at the start of 2026, and the impact from inventory stocking this quarter was negligible. We are extremely pleased with how BRINSUPRI has performed to date and remain confident in our 2026 revenue guidance of at least $1 billion. If we achieve this level of revenue generation, it would place BRINSUPRI among the most impressive launches in our industry's history. We believe that we are setting a new standard for drug launches with BRINSUPRI, which is why we intend to open our playbook and share a lot of detail with you today regarding the metrics we are tracking to gauge this launch's success. Sharing these details is meant to simultaneously help you better understand the components driving BRINSUPRI's performance so far and also why we are so enthusiastic about the future of this launch. As we walk through our dashboard with you, we will highlight the following key observations. BRINSUPRI has healthy organic demand, and we believe we have treated nearly all patients who are ready and waiting for treatment at the time of approval. Payer access is excellent. We have supported a very high percentage of patients through our inLighten patient support program, reflecting strong patient engagement with their treatment. Time to prescription refill rates are ahead of industry benchmarks. Treatment continuation rates remain high. We are broadening and deepening our prescriber base with a lot more opportunity to continue to drive that forward. And our education and outreach efforts, which have already yielded positive results have really just begun to accelerate. Let's dig deeper on each of these items and start with a closer look at patient demand. We believe BRINSUPRI's organic demand is steadily growing. To understand what we mean by organic demand, some context is helpful. We expanded our sales force 10 months before approval so they could promote ARIKAYCE and build disease awareness for bronchiectasis. This effort drove significant interest and helped to build a base of patients who are ready and waiting for a new treatment option at the time of BRINSUPRI's launch. This included nearly 70,000 self-identified patients who registered on our website before approval. The vast majority of whom were being managed at larger institutions, which were involved in our clinical trials and very familiar with BRINSUPRI. Some of those physicians even shared with us that they were maintaining lists of patients for whom they wanted to prescribe BRINSUPRI when it was approved. By proactively doing this early work, we were able to successfully accelerate new patient demand into the early part of the launch. As we noted at the time we launched, larger institutions typically take a few weeks to a couple of months to add new drugs to their electronic medical record systems before prescriptions can be written. As a result, most of these ready and waiting patients receive prescriptions in Q4 and to a lesser extent, in Q1. We estimate approximately 3,500 such patients were embedded in the 9,000 new patient starts we saw in Q4, which is supported by comparing the elevated Q4 prescribing volumes at these institutions to the steady pace we have seen in recent months. Similarly, in Q1, we estimate that about 1,500 of the roughly 7,800 new patients who started treatment in the quarter were part of this ready and waiting patient group. As we enter the second quarter, we believe this surge from ready and waiting patients is now complete. What remains is organic demand, and that demand is growing. In fact, we believe we have seen a steady increase in organic demand in each quarter since we launched as illustrated by the dark blue boxes on this slide. While total new patient additions in Q1 came in lower than Q4, this was due to a significant influx of ready and waiting patients in Q4. Further, the growth that we have seen in the latter part of Q1 gives us confidence that BRINSUPRI's organic growth is really just getting started. The second quarter will be the first period that we believe will not benefit from a component of ready and waiting demand, but we expect organic new patient demand to continue to grow sequentially from Q2 through the rest of the year. Now before we move on to discuss other launch metrics, I want to add a word about Symphony script data. We have noticed that Symphony TRx data has historically been valuable as a directional predictor for total dispenses for BRINSUPRI. Having said that, Symphony NRx data has not been as helpful in predicting new patient starts, and we don't know if either measure will be helpful in the future, but it's worth calling out that Symphony TRx has been proportionately well aligned with reality in past periods. Another crucial component of any healthy launch is a favorable payer access environment. Initially, in a world without established policies, payer approval rates tend to be higher. Our strategy at launch was to focus physician prescribing and payer access on patients with 2 or more exacerbations where payer approval would be most favorable. As a result of this strategy, I'm pleased to say that the initial expected high rate of payer approval has continued. In fact, the approval rate for patients processed through our specialty pharmacies has been impressive at nearly 90% since launch. Also encouragingly, the time required for payer approval, while inherently variable has been less than a week for the majority of patients so far, which is well ahead of our internal benchmarks. Overall, we are extremely pleased by what we have seen in terms of patient access to date. These strong approval rates are aligned with our ambition to make access to BRINSUPRI as frictionless as possible for patients. Now just as important as getting patients access to treatment is supporting their successful use of the medicine. We are pleased that more than 80% of patients on BRINSUPRI have signed up for our inLighten patient support program, which is designed to help patients navigate the practical aspects of initiating and managing treatment with a specialty therapy. Separately, we continue to hear feedback from patients that they are feeling better on BRINSUPRI. This positive patient experience, coupled with BRINSUPRI's favorable safety profile are together driving the very high compliance rates and relatively low discontinuation rates that we have observed thus far. To be more specific on each of these measures, a reasonable industry benchmark for compliance is that a patient would refill a 30-day prescription around every 37 days. This accounts for practical logistics like remembering to take each dose on schedule and order the next prescription as well as the time it takes for the medicine to be delivered. So far, we have seen BRINSUPRI prescriptions refilled at a much faster pace, nearly every 30 days, which we believe speaks to patients' positive experience with the treatment, motivating them to continue therapy with minimal interruption. Turning to continuation rates. As with any treatment, there will always be patients who choose to stop taking their medicine. Daily oral tablets generally have higher continuation rates in the real world than many other classes of medicine. Well-tolerated oral medicines like generic statins, see around 70% of patients remaining on therapy at 6 months. So far, BRINSUPRI's continuation rate is tracking slightly above these analogs. Overall, we believe this high continuation rate adds evidence that patient experience with BRINSUPRI is largely positive. Our area of greatest focus is continuing to deepen and broaden BRINSUPRI prescribing. In terms of broadening the number of physicians who have written a prescription for BRINSUPRI, we feel we are on a very strong trajectory. As of the end of the first quarter, our cumulative total writers topped 5,000, which accounts for more than 1/4 of all pulmonologists in the U.S. There remain large institutions who still have not written their first prescription for BRINSUPRI, so there is plenty of opportunity to expand that prescriber base. We also see significant opportunity to increase prescribing depth. At the end of December, approximately 1,800 physicians had prescribed BRINSUPRI to only one patient. By the first quarter of 2026, roughly half of those physicians have prescribed it to at least one additional patient. We believe this trend represents our greatest growth opportunity, which will be reinforced by the consistently positive feedback we hear from patients and physicians about their experience with the medicine. As awareness continues to build and patients share their experiences during office visits, we expect physicians will grow more comfortable prescribing BRINSUPRI, naturally accelerating its use. In addition, we are encouraged by the fact that more than 20% of BRINSUPRI's prescribers have written it for at least 5 patients. And importantly, this group goes well beyond just physicians in large academic centers. This represents both the progress we have made on deepening prescribing and also the opportunity that is still in front of us to potentially expand prescribing among the remaining 80%. We anticipate the dialogue within the treating community facilitated by gatherings like the American Thoracic Society Meeting, which kicks off later this month, could further encourage physicians to trial or expand their prescribing behaviors as news of positive patient experiences spreads. Collectively, we see expanded prescribing from existing trialing physicians and broadened physician adoption as 2 positive trends, which, if extended, could enable even greater growth than is suggested by the current $1 billion-plus guidance we have reiterated today. We are also accelerating our work to increase awareness and proper diagnosis of bronchiectasis through appropriate education. Just yesterday, we announced the launch of a new diagnosis-focused disease education campaign called Suspect BE. This campaign features Emmy Award-winning TV host, Ty Pennington, and draws on his personal experience of caring for his mother who has lived with bronchiectasis for more than 40 years, including an extended period of time before she received the appropriate diagnosis. We also have plans for direct health care provider education and medical congress presence later this year to further support these efforts. From our point of view, we believe now is the time to elevate disease awareness to enable earlier and more accurate diagnosis of bronchiectasis. I'd also like to highlight the recently announced initiative from the American Thoracic Society aimed at addressing the underdiagnosis of bronchiectasis in the U.S. This ATS initiative will analyze electronic health records across 7 large academic medical systems to identify potential patterns of misdiagnosis. Based on these insights, the ATS initiative intends to pilot scalable solutions such as electronic health record-based prompts that automatically flag potential signs of bronchiectasis and continuing medical education modules for physicians to help improve the detection of bronchiectasis. Importantly, it also intends to determine how many patients within these medical systems are currently diagnosed with COPD or asthma and may also have undiagnosed bronchiectasis. We commend ATS for leading this effort to identify a potentially large and underserved population of COPD and asthma patients who may also have bronchiectasis, but have not been diagnosed. By improving recognition, these insights could drive better outcomes for current and future bronchiectasis patients by increasing the likelihood they will be appropriately diagnosed and gain access to care sooner. In summary, we see strong and growing organic demand. Payer access and patient compliance and continuation rates are exceeding expectations. We see further opportunity in broadening and deepening physician prescribing, while other groups like ATS are taking the initiative with new and significant efforts to raise awareness and improve diagnosis of bronchiectasis. Let me now shift to ARIKAYCE. Remarkably, ARIKAYCE continues to show year-over-year growth even now in its eighth year of launch, targeting only refractory NTM MAC patients. In March, we announced the clinical success of the Phase IIIb ENCORE trial in newly diagnosed NTM MAC patients, a far larger population than refractory. ARIKAYCE, in combination with a multidrug treatment regimen, delivered a statistically significant outcome on the patient-reported respiratory symptom score primary endpoint compared to the multidrug active control arm. This end point is the most important factor for U.S. regulators. The ARIKAYCE arm also demonstrated earlier, greater and more durable culture conversion throughout the study with statistically significant benefits at every prespecified time point, including at month 15 or 3 months off therapy, which is the most important factor for Japanese regulators. Importantly, the ENCORE data make a very compelling case for using ARIKAYCE earlier in the treatment paradigm for patients with an NTM MAC lung infection. As a reminder, in our Phase III CONVERT study in refractory NTM MAC, we observed the treatment with ARIKAYCE resulted in about 30% of patients clearing the bacteria from their sputum after 6 months on treatment. ENCORE showed us that if you treat earlier, you can convert well over 80% of patients to negative sputum cultures in that same period of time. And this conversion is likely to be durable. ARIKAYCE was also better tolerated in the earlier NTM MAC lung infection setting with much lower rates of discontinuation compared to the CONVERT study. Now that we have these data and a well-defined target product profile, we will be conducting market research to understand how the product might be perceived and used by the prescribing community, which will give us a clearer view of the opportunity. We are working to submit the ENCORE data to regulators in the U.S. and Japan in the second half of this year. If successful, these label updates could increase the addressable market for ARIKAYCE from around 30,000 patients today to more than 200,000 patients next year, potentially turning ARIKAYCE into a blockbuster brand with no new competition on the horizon of which we are aware. Let me now turn to TPIP. TPIP represents a very substantial late-stage opportunity where we are pursuing 4 Phase III trials with very meaningful addressable patient populations for each. We are very excited to announce that last month, we opened our first site in the Phase III PALM PAH study of TPIP. Based on the FDA's feedback, this study, if successful, will be the only registrational trial required for potential regulatory approval for the treatment of PAH. Additionally, data from our Phase IIb 24-month open-label extension study in PAH is now expected in the third quarter of this year and will include safety and certain efficacy measures through the first 12 months of the open-label period. As a reminder, this OLE gave investigators the option to continue to increase the dose of TPIP beyond the 640-microgram maximum dose allowed in the initial Phase IIb trial. During the OLE, we have not required or encouraged uptitration. That said, we are pleased to report that about 1/4 of the participants in the OLE have achieved doses that are higher than the 640 micrograms, and that 7 out of the 91 patients who entered the OLE have gone on to reach the new maximum dose of 1,280 micrograms. Given the absence of a placebo group in this open-label portion to which we can compare TPIP's effects, a good outcome for this update in our view would be to see that patients are able to sustain the best-in-class improvements in 6-minute walk, NT-proBNP and functional class measures that were demonstrated in the 16-week randomization portion of the trial over this much longer treatment period. For those who have increased their dosage since starting the OLE, we would want to potentially see some discernible improvement in those efficacy measures compared to what was shown in the randomized trial, along with a consistent safety profile with what we've seen in the Phase II trials. We will also be interested to see the impact of treatment with TPIP for the patients who are initially randomized to the placebo arm of the trial. We look forward to sharing these data once available. Moving now to our other 3 TPIP studies. In the ongoing Phase III PALM-ILD study, we are encouraged by the trial's progress with patients having been randomized in 7 different countries so far. We are also pleased to see that we are recruiting patients even in the U.S. despite competition from other marketed treprostinil products that could discourage physicians from enrolling patients into a placebo-controlled trial. We believe this willingness to enroll patients reflects excitement for the clinical trial results shown for TPIP to date, given that doctors know their patients will gain access to TPIP either at the start of the trial for those randomized to the TPIP arm or after the 24-week study period completes for those who are initially randomized to the placebo arm. We believe this represents a very positive early sign for future adoption should the medicine continue to show positive results and gain regulatory approval. We also continue to anticipate initiating a Phase III study in PPF in the second half of this year to be followed shortly thereafter by a study in IPF. Recent positive clinical data in IPF from another treprostinil product has added to our enthusiasm about the potential opportunity for TPIP in both PPF and IPF. The mechanism by which benefit may be seen in these patient populations is not fully understood yet, but it is believed that treprostinil demonstrates its antifibrotic effects via multiple pathways, including inhibitory impacts on fibroblasts and that those effects may be dose dependent. As a result, we believe TPIP may be more beneficial by virtue of being able to deliver a greater dose of treprostinil. In this way, we think TPIP could represent the optimization of treprostinil therapy, enabling continuous delivery of much higher doses of treprostinil directly to the lung using once-daily administration. As a result, since treprostinil has now been shown in other studies to deliver positive results for patients with IPF, we believe TPIP has the potential to provide even greater benefits for those patients. So let's recap. In a year that will be defined by execution, we remain focused on delivering across our commercial and late-stage clinical programs. BRINSUPRI is setting the bar for commercial success with exceptional progress across each of its key launch metrics, keeping us on track to achieve our ambitious full year revenue guidance of at least $1 billion in global net revenues. ARIKAYCE continues to grow in its current indication. Looking ahead, we see the potential for substantial growth next year if the FDA and PMDA approve a broader label for all MAC lung infection patients in each of these regions. And for TPIP, we have recently initiated our Phase III study in patients with PAH while continuing to enroll patients in our ongoing PALM-ILD study and finalize our trial designs for PPF and IPF. We anticipate announcing data from our open-label extension programs in PAH in the third quarter of this year. I have not spent any time today on our pipeline beyond our 3 most advanced programs, but these continue to progress as well. INS1148, INS1033 and gene therapies for DMD and ALS are all advancing to or in the clinic, and we look forward to future updates about these programs as clinical data becomes available. We believe in continuing to build out our pipeline through research and select business development and efforts in both areas continue at a robust pace. With that, I'd like to now turn the call over to Sara. Sara Bonstein: Thank you, Will, and good morning, everyone. Based on the strength of our performance so far in 2026, I am pleased to reiterate our guidance for this year, which can be seen on this slide, including full year revenue and gross to net guidance for BRINSUPRI and ARIKAYCE. I would add that the actual gross to nets we saw for both products this quarter also fell within these respective ranges. Let me now spend a moment on our cash position. As of the end of the first quarter of 2026, we had approximately $1.2 billion in cash, cash equivalents and marketable securities. Excluding cash received related to stock option exercises in the period, our underlying cash burn for the quarter was within the range of quarterly burn that we have seen over the past year. We believe this burn will continue to decline as company revenues ramp at a quicker pace than spending in the future. Importantly, we continue to believe we can achieve cash flow positivity without needing to access additional capital to support our existing business. Presuming we do not add to our expense base through business development, we would expect to achieve sustainable cash flow positivity in 2027. Now moving to other relevant financial metrics for the first quarter, which are displayed on this slide. Cost of product revenues in the first quarter of 2026 was $47.4 million or 15.5% of revenues, which is lower on a percentage basis than our historical performance, reflecting the positive contributions of BRINSUPRI to the company's gross margin profile. Additionally, as expected, research and development and SG&A expenses increased this quarter compared to the prior year period due to the necessary investment made to support the U.S. launch of BRINSUPRI and to continue to fund our pipeline. In closing, Insmed continues to execute, both clinically and commercially and remains in a strong financial position, providing us with the capacity to pursue our ambitious goals on behalf of patients and to maximize the opportunities for value creation we have ahead. We would now like to open the call to questions. Operator, may we take the first question, please? Operator: [Operator Instructions] Your first question comes from the line of Vamil Divan with Guggenheim. Vamil Divan: Thanks for details on the launch. It seems to be going well. So the question we're getting, I think, just because of the additional detail you provided is how to think about sort of the sequential growth from here. I know you don't give quarterly guidance, but I know you reiterated your views for the full year. But just given some of these dynamics with maybe this initial bolus of patient and now the more sort of organic demand, if you can provide any visibility on how we should think about sort of 2Q, 3Q, 4Q, especially given some of the unknowns around 1Q? And all the issues that we sometimes see in this quarter, that would be very helpful. William Lewis: So I know I'm going to disappoint by not providing a forecast on a quarterly basis other than what we said in our comments, which is that we expect organic demand to grow from Q2 throughout the rest of the year. What I would tell you about the inbounds that we've had, are you going to raise guidance? Are you going to adjust peak sales, all those sorts of things. We have 2 quarters under our belt, and we are a cautious company, as you all have learned by now. So while we are extremely enthusiastic about the performance we see here, and importantly, a lot of the metrics we're covering today are designed to convey the notion that the fundamentals are being put in place for what will be a sustained growth of this product launch. I think it's the breadth, it's the opportunity for additional depth and all of the metrics being above our respective targets that gives us that enthusiasm. So there may be a time when we want to come back and explore what those peak numbers are. I just think after 1 quarter in the year, the calendar year, it's a little premature. And we only have 2 quarters under our belt. But I do want to just remind you that in the first 2 full quarters, we've done $350 million of revenue, which, by any measure, is an impressive result. Operator: Our next question comes from Ritu Baral with TD Cowen. Ritu Baral: Another one on BRINSUPRI dynamics. Will, any thoughts on right now, whether breadth of prescribers or depth of prescribing within prescribers is more important to increasing demand? And as you think about that depth, what are you finding that drives that depth? Is it just sheer patient experience, the number of months that the Sentinel patient is on the drug? Is it detailing? Is it just patient flow thoughts? William Lewis: Yes, sure. So look, I think both are important. When we look at breadth, we know that we've already reached 25% of all pulmonologists that have written -- they've already written at least one prescription. So I think it's important to highlight that, that includes not just large academic centers, but we are already successfully in the community physician pool and convincing them to -- this is a prescription they want to write. That, to me, is a very positive sign because the sustained growth will come on the back of those physicians being participants here. We know that our Tier 1 call points have at least 100 patients and in some cases, more each. So when we talk about 1,800 physicians who have written one prescription in the fourth quarter, and half of those have written at least one additional prescription in the first quarter set against what that Tier 1 profile looks like, it gives you some sense of the enormous opportunity that is available to us in terms of depth. I think depth will come our way. It may take a little longer than we would like in the sense that we love for everybody to be writing this for 10 or 50 of their patients. But pulmonology community we're learning, particularly for this disease, where there's been nothing approved for more than 200 years since it was identified, are slow to adopt the new novel mechanism of action, and they're a little bit cautious. The good news is that the medicines profile has resulted in feedback that is very positive. Patients feel better on the medicine, and it is certainly doing a job consistent with what was seen in the Phase III data. That, to me, is the critical element. If you look at strong blockbuster launches, almost all of them share the common feature that the medicine's perception in the early days was very positive, and we're fortunate to be able to enjoy that kind of a status. So as physicians have more experience with the medicine, I think they will naturally turn to write the prescription more frequently. They certainly have the patients. The need is clearly there. We intend to draw attention to this dynamic through our communications efforts, and I am very bullish that whether it's in the next months or quarters, we are going to see organic demand kick up as physicians shift from a mindset that this is a novel medicine that they are going to consider using to this is the default medicine for the treatment of bronchiectasis. And I think that dynamic is going to be very powerful. Operator: The next question comes from the line of Joe Schwartz with Leerink Partners. Joseph Schwartz: Thanks for all the great color on the BRINSUPRI launch. Where do you see the organic demand coming from most now and going forward? Community or academic practices, the KOLs that many of us speak with at the experienced bronchiectasis centers seem to have prescribed BRINSUPRI to many of their highest need patients and note that community palms are still often referring patients to them. And as you think about the durability of the launch, what evidence are you seeing that this isn't likely to be a bottleneck and community physicians are moving beyond first prescriptions towards repeat independent prescribing? William Lewis: Yes. So this is really important. When we talk about the academic centers, and we talk about ready and waiting demand, what we tried to articulate in the commentary was this notion that it was very clear in the fourth quarter that the physicians at the academic centers were waiting for the electronic medical records systems to update at their institutions before they could write prescriptions. How do we know this? Because 1 week, there were no prescriptions coming from the institution and the next week or 2 weeks thereafter, we saw literally hundreds. So it is the arrival of that ability to prescribe using the electronic medical system that enables that turning to the list of patients that they had in many cases and addressing that demand. And that is what we refer to as the ready and waiting components of the 70,000 folks who have registered on our website. We look at the first quarter in comparison to the fourth quarter, and we see a steady state and cadence at those larger institutions that may have exhausted their initial lists, but that steady state continues. And importantly, there are many institutions who have yet to write a single prescription. And as we tried to highlight, even though we've already reached 1/4 of all pulmonologists, the vast majority of those have not written multiple or scores of prescriptions, and many of them have that kind of patient count, in fact, almost all of them. So there's a lot of breadth and depth opportunity here, but I would say depth is the one that I'm more focused on. And I would just refer to sort of 3 dynamics in the launch itself and its durability. The first is the basic blocking and tackling that we've gone into in detail today. How do you execute a launch well? And I think continuation rates, refill rates, all the sort of stuff that we've gone over in detail today, payer access, inLighten support, all that is extremely positive. So the basic blocking and tackling is going well. The commercial team and the customer-facing part of our organization has done an exceptional job in executing on those basics. The second dynamic is the one we were talking about a moment ago, which is that physicians will ultimately adopt this as the standard of care for bronchiectasis. As that process takes hold, it's less about the promotion and communication interaction and it becomes more the default practice of the pulmonologist to write the prescription. When that starts to take hold, then it will be the volume and traffic through the office that will generate prescriptions and less of the promotional side. And then the third and final substantial contributor to this launch over the middle to longer term is the comorbid populations that have yet to be appropriately diagnosed. Those are COPD or asthmatic patients who may also be bronchiectatic and would fill the top of the funnel in very large numbers. And so there's some efforts underway to raise awareness about that, not just our own, but those made by ATS. The combination of all 3 of these things, I think, paints a very robust picture for the potential of this drug in the next quarters, but also the coming years. Operator: Our next question comes from the line of Jessica Fye with JPMorgan. Jessica Fye: I was just wondering how you're estimating which patients were ready and waiting versus which fall into that organic demand bucket? And yes, I appreciate all the detail on the patient adds this quarter. Should we continue to expect to get patient metrics? William Lewis: So on the ready and waiting versus organic, this is always a little bit of a tricky business because it's not as if someone shows up and it self-identifies as one or the other. But what we try to do, as we described, is triangulate through a couple of different measures. The expected yield from the 70,000 registered patients on the website, the behavior of patients at the large institutions and the lumps that came through clearly once the electronic medical record system was cleared and then the steady state that we've seen over the course of the fourth into the first quarter. And I think we also had an anticipation that this would be the case, and it was contained within our own modeling. So we've triangulated through all of this to arrive at the numbers that we shared today, roughly 3,500 in the fourth quarter and roughly 1,500 in the first quarter as ready and waiting patients. We continue to see organic demand improve throughout the first quarter. And I think as we go through from Q2 through the rest of the year, we certainly expect that will continue. So I think those dynamics are all positive. What was the other part of your question? I can't remember what it was? Sara Bonstein: If we're going to continue to provide patient numbers. William Lewis: Well, patient numbers, yes, that's why I forgot it. No. So I would say what we are trying to do is provide the best approach to transparency so that you can model and understand the fundamental dynamics of the launch. That may or may not include patient numbers, it really just depends on the dynamics that are unfolding, but hopefully, today, you've understood that we are quite genuine in our ambition to make sure you understand what is driving the launch and why we have the enthusiasm we do for where we are. Operator: Our next question comes from the line of Jason Zemansky with Bank of America. Jason Zemansky: Congrats on the solid progress. Will, you've spoken about potential in the COPD and asthma patients. But I was hoping you can provide a little more color on what gets you there? In terms of the potential friction points, is it just awareness? Do you see any pushback from payers? Do you see any, I guess, unwillingness from prescribers to expand the polypharmacy in these patients? I mean what drives you to that population? William Lewis: So we know from our own clinical trial work that roughly 15% to 20% of patients in the ASPEN trial and the WILLOW study were comorbid with asthma and COPD. And those patients responded just as well as those that did not have those comorbid indications. So the presence of these patients, their existence is understood. It's not documented to a refined degree. And as a consequence, the literature is sort of all over the place as to what percentage of COPD patients, for example, are also comorbid with bronchiectasis, and what percentage of those patients have had 2 or more exacerbations and are continuing to be symptomatic because those are the low-hanging fruit that should definitely be on the top of our funnel. How do we get there? We get the pulmonologists or the primary care physicians, whoever they are, to refer them for a CT scan to look for the diagnosis of bronchiectasis. Once that has happened and a pulmonologist has done a workup on the patient, they're eligible for treatment, and they are on label. And so that process, we think, is going to take some time, but I think we're going to get there. And I'm very excited about the potential for these patients. In the U.S. alone, there are roughly 20 million COPD patients. And when we speak to KOLs, they estimate somewhere in the 20% to 40% range are comorbid with bronchiectasis. Now some smaller population of that are experiencing exacerbations despite on max treatment, and it may be that they're misdiagnosed. It may be that they are comorbid. We don't know, and honestly, we don't really care. What we want is for them to get the appropriate treatment and if BRINSUPRI can play a role in helping them, we certainly want to facilitate that. But I think that serves as a top of the funnel feeder that is quite substantial, and it may take time to bring it about, but we are investing in it almost like a second launch within the company with dedicated people focused on that area, and we think that's going to yield benefit over time. So we're pretty excited about that. Operator: Our next question comes from Gavin Clark-Gartner with ISI. Gavin Clark-Gartner: So I wanted to ask on the discontinuation rate in a very specific way. For the 11,500 patients who started on therapy by the end of 2025, for that same cohort of patients, how many were still on paid therapy at the end of the first quarter? Because in order to square the revenue versus the strong new patient starts you reported, I'm seeing there's probably 2,500 or more discontinuations from that cohort, which is in the 22% to 25% realm for a 6-month discontinuation rate. So I'm wondering if that's roughly on track with what you're seeing? And if we should be expecting that same rate of discontinuations moving forward? Like should we expect 40% discontinuations in a year? Any clarity there would be really helpful. William Lewis: Yes. It's hard to walk through the particular math that you're framing out here because I want to make sure that we're conveying accurate information. What I can tell you is that -- and I'll invite anyone else in the room to comment on this. What I can tell you is that we are tracking above trends for small molecule product use in terms of discontinuation rates. Statins are around, I don't know, 2%, 3% per month that tend to drop off. And the dropout rate is heavier in the first 6 months than the second 6 months, typically. So I think we feel like we're well ahead of industry benchmarks there. I don't know if we can give greater clarity. Would you... Sara Bonstein: Yes. The only other thing I would comment on is, in the prepared remarks, Gavin, we shared that statins had continuation in the first 6 months of around 70-ish percent. If you look at that over 12 months, it's about 60%. So as Will said, if you're going to have discontinuations, it tends to be earlier, but you do continue to see a level of discontinuations with statins. William Lewis: So hopefully, those numbers are helpful. I can't go through the particular calculations you're running over the phone, but we'd be happy to do that at sidebar. But in the meantime, I would just draw attention to that discontinuation rate that we've cited for statins and indicated that we're slightly ahead of that, which is about as good as you can hope to do. Operator: Our next question comes from the line of Olivia Brayer with Cantor Fitzgerald. Olivia Brayer: Yes, I appreciate the color around new starts and underlying demand. Sorry to ask another follow-up here. But the fact that you guys are pointing to sequential growth, I actually think is a really positive sign for 2026 numbers. So maybe a couple of questions there, is where is that confidence coming from? I'm assuming you're seeing some good growth in April trends? And then how long do you actually expect that sequential growth to continue until you start to see some of those new starts level off? And then I hate to ask a competitor question, but on TPIP, how quickly do you actually think you can enroll some of those studies like PAH in particular? I only asked given some disclosures yesterday around trying to expedite a once-daily DPI program from United. William Lewis: Yes, sure. So on the sequential growth point, what I would describe for everybody is that there is a massive opportunity that we still have before us with physicians, large practices, community docs and many, many patients, even within practices that have already written prescriptions that are available to us to access. So the opportunity for growth remains and will be there for some time. It's typical that in launches, you see companies get to a steady state after a certain period of time. You can look at the analogs to sort of define where you think the average is. But we would expect certainly to follow that sort of a profile, maybe a little bit better because of the opportunity that we think is before us. All of the metrics we've defined speak to the execution excellence of the team, and I think portend very positive things for when we're able to get those patients into the funnel in terms of our ability to execute and bring them through. I do think that our efforts in terms of communication and advertising and those sorts of things are going to amp up materially from here. And it takes time to get that stuff through the FDA and cleared and set up once we understand the launch dynamics. We are in that place now. And the Ty Pennington campaign as an example, is the first of what will be additional efforts made to raise awareness. And I think that will activate what is already a very vocal population of patients and probably drive additional demand. So lots of different vectors that give us this confidence. It starts with the capabilities of the team to execute, but it is complemented by the enormous availability of additional patients and physicians and all of the different efforts we've made to raise awareness and bring people into the funnel. On TPIP, the enrollment timing, we're going to go as fast as we possibly can. We have a good track record of accelerating our enrollment in trials better than standards, certainly in the industry. And I would expect that to be the case here. We tried to highlight today that we're already hearing some positive feedback from physicians even in the U.S. where there are available approved treatments for their patients. They're choosing not to put them on that treatment and instead putting them in our trial where their patient may be on a placebo for 6 months. So I think that speaks to the enthusiasm that is in existence already for our medicine and what it may be able to do for these patients. A comment on the other programs that are out there. I'm sure we're going to see a lot of talk about different programs and what they may be able to do. We are all about the data. And the data will lead the way, certainly for the physicians and the treatment of their patients, and the data we have so far is second to none in this category. So I think as long as that continues, we're going to be in a very strong position. The sooner we can get it out there, the better for everybody. The fact that we have to run through Phase I, II, III programs is because this is a novel differentiated compound. It is not a copycat, it is not a rewarmed version of an already existing drug. This is a very different drug that is breathed in inertly and then becomes active once in the lung. It has longer residence time, has a lower peak, a longer trough, once-daily coverage for patients, including nighttime with really excellent results. So I think its profile is very distinct from everything else that is in the prostanoid class, and we hope that, that will continue. Operator: Our next question comes from the line of Ellie Merle with Barclays. Eliana Merle: Can you elaborate a bit more on sort of the half of the single patient prescribers in 2025 that have not written an additional script in Q1? I guess why do you think that was the case? And are there any indicators that, that's changing? And I guess, from the organic growth that you've seen in 1Q, I guess, what is the mix that's coming from some of these higher volume prescribers versus some of these sort of like lower volume writers? William Lewis: Yes. So the half that have not written, there's an interesting dynamic in this therapeutic area and with these particular physicians. There's a conservatism, I think, that is now in evidence with the new mechanism of action and a new treatment for a disease that they've known about forever, but for which they've never had a treatment. And so I think what we've seen is great physician engagement. We have 1/4 of all pulmonologists who've already written a prescription. So they've crossed the hurdle or the rubicon of being willing to put their patient on the medicine. We now have to have the cycle of time take place where they go and they are on the medicine for perhaps 3, maybe as long as 6 months before they come back through the office and tell the physician of their experience. We are hearing a flood of positive feedback, and we read it in the social media as well. And it's not universal, but it's pretty overwhelming. And I would tell you that, that, I think, is the most powerful motivator for these physicians to write again. When they hear that 1 or 2 of the patients they put on medicine have had a good experience, they want to write again and more broadly, and that becomes a narrative and a dialogue that they share with their peers at places like the American Thoracic Society. So I think we're going to see this pick up throughout the year as physicians who have trialed the medicine have success and get good feedback from their patients and decide to continue to write prescriptions for others. Once they're over a hurdle, I don't know what the breakpoint is, a couple, 2, 3, 5 patients perhaps, we think that the rest of their practice is going to pick up. And so that just provides a really interesting opportunity for us. We haven't really broken out the organic versus -- between the high writers and the lower writers, that's even harder to discern, but what I would say is it's across the board. The vast majority of the ready-and-waiting patients came through the large centers where physicians had lists of patients and those are the ones that are easily identifiable as, if you will, ready and waiting versus those who are steady state. So hopefully, that's helpful. Operator: Our next question comes from the line of Graig Suvannavejh with Mizuho. Graig Suvannavejh: We've got ATS coming around the corner. I know that the ATS put out a statement just on new efforts to improve diagnosing of patients. I was wondering if you could comment just on how much of a potential springboard ATS might be, particularly from a prescribing perspective. And if you could also remind us of past comments that you've made around how maybe AI can help with increasing diagnosing of patients? William Lewis: Yes. So there's going to be a lot -- we're going to be quite loud at ATS, as you might expect, and also ERS and other academic meetings. And I think you will see both positive feedback stories that are shared by physicians from their experiences just in the hallways, but also a very deliberate effort to talk about the disease, raise awareness. We certainly will have a big presence in that regard. I think what ATS usually represents, you asked if it's a springboard, you take physicians and patients -- or pardon me, physicians and our commercial-facing group out of the market for a week, you tend to see a little bit of a drop during that week because of that, but then it tends to accelerate in the aftermath. How much? We don't know. But again, we pointed to the Symphony data, TRx has been fairly accurate for what we've seen proportionately in our own tracking. So hopefully, that may be something that can give some insight. With regard to AI, we are looking at a number of different ways to bring that to bear, most prominently in the area of examining historic CT scans and also doing sort of audits of patients -- patient records to try to understand what the diagnosis rate and identification of these patients might be able to be in a world where we bring that to bear in a more broad basis. I think you could expect us to be talking about a lot of different programs running in parallel to try to raise awareness and identify the appropriate patient and help with the diagnosis. And AI certainly is going to play an important part in that, not just for bronchiectasis, but generally. Hospitals are looking to bring that into the radiography field to help them get to more accurate and timely diagnosis. Operator: Our next question comes from the line of Matt Phipps with William Blair. Matthew Phipps: I appreciate all the additional color today. At the beginning of this year, you all cited a couple of potential risks to the launch as hypotheticals, including particularly more stringent payer contracting, more prior auths, things like that, that could come into account some point in 2026. First quarter, it doesn't look like that was an issue, still getting good payer coverage and time lines to dispensing. But just curious as you're now 5 months -- getting into 5 months into the year, if you still see that as a risk at some point this year? Or if you think you're at a good point with payer contracting that, that's not a concern? William Lewis: Yes. So through the specialty pharmacies, we've seen an approval rate of 90%, which is extraordinary. Now we don't expect that, that will sustain for the entirety of the launch. In fact, typically launches, you see that tend to trend down over time. We'll have to see where it goes. But I'm still very excited to be in possession of that kind of an approval rate. I think that speaks volumes about the perceived value of the medicine as well as the physician desire to push to ensure that it gets approved. Collectively, that lays a very positive forward view for where we may be able to go. I don't think there's as much risk for us in the payer approval collapsing, if you will, because of contracts and policies that are finally put in place. Many of them already have been put in place, more will come, but the point of that is because at the outset, we were focused on the moderate to severe patient for approval, there is not a big shift in what those policies will result in, in terms of holdback of patients. In fact, it may accelerate in some cases, the approval process. So one of the things we're trying to highlight today is that while whenever you start a medicine, it's always medical exception in every way, and you get higher approval as a result without a lot of scrutiny. Because of the way we channeled physicians and focus people on 2 or more exacerbations, we haven't seen a material decline with the implementation of these new policies. So that's a very positive thing. Operator: Our next question comes from the line of Leonid Timashev with RBC Capital Markets. Leonid Timashev: I wanted to ask on the international side and MFN. I know historically, you guys have been very conservative on how to approach an international launch. Just curious sort of what your latest thoughts there are? How much you expect some of these other governments to work with you around pricing? And then just given the discussion we've had around sort of the ready and waiting patients, how much of that dynamic you might be seeing in other geographies? William Lewis: Sure. So the interesting thing about MFN is, it does -- it has caused us to pause our launch efforts in Europe and the U.K. We are approved -- BRINSUPRI is approved for use in Europe and the U.K., but we need to be very cautious because the normal logic for selling in those regions is that if you can sell above the marginal cost of production of your medicine, it makes financial sense to do so. It is not intended to be a way for us to ensure that Europe pays the same that the U.S. does. We do not hold that bargaining power. We have 2 medicines that are approved. If I go to Germany and insist that they pay more for the medicine, they're simply going to say no. So we're not in a position to extract a higher price abroad than what we get currently from them. I think the pressure that's being brought to bear is causing Europe to reconsider some of those positions. But there's not a lot we can do about it, to be blunt. And so that puts us in a place where, if there's a risk that someone is going to import a price control into the U.S. at a fraction of what we're currently able to command based on the impact that is positive for patients, then that's something we simply cannot permit to happen. So we have 2 choices. We can either try to get a much higher price, which we do in Europe, or we sell -- we don't sell the medicine abroad. And in the latter case, I don't think that really serves anyone's interest because the intent behind MFN was to lower prices in the U.S. And at least for the mid-cap biotech companies, that's not going to be the result. The result is we simply won't sell the medicine abroad. And then the copycat medicines that are made in China are going to take our place. And then the result of MFN will be to bankroll the Chinese biotech market, which I don't think is really in anyone's interest. I appreciate and align with the notion that it is frustrating for Europe to pay far less than what the U.S. pays for the medicine, but we are not in a position to force them to pay more. And as a consequence, we have to be very cautious. Practically speaking, we will wait for clarity on where MFN is going to go in the coming months, and that will inform whether or not we're able to move forward as we would like to. Because the goal of the company is to make its medicine available to those patients who can benefit from it. And we need to work within the financial constraints that exist in these other countries, but we can't dictate them. Certainly, we think of Japan as a very exciting market opportunity. Europe has a role to play as well, but we need to sort of get to the heart of what MFN is going to be and how it's going to operate first. Operator: Our next question comes from the line of Danielle Brill with Truist Securities. Danielle Brill Bongero: I wanted to ask on -- a follow-up on discontinuations. Of the discontinuations that you are seeing, can you comment on what's driving them? Like what's the relative contribution of Medicare out-of-pocket resets and payer dynamics versus other variables? And then given the recently unveiled competitor programs, how important is it for TPIP to now demonstrate enhanced efficacy to support the thesis? William Lewis: We don't really have a breakdown of the reasons for the discontinuation that we can share today. We can step back and take a look at that and see if there's commentary we can provide, so we'll do so. But there isn't something I can tell you right now about the profile of discontinuations and where they're coming from. I think that given that they're at -- sorry, that they are above the best benchmark rates out there, certainly, it is not driven by the medicine. I think it's fair to conclude, this is driven largely by patients having other motivations. When we talk about the competitor programs, I don't -- we're not particularly focused or worried about them at the moment. The Phase II data we saw from the BI program was not particularly compelling in our mind, and we'll have to see what Phase III looks like. It's going to be several years before they're on the market. So we have a lot of room to run here and really to establish ourselves. We'll have to see what BI's data looks like. I want to remind everybody, BI has targeted 30% enrollment of Asian patients in its Phase III program. That is very deliberate. That is -- it is 8% of the population in the U.S. They are over-indexing to that group because as we saw in our trial, the Asian patient population is a hyperresponding group in terms of reduction of exacerbations. We had a 20% reduction in pulmonary exacerbations in our Phase III results. If we look at the subpopulation of Asian patients, it was north of 60%. So you can expect the headline number coming from BI to be better than ours. Certainly, that's what we would expect given the over-indexing to the Asian patient population. But when we tease through the data and see what is really there, we'll know what kind of profile that product represents. Operator: Our next question comes from the line of Max Skor with Morgan Stanley. Maxwell Skor: I was just wondering, have you seen any change in the severity mix or overall profile of the bronchiectasis patients on treatment through the early stages of the launch? And as the commercial base builds, how are you prioritizing business development? William Lewis: So on the mix of profile of patients, as I was commenting earlier, we really focused on those patients with 2 or more exacerbations, and so that continues to be the phenotype that we really want to advance for attention. We think they're going to benefit the most. Certainly, we saw that in our Phase III study very definitively. I don't expect that to change very much. You are right to highlight that our label is much broader than that. It actually is available for any patient with bronchiectasis, regardless of the number of exacerbations they've had in the last 12 months. This is just trying to work with the insurance companies and their policies, which will be focused primarily on those with 2 or more exacerbations. Sara Bonstein: Prioritizing BD. William Lewis: Prioritizing BD. So BD, let me just comment on this. I'm a big believer, and we are collectively as a company that the right time to do BD is when you don't need it. This is a particularly interesting time for us because we have 3 programs that are in excellent position to really be blockbusters or in at least 2 cases, potentially mega blockbusters. That gives us a very strong runway for revenue generation over the next 5 to 10 years. We could sit still and do nothing and perform, I think, exceptionally well. The opportunity is to augment our pipeline and to look for ways in which we can leapfrog from our current position into one of greater strength. We have done that with INS1148 at the end of last year for a very modest investment. That is a novel mechanism of action that we think has potential applicability in multiple disease states. We will look for similar programs like that. We will be certainly developing our China strategy, and we will be looking for other potentially even more substantial acquisitions if they fit all of our criteria, which is, number one, can it provide an asymmetric return opportunity for our shareholders. And that's the #1 criteria we have for BD that we're pursuing. Simply adding a program that targets a single disease is not interesting to me, unless it has the ability to go into broader disease states. So we may end up doing nothing. We may end up doing a lot. We don't know. What I can tell you is we are very active in looking, and this is a time when there are a lot of really interesting companies and technologies out there that I think are ripe for potential acquisition. Operator: Our next question comes from the line of Faisal Khurshid with Jefferies. Faisal Khurshid: I just wanted to ask you, you cited that the, I think, persistency rate on oral meds like statins at 6 months are around 70%, and that you're sitting a little bit above that. Just wanted to clarify that comment and also ask if you're seeing any meaningful differences that you can tease out between the kind of ready and wait patient population and your organic new demand patient population to the extent you're able to tell? William Lewis: Yes. So that is, in fact, the benchmark that we're using. The statin discontinuation rate of 70% is at the 6-month mark. After a year, it's about 60%, as you heard Sara referred to earlier, and we are above that benchmark. So we feel very good about what that portends for our -- for keeping patients on drug and of course, the benefit of that that inures to our shareholders. I think as we think about where we can go from here, we'll certainly continue to emphasize trying to keep patients on drug. I think the storylines that come back from the use of the medicine are going to help support that more than anything. And patients that come into their physicians' offices and report having their life back or feeling better again, I mean we have very dramatic stories. These are not necessarily indicative of how everybody responds to the medicine. I want to be really clear about that. But we do have quite dramatic stories of patients coming in and breaking down in tears and telling their physician how they couldn't take a short walk and now they're out doing a 4-mile hike. So I think there's a lot to like there. Sara Bonstein: Yes. The only other thing I would comment on is, I'll just remind you of the benign safety profile for this product, and Will mentioned it earlier, but the best launches in our industry start off with really these positive launch dynamics and experiences, and that is what we're hearing and seeing consistently through. And you guys are all seeing it too on the social media posts and just the feedback loop from the patients themselves, and that is sort of the building blocks of really successful launches. And so very pleased with the continuation rate that we've seen. As Will said, we're a little bit better than statins. So we're encouraged by that. Operator: Our next question comes from the line of Adam Walsh with ROTH Capital Partners. Adam Walsh: Going into the quarter, your guidance was $1 billion plus for BRINSUPRI, and consensus was at $1.2 billion. What will you need to see to be able to give more granular guidance going forward as we progress through the 2026 quarters? William Lewis: Yes. I think we always tend to take a conservative approach to guidance. If things -- dynamics are expected to continue to be positive, and certainly, the -- all signs are pointing in that direction, we'll come back and revisit this every quarter. I'm less focused on giving a higher estimate or putting out new guidance and much more focused on the execution. The execution is there, the numbers will come. And I'm just here to tell you that the execution is there. Our team is doing an excellent job. And my enthusiasm for where this product is in its launch, if it's not apparent by this point in the call, let me be explicit. I could not be happier about where we are. We are in a fantastic spot, not just for the performance in the first 2 quarters, but what it portends for the future because the building blocks for a long-term sustainable growth of this drug in this disease indication, they're all there. And that's probably the thing that's the most exciting about what we've seen and why we shared so much detail today. Operator: Your next question comes from the line of Ben Burnett with Wells Fargo. Benjamin Burnett: Just a question on TPIP. Great to hear that higher doses were tolerated in the Phase II OLE. But I guess, is this -- is it fair to assume that this will be reflective of sort of the Phase III doses? I guess really the question is, will patients have enough time to titrate up to those doses as high as what you're seeing in the Phase II OLE? William Lewis: Yes. So I think they are going to have enough time. We thought about that issue very particularly because the top dose is 1,280 micrograms in the Phase III studies. And our experience and our dialogue with physicians has made it very clear that they do have the ability to titrate up all the way to that max dose should they wish to. It is important to emphasize that in the OLE, we did not push physicians to increase the dose. That was a decision they made completely independently of us. And it was an option that was given, but it was not one that was encouraged or pursued. So what you're looking at is true organic decision-making that has driven these patients up in dose. And as we said, I think a total of 7 of them actually went all the way up to 1,280, which I find remarkable given that 640 was the original max dose of the Phase II study. So in all of the Phase III studies, we're going up to 1,280 as an option, and there's plenty of time to titrate up to that level. And of course, more drug to date has certainly shown better performance. So that's a very exciting dynamic. Operator: Our next question comes from the line of Andy Chen with Wolfe Research. Andy Chen: Just a follow-up regarding the diagnosis rate and expanding the pie. I know you're very excited about your diagnosis initiative and raising awareness, but that's still very qualitative, and we may not see results until sometime in the future. So can you please provide some timing expectation around this diagnosis expansion? Or maybe, in other words, can you maybe speak more regarding the appropriate industry analogs for this diagnosis expansion? William Lewis: Yes. It's a difficult question to answer accurately at this stage. I think what we believe is that through these efforts, we should begin to see, in the case of the COPD and asthmatic, comorbid patient populations. And we can look at things like CT scan rates or diagnosis rates of bronchiectasis, like there are lots of little markers out there that we can track to see if they're having impact. I would expect that by the end of this year and certainly more robustly in 2027 that these efforts will begin to result in some positive results. And we would expect to be able to look at that and hopefully share that with you at some point. I'm not concerned with whether it's the fourth quarter of this year or the second quarter of next year, because the size of this opportunity is so significant, potentially that I think it warrants patience for those patients to come around. And the process here is very straightforward. It's a CT scan and a diagnostic workup by a pulmonologist and the patient is at the top of the funnel. So it isn't that far to go. And I think as we think about low-hanging fruit, many of these patients already have CT scans from their interaction with pulmonologists over the years. In many cases, they were simply not asked at the -- the radiologist was not asked to look for bronchiectasis. So unless they identified it and sua sponte decided to report it, with no treatment available. There's not a lot of reason to do that. So what does that mean? It means that there's a slew of CT scans out there we can go back and look at retroactively to see if there's evidence of bronchiectasis already, and that is really at the heart of the ATS initiative. They see this opportunity as well. They see the risk of under diagnosis. And so they're running this effort at 7 different centers, and that should yield some very interesting information. And 1 of their 4 priority goals of this was to be sort of loud in terms of the discovery that they have. So I would look to them as a third party for information as well on diagnosis of bronchiectasis and the potential for underdiagnosis and what that will all look like. So I'm sure they'll have some time lines around their publications and the expectation of that. But end of this year, certainly in '27, I would want to see some evidence. Operator: Our final question for today comes from the line of Ash Verma with UBS. Ashwani Verma: Can you confirm the 1Q BRINSUPRI gross to net that you mentioned? Is it at the top end of the range, the mid-20s to low 30s? And then just trying to get a sense if there's any other extraneous factor like free goods or if the delta from the sales that you printed and new patient adds is just primarily the discontinuation that you talked about? William Lewis: So I'll ask Sara to address that. Sara Bonstein: Yes. So on GTN, what I can reiterate is the guidance that we provided for BRINSUPRI mid-20s to low 30s and the actual for Q1 was within that range. We're not providing additional clarity than that, but we were within that range. Same goes for ARIKAYCE, low to mid-20s, and we were within that range for Q1 actuals. Operator: Thank you, everyone. That concludes today's call. Thank you for joining. You may now disconnect.
Operator: Welcome to the Primo Brands 2026 First Quarter Earnings Conference Call. I will now turn the call over to Traci Mangini, Vice President, Investor Relations. Traci Mangini: Thank you, operator, and hello, everyone. With me on the call today are Eric Foss, Chairman and Chief Executive Officer; and David Hass, Chief Financial Officer. Our discussion today includes forward-looking statements within the meaning of U.S. federal securities laws, which are subject to risks and uncertainties that may cause actual results to differ materially. For more information, please refer to the forward-looking statements disclosure in our earnings release. In addition, the definition of an applicable reconciliations for any non-U.S. GAAP measures are included in our earnings release and the supplemental earnings slides, which were made available earlier today on the Investor Relations section of our website. With that, I'll pass it to you, Eric. Eric Foss: Thanks, Traci. Good morning, and thank you all for joining us. This morning, I'll provide a high-level review of our 2026 first quarter results. I'll share with you an update on our progress on our direct delivery customer experience, and discuss the current operating environment and our key growth priorities. David will then take you through our financial results and our updated 2026 guidance. Let me begin by stating how encouraged we are by the strong start to 2026 and the momentum building broadly across the business. First quarter net sales of $1.63 billion were up 1.7% on a comparable basis versus prior year. Marketing a return to growth for Primo Brands. Top line performance was broad-based, driven by both price mix and volume. It was fueled by the strength of our brands in retail, particularly premium and another quarter of sequential improvement for direct delivery with service levels exceeding our expectations. Our comparable adjusted EBITDA was $306 million, down 10.4%. This was driven by increased investments in the business discussed during our last earnings call to improve service and direct delivery, which have yielded operational improvements, higher on-time in full and an improved customer experience as well as incremental cost incurred attributable to the winter storms and incremental freight and logistics costs year-over-year. Based on our strong first quarter top line growth, we're raising our 2026 comparable organic net sales growth guidance to 1% to 3% from flat to 1% previously. At the same time, given recent geopolitical events and the dynamic cost landscape, while we believe we're well equipped with multiple levers to help mitigate oil-related commodities inflation, we are prudently widening our adjusted EBITDA range. As a result, we're updating the low end to $1.465 billion while maintaining the high end at $1.515 billion. This implies a revised adjusted EBITDA margin midpoint of 22%, which would be up 20 basis points versus prior year. Despite the macro environment, we are executing with pace and purpose so we are fit to win. We believe we are well positioned in an attractive growing category, supported by our differentiated portfolio of leading brands and our advantaged to market. On our fourth quarter earnings call in February, we outlined 2 critical near-term priorities. First was improving the customer experience in direct delivery and second was returning the company to balance growth. Our actions in the quarter drove meaningful progress across both of these priorities. First, on direct delivery, we achieved another quarter of improvement in key leading indicators and more importantly, sequential improvement in financial performance. Top of the funnel demand remains strong and customer quits continue to decline, leading to a sequential improvement in customer nets, which approached a net breakeven customer position in March. Customer call volume declined and our respond and recover solved by send-out initiative resulted in an accelerated pace of customer issue resolutions. Notably, one of our most important success metrics on-time in full reached over 90% in March. While pleased with our progress, there's more to do. So we're taking some additional actions. We're implementing a new warehouse management system to support superior supply chain execution from product supply to in-branch inventory to help satisfy customer demand. With the final wave of our U.S. integration behind us and those delivery customers now on one enterprise management system, we're focusing on harmonizing data enhancing analytics and insights and strengthening management tools to better serve our customers. We're reimagining and optimizing the end-to-end customer journey from customer sign-up and delivery, through billing and issue resolution. By enhancing the digital and mobile app experience, strengthening our win-back initiatives and designing a more efficient customer contact center. This ongoing work is grounded in 3 principles that we believe matter most to our customers: transparency, convenience and trust. And with that in mind, our current initiatives are focused on streamlining and improving communications across every stage of the customer experience. Our second priority was to get the overall business growing again. First quarter results put us firmly on that path led by retail, where we expanded our leadership position in branded bottled water, gaining both dollar and volume share in the category. We plan to build on this momentum through multiple growth vectors going forward, including brand building and innovation, improving our in-store presence, leveraging the momentum behind our leading premium brands and a comprehensive development approach to revenue growth management and pricing. Our summer plans around brand building include building on our successful partnership with Major League Baseball for our regional spring waters. This marks the first time our entire regional spring water portfolio is under one creative campaign. In addition, we'll have a significant presence in Philadelphia this July as we celebrate this year's All-Star game. As part of our multiyear partnership with Disney, we're launching a limited edition Pure Life bottle series this summer, featuring Toy Story 5. We are also focused on extending our retail presence by driving new points of distribution getting more display inventory and expanding our exchange and refill footprint. Expanding our presence extends beyond physical footprints to e-commerce. In April, for the first time, our regional spring waters became available through Amazon Grocery, providing an opportunity to increase household penetration, further accelerate brand awareness increase our share of virtual shelf at this important marketplace and add new customers. Another growth vector is prioritizing premium. Saratoga and Mountain Valley continues to be incredible contributors to growth, growing an impressive 43% in the first quarter. Both brands showed momentum via new points of distribution and grew volume and dollar share of category in the quarter. Going forward, we'll be amplifying awareness of our new Saratoga collection, 4 sparkling flavors in a slim can with the highly recognizable Saratoga's signature blue color. Also for the second year, Mountain Valley is the proud sponsor of the Academy of Country Music Awards in May. We believe these brands are early in their growth trajectory with expanding distribution, strong brand equity, and investments in additional capacity coming online to drive continued momentum. Saratoga capacity in Texas became operational in May and adding the second production location supports lower distribution costs. We expect to complete the Mountain Valley new greenfield facility in mid-summer. Our final growth priority is the development and execution of a more strategic and holistic revenue growth management approach across price points, package types and channels. Our pricing strategy begins and ends with the consumer, understanding how they define value and how that perception shapes their purchase and usage behaviors. At the same time, we assess our competitive position across our brands and products, while attempting to make sure our decisions reflect both our cost structure and margin goals as well as the economics of our retail partners. As we navigate today's dynamic macro environment, pricing, along with productivity initiatives, are levers we can use to help offset commodity headwinds. In closing, I want to extend my thanks to our associates for their pride and commitment to ensure we sell and serve our customers with passion each and every day. Let me also reiterate that the investment thesis behind the merger that created Primo Brands, the U.S. bottled water leader remains intact. We compete in an attractive category and continue to benefit from strong tailwinds in health and wellness and hydration. It's highly penetrated, frequently purchased and among the fastest-growing categories within liquid refreshment beverages. We are a clear leader in branded water and healthy hydration and a major player across the liquid refreshment beverage category. As a leader in a structurally advantaged category with consumer and customer-first culture, we're investing to capitalize on the category momentum and the power of our brands. By ensuring we elevate service and execution, we're positioned for sustained growth, margin expansion, stronger free cash flow and long-term stakeholder value. With that, let me turn the call over to David. David Hass: Thank you, Eric. For 2026, reported financials include Primo Brands results for both 2026 and 2025 as we're now past the anniversary of our first quarter as a merged company. For greater comparability on our continuing operations, we focus on comparable results, which exclude the Eastern Canadian operations, which we exited in the first quarter of 2025 and our Office Coffee services business, which we exited across 2025. Reconciliations of this information is available in our earnings supplemental deck available on our website. For the first quarter, comparable net sales increased 1.7% versus the prior year, driven by a 1.3% price or mix contribution increase and a 0.4% volume contribution increase. These results reflect an earlier-than-expected positive inflection in the business and validate that our actions are driving measurable top line progress ahead of plan. Simply put, we had a priority of returning to growth, and we delivered that with a fairly balanced first quarter top line performance. Volume, which we define as case goods equivalents measured in 12 liters, was driven by an increase in retail channels, partially offset by a decline in direct delivery. In retail, net sales growth was driven across multiple channels, particularly mass, club and away-from-home, pack sizes driven by occasion and case packs and brands led by Primo. As Eric mentioned, Saratoga and Mountain Valley, combined net sales were up 43% in the quarter, continuing their incredible momentum. While direct delivery net sales declined in the quarter, it reflected lower volume from a smaller customer base and a tough comparison to prior year, which was just prior to the main integration activities. That said, customer net adds trend continued to improve approaching breakeven. On a comparable basis, direct delivery sales declined 3% with sequential improvement each month within the quarter. The performance also reflects sequential improvement over the last couple of quarters, a trend we expect to continue over the balance of 2026. Comparable adjusted EBITDA decreased $35.5 million to $306 million with comparable adjusted EBITDA margin, down 260 basis points to 18.8% versus the prior year. Margins were affected by our decision to continue to operate with a higher route count than typical in order to strengthen our direct delivery service levels, an investment that we -- that contributed to better-than-expected net sales and customer retention. We expect these costs to begin to normalize in the second half of the year as we realign the cost structure under the improved operating model, which should improve the overall margin profile. This approach also helped us navigate the temporary disruptions caused by severe weather across many of our markets during the quarter. Leading indicators such as OTIF and customer volume trends validate these actions. Additionally, margins were pressured by higher transportation costs in retail tied to severe weather and a tighter freight market. Moving to our balance sheet and cash flows. Underscoring our commitment to a disciplined capital structure, on March 31, 2026, we proactively refinanced our $3.1 billion term loan at SOFR plus 275 basis points, extending the largest and nearest maturity in our debt stack to 2031 from 2028. Our liquidity remained strong with $874 million of availability between our cash balance and our unused line of credit. At quarter end, our net leverage ratio was 3.52x, reflecting expected seasonal working capital dynamics in the first quarter. We believe we remain well positioned to generate leverage ratio improvement as cash flow strengthens throughout the year. We generated $103.8 million of cash flow from operations for the quarter, adjusting for significant items, most notably our integration and merger activities cash flow from operations would have been $191.6 million. Adjusted free cash flow, which excludes integration-related capital expenditures, was $128.6 million representing a $73.9 million improvement versus prior year. Our strong financial flexibility allows us to reinvest in the business while returning cash to stockholders. First quarter total capital expenditures were $118.1 million, while $47.2 million were related to integration capital expenditures, the majority supported growth initiatives and maintenance. We also continued to execute our share repurchase program, repurchasing $29 million or approximately 1.5 million shares under the $300 million program announced last November. Before we move to our financial guidance, we believe it's important given the macro environment to outline our oil-related commodities exposure and how we manage that risk. We do not speculate on the market. Instead, we hedge key input costs to create predictability around our input costs and to strengthen our ability to forecast. Our risk management program blends fixed price and forward contracts where those instruments are available. The strategy is intentionally balanced and programmatic in structure and opportunistic when conditions allow. It's guided by guardrails and typically include coverage that extends 12 to 24 months. Our primary oil-related commodities include plastic resins, virgin PET or VPET, recycled PET or RPET, high-density polyethylene or HDPE and low-density polyethylene or LDPE which are used across our product portfolio as well as diesel and propane. Within our delivery fleet, about 40% of our trucks run on propane and given elevated industry inventory levels, propane markets have been relatively stable. For the diesel-powered portion of the fleet, we have significant hedge coverage in 2026, and we are extending some of that margin protection into 2027 through longer-term derivative contracts that lock in prices well below current spot levels. At present oil futures in 2027 remain significantly below today's levels, which, in our view, provides visibility and confidence to navigate the current situation. That said, the recent unexpected volatility in these oil-related input costs occurred shortly after providing our full year 2026 guidance in February. While this will likely result in some added headwinds, we are actively managing our cost outlook and believe our financial risk management program is one of the multiple levers to help mitigate the impact. Moving to our financial outlook. We are raising our comparable organic net sales guidance for the year. As a reminder, in 2026, we cycled the exit of our Office Coffee Services business, which accounted for $25.5 million in our reported 2025 net sales. This puts our comparable 2025 net sales at $6.635 billion. This is the base for our full year 2026 guidance and growth rate. With that in mind, we now expect comparable organic net sales growth in the range of 1% to 3% as compared to flat to 1% as provided in February. The increase is driven by not only the broad-based better-than-expected first quarter top line, but also a trajectory change in direct delivery. We now expect direct delivery to transition from the down 3% in the first quarter to closer to breakeven in the second quarter and to modest growth in the second half of the year. We also expect continued strength in our consolidated retail channels behind our brands and premium momentum. Our revenue growth management capabilities intend to fully leverage the power of our brands and should also help mitigate some of the commodity cost pressures. Turning to adjusted EBITDA. We are widening our previous range to include an updated low end of $1.465 billion and maintaining the $1.515 billion on the high end. While we are confident in the guidance provided in February, the macro and commodity environment meaningfully change shortly after. Despite the shift, we believe we have multiple levers, including pricing actions, growth initiatives, ongoing supply chain cost initiatives and our financial risk management program to help mitigate the impact. We expect to benefit from productivity improvements in direct delivery in the second half of the year as we realigned the cost structure under the improved operating model. At the same time, we plan to prudently invest in enhancements in the customer experience, including the redesign of our contact center and capabilities that support future growth. The revised midpoint adjusted EBITDA margin is 22.0%, down approximately 50 basis points compared to the previous guidance and continues to imply margin expansion for the year. We are reaffirming our adjusted free cash flow range of $790 million to $810 million. Beginning in Q2, we anticipate free cash flow add-backs to decline. This trend follows the first quarter reduction in EBITDA add-backs and reflects the typical reporting lag between expense recognition and cash payment. As integration activities mature, we expect a cleaner cash flow profile that more closely aligns with our underlying operational performance. Our strong free cash flow supports our capital allocation priorities, we continue to expect to deploy approximately 4% of net sales and capital expenditures for the year in addition to the approximately $100 million in integration capital expenditures. Also, given our commitment to return cash to stockholders last week, we announced our Board of Directors authorized a $0.12 quarterly dividend, which annualizes to $0.48 per share. We also intend to continue to execute our share repurchase plan, which had $78.3 million available under the program authorization as of the end of the first quarter. And with that, I'd like to turn the call back to Traci. Traci Mangini: Thanks, David. To ensure we can address as many of your questions as possible, please limit yourself to one question. And if we have time remaining, we will reap poll for additional ones. Operator, please open the line for questions. Operator: [Operator Instructions] And your first question comes from Peter Galbo with Bank of America. Peter Galbo: David, thanks for all the detail around the hedging program, particularly Slide 6, I think is very helpful. I wanted to just kind of pressure test that a little bit, David, first question being just how locked are you for the year? So if we do get kind of resolution based on the conflict and let's say, oil goes lower from here, is there actually kind of upside to what you presented, are you pretty much locked for this year? And then the second question is, I believe last quarter, you talked about a 48-52 split on EBITDA first half, second half for the year, I wanted to see if that still holds in light of kind of the updated guidance? And given that Q1 maybe came in a little bit light of Street, but maybe you could address those 2 items for us. David Hass: Sure. Let me maybe start with the second one quickly because I think in that regard, we're probably a little bit more like $47.53 and be about maybe one point from those investments inside the quarter. But again, I think we remain very encouraged by what that led to in our top line performance. And notably, when you see the momentum building in direct delivery, it gives us that confidence to go from essentially the down 3% in Q1 to closer to breakeven in Q2 and then resuming growth. So we think that those investments have really yielded the right activity set to respond to the consumer, deliver what they ordered on time and in full. And if not recover very quickly to sort of retain them, which is our #1 priority. Into the actual hedging and some of that activity year-to-date, really where we have technical hedges is within our diesel activity, and that's basically just using sort of market-based hedges. And then that allows us to sort of transact with that and sort of align that usage to our sort of what we believe is our fleet consumption. We're pretty far hedged but if there were to be a resolution as maybe the markets have anticipated this week, that would provide some opportunity for benefit balance of year. And it would obviously allow us to start to lock, if we felt so inclined, locked prices for '27 in that category itself. Where we have more forward priced contracts with our vendors, that happens in the resin portfolio. I think if there was a resolution, whatever premium that vendor or supplier is attempting to pass through to customers like ourselves and others, that would provide a more advantageous sort of negotiation posture for balance of the year and again into 2027 activities. Operator: Your next question comes from Nik Modi with RBC Capital Markets. Nik Modi: Maybe we can just talk a little bit about the scenarios between kind of the low end and the high end, whether it be on the revenue side and the EBITDA just so we can understand exactly kind of scenario wise, what would need to happen to get you to the high end versus, let's say, the low end? And then the second question is, would love just some more clarity around some of the pricing actions that recently have taken place. Maybe you can just kind of quantify like what percent of the portfolio is that happening? My understanding is that's not the case pack side. And do you believe you have opportunity to actually take price in case pack if you need to offset some of these headwinds from inflation? Eric Foss: Nik, it's Eric. Yes, thanks for your question. I think -- let me just start with the fact that I think we're really pleased, and I think we made meaningful progress in the quarter versus some of the growth priorities we laid out. So I'll get to your question. But I think the way to connect the dots to the low end or the high end on the growth side is look, we continue to improve our customer experience in direct delivery. That happened faster than we anticipated. So we were pleased by that. I think we also delivered earlier than anticipated this commitment to return the business to growth. I think on the last call, I talked about those 2 being our 2 focal points for the business. And I think what to me -- leads me to conclude that the growth is durable and even structural is the fact that, that growth was balanced and broad-based. And it was -- it took place across premium, which has been a key growth facilitator for us. But it also was applicable to our regional spring water portfolio. It was applicable to Pure Life. It was fairly broad-based across channels. And so as we look ahead, to me, the path forward is clearly compelling. We think that the continued brand building to create demand, continuing to raise the bar on execution. We are going to leverage a very disciplined revenue growth management approach to drive value and over time, expand margins. So anyway, we really believe that we're in a good spot as we look forward to the rest of the year. Second, I think when it comes to pricing, again, we still have a lot of work to do on RGM, but I'll give you a little bit of just the framework on how we think about pricing. Our first principle is that all of our pricing actions start and end with the consumer. So we keep the consumer and her decision-making matrix at the forefront of anything we would do. We also have to maintain competitiveness, which we have and will continue to do. And then we've got to look at the company P&L and look at the cost margin implications and try to make sure we're appropriately managing margins. So I'd say it's a comprehensive development approach that includes rate mix and trade spend. And what we've done is we felt like given the current environment, our focus would be more on immediate consumption, where you tend to see the consumer be more convenience oriented than price-oriented. We did take actions on the immediate consumption portfolio. We still maintain kind of the best value across channels in the marketplace. And relative to your question on case pack, yes, I think later this year, we probably look at taking some pricing on case pack, obviously, being very sensitized to the starting point, which is making sure we understand consumer value and elasticity on that package. Operator: Your next question comes from Daniel Moore with CJS Securities. Dan Moore: Obviously, encouraged to see the increased revenue growth -- revenue and growth guidance. Of the delta or change beyond the improvement or faster recovery in direct delivery, are there other areas of the business you're seeing more significant opportunities or acceleration? And how much of that delta is kind of volume versus price? Eric Foss: Yes. Well, again, I think, Dan, we want to continue to be very balanced. So I think we came out of the quarter with a combination of price mix and volume. I think as we look at the growth opportunities, I think, again, if you think about the kind of the structural tailwinds at the category and consumer level, you look at our leadership position within the category and then you think about the strength of our brands and where we can continue to make, I think, significant inroads on the direct delivery business. We also have an opportunity to continue to grow our presence in retail execution in store. And so you look at the momentum we have had at retail, I think that's poised to continue to run really well for us the rest of the year. And again, the encouraging thing, as I mentioned on Nik's question, is how broad-based that momentum has started to become as evidenced by the Q1 results. Dan Moore: Super helpful. I'll just sneak one more in. Just you are at your 6-month anniversary, congratulations. Beyond the stabilizing the HOD business, any surprises, takeaways or just things that you're hoping to change kind of culturally kind of high level, would love your thoughts there. And I'll jump back in queue. Eric Foss: Sure. Well, again, we -- I think have made a lot of progress on the culture front. We had our senior leadership team together a few weeks ago and had a very good discussion around our mission around hydrating a healthier America, rolled out a new set of values with the customer in our frontline really at the centerpiece of that. And so we continue, I think, to strengthen the team. I think we continue to change the mindset, which is we're a leader in not just the water and healthy hydration space, but a major player across LRB. And I think we're developing a winning mindset and changing our pace to be a little faster to market and our perspective of who we really are. So I'm really pleased with what's happened on the culture front and how the team has responded. And I think we're in a very different position than when I entered in November. Operator: Your next question comes from Andrea Teixeira with JPMorgan. Drew Levine: This is Drew Levine on for Andrea. You mentioned a number of potential mitigation options for the potential commodity inflation that we can be seeing, productivity and pass-through mechanisms among them. Just hoping you could talk a little bit more about some options on the pass-through side, particularly on direct delivery, maybe how quickly you would be willing to pull that lever? And if you could give some perspective on the stickiness of the customer base historically when there are changes in delivery fees, for example, I think in the past, it's really not been too much of an issue when the service is good. But clearly, that's been an area that was maybe a little bit more challenged over the past year. So if you could give us some perspective on when and if you would be able to adjust the delivery fee and expectations from a customer perspective when that happens? Eric Foss: Sure. Yes, it's Eric. I'll take that, and then David can jump in as well. I think let me just maybe back up as we think about how we might face any commodity or inflationary pressures, I think there's a variety of ways and a variety of levers for us to think about. One is just more top line growth and leveraging that growth through the P&L. Second is productivity and cost management third is pricing. And then we have 2 other ones available to us, which historically at times have been activated, whether that's the delivery fee that you referenced or fuel surcharges. I think our near-term focus is really on the productivity and the pricing side and wouldn't see us, at least in the near term, thinking about any changes on the delivery fee or fuel surcharge. And I think, again, our goal here is to make sure we have a balanced algorithm, meaning growth and margin improvement over time and that growth being a combination of sustainable volume and pricing actions. And that's what's reflected in the full year uptick in our growth guidance that you saw earlier this morning. The other thing I think I want to just make sure that I message is I've seen this movie before in the beverage industry. And I think when something like this happens, there's a couple of things to keep in mind. I think the first thing to keep in mind is unlike the growth potential that we have in this company, which is very much structural. This issue is transitory and it is not while near term, there is volatility and uncertainty that we have to deal with, it's not structural. Second, it tends to impact the industry broadly, both branded and private label players. And so everyone is kind of equally impacted. We all have our hedging strategies and forward by processes that David highlighted. But that's the reality of how this typically gets impacted. And then the final one is that we have multiple levers to offset, which I talked about earlier. So again, we are, I think, in a very good position to deal with this and to continue to move this business forward. Operator: Your next question comes from Derek Lessard with TD Cowen. Derek Lessard: Great to see that sales performance, Eric and David. Just one for me. I just want to maybe touch on the retail side. Can you maybe just talk about sort of the growth in your points of distribution category growth or maybe some share gains that you're getting in some of the categories? Eric Foss: Sure. Yes, I think this quarter, what you saw at retail as you saw us continue to expand points of availability across the portfolio. Certainly, we gain points of availability on the premium side, we also saw improved execution around number of displays. And I think as we go forward, again, we've talked about a more holistic approach to in-store executional excellence whether that be displays, space, certainly, coolers over time is a big priority for us. I think we were encouraged because from a market share standpoint, in addition to the great growth, we obviously translated that into both dollar and volume share gains in water and the same thing across LRB. So again, we are making progress. We still have more work to do, whether that's on the customer direct and direct delivery side or the retail side. But again, some of those success metrics executionally are starting to trend in a more positive direction. Derek Lessard: Absolutely. Congrats on that. And that's it for me. Operator: [Operator Instructions] Your next question comes from David Shakno with William Blair. David Shakno: This is David Shakno stepping in for Jon Andersen. Question, looking at Q2 specifically, if I recall correctly, a year ago, it was a pretty wet and cold spring season across the U.S. I just wanted to understand what we should be looking for in trends over the next couple of months here, especially as we get throughout May and June. And then separate from that, just kind of -- almost as a follow-up for the previous question, I wanted to understand if you're feeling kind of competitive pressures from private label, given the weaker consumer right now? I wasn't sure if there's pressure in specific channels, be it club or somewhere else or just kind of overall what you're seeing across channels related to private label, too? David Hass: Yes. Thanks, David. This is David. I think maybe let's start with a little bit of chronological framework of Q2 last year. So -- but what I want to start with is, first, Q1's performance. So if you recall last quarter, excuse me, same quarter prior year, we delivered a 3% top line. So on a 2-year basis, not only was this our hardest comp in which we still delivered actual growth. But it was obviously higher within the retail pieces of the business in our Q1 of this year. Obviously, offsetting what was the direct delivery decline I mentioned earlier, of approximately 3%. And so we feel incredibly encouraged by taking on a very challenged comp and still delivering. And again, that growth was broad-based and really balanced. And when you look at the disclosure tables in our quarter information in the supplemental, you'll see a couple of things that I want to call out. One, almost every brand and pack basically expanded in the quarter. And when you see things like purified water showing de minimis growth, if not a slight decline, that actually reflects a little bit more of the drag that's occurring in the direct delivery business itself. Similar things when you look at the premium water that grew substantially in Q1. And on a -- 2 years ago, this was a $50 million business in that quarter. So we've basically essentially doubled that business in 2 years. That's actually held back because Mountain Valley was a larger distributed brand on our route-based system in direct delivery. So that growth actually would have been even higher if we wouldn't have gone through some of the integration challenges and like you mentioned, weather disruption that occurred. So now let's kind of go into that sort of time line. Last year, just a few weeks ago, last year is when our Hawkin's facility was hit by a tornado. Actually, we held our board meeting in Texas in the market. And went and visited the plant, [indiscernible] celebrated what that team has done to rally and bring that factory back online and not only bring it online, but actually enhance it with an expanded line that we mentioned where Saratoga product will be coming to market from that facility. And then obviously, later in the quarter when some of the integration disruptions began. So we're not raising guidance because we have an easier comp. We're raising guidance because we have structural tailwinds that are occurring in the business and feel pretty confident in what's happening and what we're watching with both service levels as well as the retail execution, which was your original question, that retail execution continues to perform quite well. And it's not really at the expense of another brand and not really feeling directionally threatened at this point from private label, but I'll let maybe Eric provide some perspective there. Eric Foss: Sure. I think when it comes to private label, again, in this sector, you're always going to have a price-only shopper that's going to look for what's cheapest, which tends to be, in most instances, private label. Having said that, as the leader in the category, the good news is there is a high level of brand loyalty. And so as we look at our future consumption business. As I mentioned earlier, we have and intend to continue as we go through the summer months to maintain very good value around that portfolio. The encouraging thing in the first quarter is all 6 of our regional spring water brands grew. In addition to that, Pure Life, which is really our brand that tends to compete most against private label, and we manage a gap accordingly, also grow, as a matter of fact, grew mid-single digit. And so I think the point David and I are trying to convey is the durability and sustainability of some of the things we're starting to see on the recovery side. And certainly, that applies to our retail business in a big way. Operator: Thank you so much. That concludes our Q&A. I would now like to turn the call back to Eric Foss for closing remarks. Eric Foss: Thank you. Well, in closing, let me just state how excited we are by our start to the year. I think the fundamentals are strengthening. The momentum is building, and we're very energized by the opportunities ahead. and feel like we're well positioned to deliver sustainable long-term growth. So thank you for your continued interest, and we look forward to updating you on our progress. Operator: Ladies and gentlemen, this concludes today's conference call. We thank you for your participation. You may now disconnect.
Operator: Welcome to the Curtiss-Wright First Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Jim Ryan, Vice President of Investor Relations. James Ryan: Thank you, [ Leo ], and good morning, everyone. Welcome to Curtiss-Wright's First Quarter 2026 Earnings Conference Call. Joining me on the call today are Chair and Chief Executive Officer, Lynn Bamford; and Executive Vice President and Chief Financial Officer, Chris Farkas. A copy of today's financial presentation and the press release are available for download through the Investor Relations section of our website at curtisswright.com. A replay of this webcast will also be available on the website. Our discussion today includes certain projections and forward-looking statements that are based on management's current expectations and are not guarantees of future performance. We detail those risks and uncertainties associated with our forward-looking statements in our public filings with the SEC. As a reminder, the company's results and guidance include an adjusted non-GAAP view that excludes certain costs in order to provide greater transparency into Curtiss-Wright's ongoing operating and financial performance. GAAP to non-GAAP reconciliations are available in the earnings release and on our website. Now I'd like to turn the call over to Lynn to get things started. Lynn Bamford: Thank you, Jim, and good morning, everyone. We had a highly productive start to 2026. We delivered a strong first quarter performance that exceeded our expectations as we demonstrated exceptional operating results, reflecting higher growth in revenue and operating income across all 3 segments. As we continue to compound sustained profitable growth, I'm pleased with the team's steadfast focus on innovation where we are driving incremental investments in research and development to support a number of critical pursuits across our end markets. These investments, along with the continued growth in our order book, better position us to accelerate the pace of long-term organic growth. We also continue to have strong alignment with leading industry growth vectors, which has been further reinforced by improving underlying demand and industry fundamentals across our A&D, commercial nuclear and industrial markets. The momentum continues to build across Curtiss-Wright's portfolio. Based on the strong start, we raised our full year 2026 outlook, which provides us with confidence that we will exceed our overall Investor Day targets and continue to deliver strong results for our shareholders. With that, I'll turn to today's presentation. Starting with the highlights of our first quarter 2026 results. Sales of $914 million grew 13% year-over-year, while operating income once again exceeded our sales growth, resulting in 100 basis points of overall operating margin expansion. Of note, our results reflected higher year-over-year sales across all our major end markets. Diluted earnings per share grew 23% year-over-year, slightly ahead of our expectations and primarily driven by our strong growth in A&D sales. Regarding our order book, new orders increased 15%, reflecting a 1.3x book-to-bill ratio, driven by mid-teens growth in each of our 3 segments. I'll cover some of the key highlights. Starting in defense, where we're pleased to see the overall improved pace of order activity, which is a testament to Curtiss-Wright's long-standing alignment to U.S. and allied military priorities. Digging deeper and starting with Defense Electronics segment, the team delivered the best performance since the third quarter of 2024 and is making great strides to move past the delays caused by the prior continuing resolution and 2025 government shutdown. Notable wins during the quarter range from the mission computer upgrades supporting the C-17 cockpit modernization to various awards supporting next-generation helicopter platforms and programs, along with increased activity for some of our short-cycle businesses, including tactical communications. Overall, our pipeline of opportunities for these businesses remain strong. Our programs remain in good standing and the improved demand to begin the year provides us with increased confidence to deliver on our full year objectives. In the Naval and Power segment, which delivered a 1.5x book-to-bill ratio, we experienced continued strong demand for nuclear propulsion equipment supporting the U.S. Navy's current and next-generation submarine programs. We also continue to benefit from increased demand for our commercial nuclear aftermarket products. Lastly, within the A&I segment, I would like to highlight the improvement in our order book for industrial vehicles, which has now delivered 2 strong quarters in a row and is contributing to increased optimism in our general industrial market relative to our 2026 guide. Overall, based on the healthy growth in Curtiss-Wright's order book, we reached a new record of nearly $4.3 billion, which provides us with great visibility and continued confidence in our future top line growth. Regarding our full year 2026 guidance, we have raised our overall outlook for sales, operating margin, earnings per share and free cash flow and remain well positioned to deliver strong operational performance this year. Of note, we now expect overall sales to increase 7% to 8%, driven by improved outlook in our defense and commercial nuclear markets and further supported by the overall strength of our order book. We continue to expect that operating income growth will outpace sales growth and now anticipate an increase of 40 to 60 basis points in operating margin in pursuit of a record 19% to 19.2%. As a result, diluted EPS is now expected to grow 13% to 16%. In addition, we raised our free cash flow guide to reflect higher confidence in the full year outlook, and we continue to expect strong conversion in line with our long-term targets. Overall, we are pleased with the strong growth in revenues and profitability to begin the year, and we're strategically positioned to deliver another outstanding performance in 2026. Now I would like to turn the call over to Chris to provide a more in-depth review of our financials. K. Farkas: Thank you, Lynn. Turning to Slide 4. I'll begin by reviewing the key drivers of our first quarter 2026 performance by segment. Starting in Aerospace & Industrial, overall sales increased 12%, which exceeded our expectations. Beginning with the segment's defense markets, which drove the outperformance, our results reflected higher sales of actuation and sensors equipment supporting various U.S. and European fighter jet programs as well as increased demand for EM actuation equipment supporting ground-based mobile launcher systems. Within the segment's commercial aerospace market, we experienced solid OEM sales growth supporting increased production on both narrow-body and wide-body platforms. And in the general industrial market, the steady improvements in our order book, primarily attributed to increased demand for industrial vehicle products contributed to solid mid-single-digit growth in sales. Regarding the segment's first quarter operating performance, operating income and margin were ahead of expectations, growing 24% and 150 basis points, respectively, driven by favorable absorption on higher revenues, restructuring savings and favorable mix. Next, in the Defense Electronics segment, overall sales increased 5%, which was slightly ahead of our expectations. Within the segment's aerospace defense market, we experienced higher domestic sales of embedded computing equipment supporting various aircraft modernization programs as well as higher direct foreign military sales of embedded computing and flight data recorders serving NATO and allied countries. Ground defense market sales were flat as increased Turret Drive stabilization systems supporting international programs were offset by lower sales of tactical communications equipment. Regarding the segment's operating performance, we delivered a strong first quarter operating margin of 28.1%, up 60 basis points year-over-year, reflecting favorable absorption and mix on higher revenues. Moving to the Naval and Power segment. Sales growth of 21% exceeded our expectations. This was due to stronger-than-expected revenue growth in naval defense associated with the accelerated ramp-up in production on submarine programs. We also experienced a solid uplift in aftermarket revenue supporting naval shipyards through fleet services work and overhaul programs. Within the segment's aerospace defense market, our results reflected strong growth in revenues for arresting systems to international customers. In the power and process market, overall, we experienced high teens year-over-year growth in revenues. This was mainly driven by strong growth in the commercial nuclear market, supporting maintenance and life extensions at operating plants across North America in addition to increased revenue supporting advanced small modular reactors. Regarding the segment's operating performance, operating income grew 33%, generating 140 basis points in operating margin expansion, principally reflecting favorable absorption on the better-than-expected growth in sales as well as favorable mix. To sum up Curtiss-Wright's first quarter results, we generated a strong operating margin of 17.6%, driving 100 basis points in operating margin expansion on the better-than-expected top line performance. Turning to our full year 2026 guidance. I'll begin on Slide 5 with our end market sales outlook, where we now anticipate total sales to grow 7% to 8%. Starting in Aerospace Defense, we now expect full year sales growth of 11% to 13%, benefiting from increased sales of actuation and sensors equipment supporting domestic and international fighter jet programs as well as increased demand for defense electronics. Within ground defense, while we were pleased to see the overall improvement in Defense Electronics order book, we continue to take a conservative approach in tactical communications resulting from the FY '26 budget delays. And as a result, our outlook in this market remains unchanged. Aside from those timing delays, we continue to expect increased EM actuation sales supporting the U.S. Army's IFPC program and increased demand for Turret Drive stabilization systems supporting international ground vehicle programs through our relationship with Rheinmetall. In Naval Defense, following the strong first quarter results, we now expect full year sales growth of 6% to 8%, mainly due to expectations for higher production revenue on submarine programs, while we continue to project solid growth on the CVN-81 aircraft carrier program. In addition, we anticipate solid growth in aircraft handling equipment revenue supporting various international programs. Looking more broadly across all 3 defense markets, we expect direct foreign military sales to grow 10% this year and slightly ahead of our prior expectations, driven by the alignment of our technologies to global defense spending priorities. Moving to Commercial Aerospace. Our outlook for 10% to 12% sales growth remains unchanged and continues to reflect our strong backlog supporting the anticipated ramp-up in OEM production across the major narrow-body and wide-body platforms. Wrapping up our aerospace and defense outlook, we now expect total sales in these markets to increase 6% to 8%. Moving to our commercial markets. In Power & Process, we now expect full year sales to increase 13% to 15%, mainly due to the continued underlying strength of our order book within commercial nuclear, we now expect to deliver mid- to high teens growth in sales this year. Shifting to the process market. We continue to project strong growth in sales, which we anticipate will more prominently benefit our second half results based on the higher sales of MRO valves and instrumentation solutions. And lastly, in general industrial, we continue to take a cautious approach in this market and anticipate sales to be flat in 2026. However, we're encouraged by the more recent improvements in the order book and remain cautiously optimistic that we'll see a return to growth as we approach 2027. Wrapping up our total commercial markets, we now expect total sales in these markets to increase 8% to 10%. Moving on to our updated full year 2026 financial outlook by segment on Slide 6. I'll begin in Aerospace & Industrial, where we now expect sales to grow 6% to 8%, driven by the strong first quarter performance in the segment's defense markets, continued growth in the order book and the anticipated ramp-up in commercial aerospace OEM production. Regarding the segment's profitability, operating income is now projected to grow 13% to 15% and drive operating margin expansion of 100 to 120 basis points, ranging from 18.4% to 18.6%. In addition to the improved top line guide, this outlook reflects the ongoing benefits of our operational excellence and restructuring initiatives more than offsetting higher year-over-year investments in development programs. Shifting to Defense Electronics, where we continue to expect sales to grow 4% to 6%, principally driven by strong growth in aerospace defense and partially offset by the timing of our orders and revenues in ground defense. Regarding the segment's profitability, we continue to expect operating income growth of 4% to 6%, and we remain on track to deliver record levels of operating margin at 27.3% to 27.5%. In Naval and Power, based on the continued strength of our orders and backlog in both our naval defense and commercial nuclear markets, we now expect sales to grow 9% to 11%. Regarding the segment's profitability, we now expect operating income growth of 13% to 15% and operating margin expansion of 40 to 60 basis points with this uplift mainly driven by the stronger revenue outlook. Also, as a reminder, this outlook reflects the savings generated by our restructuring actions as well as continued investments in both internal and customer-funded development programs. To summarize our 2026 outlook, overall, we now anticipate total Curtiss-Wright operating income to grow 9% to 12% and expect operating margin to range from 19% to 19.2%, up 40 to 60 basis points as we lift at the bottom end of the range to reflect our increased confidence. Next, to aid in your quarterly modeling of sales and operating margin, we expect overall second quarter 2026 sales to grow by mid-single digits while also targeting high single digits plus growth in operating income, both relative to the second quarter of 2025. Of note, within our A&I and Naval and Power segments, we anticipate strong year-over-year growth in sales, resulting in improved second quarter profitability, while we expect both sales and profitability within the Defense Electronics segment to be in line with last year's Q2 results. In summary, at the overall Curtiss-Wright level, we expect modest year-over-year improvement in profitability to result in a high teens second quarter operating margin. We expect this to be followed by strong second half operating margin expansion, keeping us on track to deliver record results this year. Continuing with our financial outlook on Slide 7 and starting with our EPS guidance. Building upon our strong first quarter performance, we now expect full year 2026 diluted EPS to range from $14.90 to $15.30, up 13% to 16%, reflecting improved sales and profitability within our A&I and Naval and Power segments. To aid in your quarterly EPS modeling, we expect second quarter 2026 EPS to grow by low double digits relative to the second quarter of 2025. We then expect modest sequential EPS growth over the remainder of the year with the fourth quarter EPS being our strongest. And lastly, turning to free cash flow. Overall, we were pleased with the strong start to the year, and that provided us with increased confidence to raise our full year free cash flow projections to a new range and record of $580 million to $600 million, up 5% to 8% over 2025. This outlook continues to reflect our expectations for strong growth in earnings and a record level of working capital below 18%, while overcoming a nearly 30% year-over-year increase in growth investments through capital expenditures. We are confidently executing while continuing to deliver a free cash flow conversion rate of approximately 105% again this year. Now I'd like to turn the call back over to Lynn. Lynn Bamford: Thank you, Chris. And turning to Slide 8. I would like to conclude today's prepared remarks by highlighting how we are accelerating momentum across Curtiss-Wright's portfolio through our strategic initiatives and our alignment with industry growth drivers, positioning the company for long-term financial success. As we have discussed today, our strong execution to begin the year, combined with our growing order book and strength of our backlog reinforces our ability to deliver record financial results across our major metrics. This outlook is underpinned by increased sales in the majority of our end markets, while we're also targeting a record level of profitability with overall operating margin at or above 19%. The team is focused on driving margin expansion through an unwavering commitment to operational and commercial excellence while continuing to accelerate investments in R&D and infrastructure to support future organic growth. As a result, we continue to be successful under our operational growth platform as we sustain Curtiss-Wright's stature as a top quartile margin performer relative to our peers. We are also compounding earnings at a mid-teens pace over time by pairing that focused operational execution with our commitment to a balanced capital allocation strategy. In addition, Curtiss-Wright remains strategically aligned with many favorable secular growth trends across our markets. Starting in defense, Curtiss-Wright is firmly anchored across the most critical current and next-generation platforms of programs to be funded within the U.S. Department of War budgets. As a reminder, our technologies are trusted on over 400 platforms and 3,000 programs worldwide. Building off of a strong and funded base of approximately $1 trillion in the FY '26 NDAA, we're pleased to see the upsized levels to a historic level of $1.5 trillion issued in the President's budget request this past month. In naval defense, we remain aligned with a strong drive for accelerated production across the U.S. Navy's major platforms as well as investments in the next-generation SSN(X) submarine. Similarly, within our aerospace and ground defense businesses, we maintained strong alignment to the Dow's top strategic priorities, including tactical aircraft modernization, next-gen air superiority, radar and strategic missile defense and Golden Dome, just to name a few. All of these areas have received increased requests for funding in the FY '27 budget. Equally important, we're making focused investments in research and development to further advance our technology and ensure we maintain strong positions across our entire defense portfolio. On an international front, our NATO allies continue to strengthen their operational readiness by targeting record levels of defense spending, while we continue to solidify our positions with technologies such as Turret Drive stabilization systems, embedded and tactical computing and both ground and naval arresting systems. Turning to commercial nuclear. Curtiss-Wright's extensive portfolio of aftermarket technologies support the continued performance, safety and modernization of operating reactors worldwide, where we have content on every reactor across North America and South Korea. We remain aligned with plant operators and their incremental investments in plant extensions, power upgrades and modernization. In the U.S., we have seen an increased pace in number of plants receiving NRC approval for subsequent license renewals. Thus far, 23 reactors have been approved to extend their operating license, up from 9 reactors at the beginning of last year, with the most recent SLR completed in a record time and in less than 12 months. Similarly, in Canada, we continue to support the modernization of reactors progressing through major component replacement programs to extend the life of their plants. We are also committed to supporting the construction of new Westinghouse AP1000 reactors expected to be built in the U.S., Poland, Bulgaria, Canada and other locations globally. While not included in our current year guidance, we still anticipate an order for our reactor coolant pumps this year. In addition to large light water reactors, we continue to grow our relationships and secure content across leading 300-megawatt plus SMR designs. Our strategy ensures we will be engaged regardless of who is participating in the SMR race, which will ultimately support a number of winners. We expect SMRs to be a meaningful contributor to our revenue growth in 2026 and beyond. As we highlighted yesterday, one of those driving forces is our strong position on the X-energy Advanced Reactor where we have transitioned from design to prototype manufacturing of both the helium circulator and the reactivity control and shutdown systems as we continue to support the advancement of their next-generation reactor. Overall, we have a clear path to capturing tremendous growth in our commercial nuclear power business, and I'm confident in our ability to capitalize on the robust industry growth that lies ahead. Within commercial aerospace, we continue to build upon our strong core positions and alignment to the OEM production ramps across Boeing and Airbus platforms and support our customers' growing backlog. Over the next years, the elevated growth trajectory based on increased rates of narrow-body and wide-body production will provide us with durable opportunities for growth. At the same time, we expect that our continued investments in critical technologies and highly engineered components will bolster our ability to capture new positions and expand our portfolio across both current and next-generation platforms. Shifting to Industrial. Earlier, I spoke about the improved order momentum that continues to build in these businesses. This reflects our ability to grow our leadership positions while simultaneously investing in technologies that advance customer efficiency, performance and safety. This, in turn, together with the team's ability to successfully navigate global macroeconomic pressures, mitigate the impact of tariffs and identify opportunities to drive pricing and cost containment initiatives has enabled us to routinely overcome industry headwinds in this market. Overall, across all our end markets, we continue to take the necessary steps to ensure Curtiss-Wright remains aligned with the fastest growth vectors and that we are well positioned to capitalize on the needs of our customers, both today and well into the future. Turning to the bottom section of the slide. We are intensely focused on leveraging the full breadth of Curtiss-Wright's financial resources to maximize our returns across numerous investment opportunities. We are driving record levels of free cash flow, and we are doing so while investing in critical technologies at an accelerated pace across the portfolio. In 2026, we are ramping up our investments in people, systems and capacity to drive increased throughput across our naval businesses and also in anticipation of future commercial nuclear awards. Overall, we have and remain very focused on efficient capital deployment. Finally, Curtiss-Wright maintains a very healthy balance sheet, and we have remained extremely disciplined in our approach to capital allocation, continuing to strategically pursue acquisitions as our top priority in order to further accelerate top and bottom line growth. Beyond this, we look to further balance that allocation and sustain our strong track record and commitment to return capital to shareholders. In closing, I'm excited about Curtiss-Wright's numerous prospects for growth and we look forward to delivering another record financial performance this year as we continue to drive long-term value for our shareholders. Thank you. And at this time, I would like to open up today's conference call for questions. Operator: [Operator Instructions] Our first question is coming from Kristine Liwag with Morgan Stanley. Kristine Liwag: Your pivot to growth has been very successful, and you're seeing that with your strong book-to-bill of 1.3x in the quarter, and we're seeing very strong demand signals from customers. I guess when we look at the industry as a whole, U.S. defense primes have a record backlog of over $500 billion, but their ability has been gated by the supply chain. You guys have been executing fairly flawlessly the past few years. And Lynn, you highlighted that you're interested in also doing more deals. So are there specific areas when you look at that broader ecosystem where you see gating factors that are pretty high ROI? And is that an area that you would be interested in doing more M&A? And so any color you could provide here would be really helpful. Lynn Bamford: A great question, Kristine, and thank you for joining us today. We are positioned very broadly across both all 3 branches of the U.S. Department of War and have a great footprint in NATO. And so I feel like we're very well positioned. And from an ROI standpoint, obviously, our Defense Electronics team continues to really deliver very strong results for our shareholders. And so that's always when we talk about M&A and where we're interested in pursuing targets, they usually remain at the top of the list. We know how to buy businesses there, integrate them. And even if their profitability, which we were very open with PacStar as an example, our last acquisition there was well below the segment's margins. We've had outstanding performance with that team, and it continues to grow and expand its footprint, both here in the U.S. and really some early days traction internationally, which is exciting to see. So that is always a focus. We're we very much appreciate the tone out of the Department of War with wanting to have more commercial acquisition, be more willing to do second sources, dual sourcing equipment. And so first and foremost, that's a good reminder for us, we need to be a great supplier into our customers, and that is a big focus for us, and we don't take that for granted, and we're not perfect. So there's always areas we can improve. But that's also an area where we are making ourselves clear to the Navy. We're very open to being considered to become a second source in some of those areas. And I think when we think of our scaling in the naval business, when you look at our MIB funding going from $15 million 3 years ago to $60 million now, that's indicative of where the Navy wants us to go and our ability to be a vital part of their supply chain. So that is one. But we're also looking more broadly across our aerospace and defense areas where there's critical aerospace technologies, especially the things that we can take both to the commercial space and the military space. That's one of our strategies that drives our ROIC in the company is having technologies we invest in for one end market, but then leveraging the breadth of our end markets to be able to take the same core investments and spread them across. Aerospace is a great place to do that. And so definitely an area where we're interested. And our last 2 acquisitions were in commercial nuclear. We continue to look. There's less targets out there in that space, but we found 2 and who's not to say we won't find more. That's another area where we continue to look. But we're really looking -- we consider how we look at things -- we have KPIs that we're very focused on, and you have to look at that in balance. And I don't know, Chris, if you'd add anything for -- from a financial perspective and how we think about that. K. Farkas: Sure. Yes. I would just kind of note in the current environment, I mean, there's a good amount of competition for acquisition targets that are out there right now. There's a scarcity of high-quality strategic assets. And that, in turn, is driving some elevated multiples. But we are very stringently applying our strategic and financial filters as we're looking at books in the process. We're generating a significant amount of free cash flow. We're continuing to invest in our organic growth. But you can see from the health of our balance sheet, I mean we've deployed $2.5 billion towards acquisitions since we began the pivot to growth. Despite this, our leverage is approaching record lows. We've got a fully untapped revolver, $3 billion of borrowing capacity today. So as we look at financial -- acquisition targets from a financial lens, we're looking for businesses that can really be accretive to our core KPI growth rates over time, revenue, operating margin, EPS, free cash flow and ROIC. I think this in combination with the market environment, it's just -- it's important to note that not every asset is going to be immediately accretive to all KPIs, but we'll balance those strengths and opportunities in various ways against the full portfolio and generate improvement over time as we've done successfully for many years. Kristine Liwag: Great. Super helpful color. And if I could follow up on margins. The company, you guys have done a lot of restructuring, and we see that benefit with your record margins here. I guess as the Department of War wants to shift more towards more commercial terms, I mean, I presume, is that more margin accretive for you in the long run? And also, I guess, it's a broader margin question as we think about demand from international customers also coming in. I would also presume that would be higher margin. And it'd be great to get your views on those long-term drivers. But then also within the defense ecosystem, you're seeing more players like Anduril, like nontraditional player come into the industry. How does that shift the margin opportunity for a supplier like you where you've got pretty core capabilities that could be used by the incumbents and the new and you've got these new shifts in contracting approach. Is this good for margins in the long run? Lynn Bamford: So we feel confident about and comfortable with where we are. And this year, we're not going to speak beyond this year, but continue to expand margins this year. And you can see that's across our portfolio, including some uplift in our defense businesses. And I really -- as a team, we like to think of it with delivering value. We spend over half of our internal IR&D is spent in our defense electronics portfolio. We have brought some outstanding capabilities to the market that are really unique to a product offering in Curtiss-Wright around some of the capabilities with a variety of NVIDIA-based products from things that use the Blackwell 5000 down to products that leverage the 4 that are much more size-weight-power oriented. And so really having that our Fabric100 capability, which is unique to Curtiss-Wright, the Microsoft Azure offering that we have. But from our perspective, we're very targeted at delivering technology excellence to our customer base, and that goes hand-in-hand with the value you can ask for those products. And so we just keep our eye on solving the hardest, most critical problems that our customers have and believe we will be comfortable. We work with the nontraditional primes. We have active engagements with many of them. There's places our products fit and places our products don't fit. So we're not -- we don't have applicable products to all of them. But the things that we build are complicated and hard and take lots of investments in long periods of time, especially around the defense electronics, not setting aside all the submarine work and such like that. And they're in a foot race. And so for them to be able to acquire product from us is really -- fits hand-in-hand with their value proposition. So I think we're in a very solid place for where we are regarding margins and our ability to continue to grow. Operator: We'll move on now to Myles Walton with Wolfe Research. Gregory Dahlberg: This is Greg Dahlberg on for Myles. I was just hoping to follow up on the X-energy announcement, shifting from design to prototyping work. Can you just give us a context of how much of the announced chipset content this allows you to recognize or maybe frame how large SMR revenue is in 2026? Lynn Bamford: So it's not really our place to talk about what exactly the content is we're prototyping with X-energy. We've been very open and said our content is $120 million per reactor. We only mentioned 2 of the 3 major subsystems that have moved to prototyping. So it's obviously below that. And we're not -- and I will be open, we're not prototyping the full complement of what an end reactor would be, but it's still great and meaningful revenue for Curtiss-Wright. And we're underway with that. And there's also some things we need to do from an infrastructure and test fixtures and stuff to be able to prepare to be able to do that testing. So it's a good revenue driver for this year, but I'll let leave it to Chris to talk about maybe any specifics he'd be comfortable giving. K. Farkas: Sure. I would just say embedded within that mid- to high teens organic growth guide that we're giving for commercial nuclear, you've got aftermarket coming in at approximately low double digits. I mean we're seeing a lot of global strength related to that business. But also, there's a very strong ramp-up in SMR revenues for the development transition to the initial prototyping phase. And last year, we were roughly 10% -- it was roughly 10% of our commercial nuclear revenues. And this year, with the guidance, we're targeting 12% of our commercial nuclear revenue. So a pretty sizable and growing improvement for a smaller part of our overall commercial nuclear portfolio today. Gregory Dahlberg: Great. And then I just wanted to touch on Defense Electronics bookings real quick because it sounded like things were good in 1Q based on your commentary and the short-cycle tactical comms work was accelerating. So can you share your expectations for 2Q book-to-bill maybe just given the context of the ground defense end market reiterated for the full year? K. Farkas: Yes. I mean maybe I'll just kind of back up a little bit before I kind of dive into Q2. Lynn mentioned in her comments, some of the changing government structure and budget delays we faced this last year. And on the last call, we said once that was resolved, we expected we'd see a normal flow in approximately 60 to 90 days, which would put most of that at the time into the April and May timeframe. And I think broadly, across Defense Electronics, that held true. We had the best order quarter for that business dating back to Q3 of '24 and also in Q1, Lynn mentioned, we received several of those orders that we had expected in 2025, including the C-17 and tactical comms and strategic returns. But the Q1 order book was up 18% year-over-year. We had a book-to-bill that was near 1.1x. And then I'll also say that as we're looking at the April order update right now, we're seeing an improvement of 46% year-over-year for that month. So we're really off to a great start here in the second quarter, and we're expecting another good order quarter here in Q2. I will say that you heard in our prepared remarks that there will be some pressure on the second quarter revenue. I think we forecasted that and discussed that a little bit on the last call as well. But what's fortunate for us with some of these delays is many of the businesses here that are impacted are shorter cycle in nature and we've been taking steps to ensure that we can convert those orders into revenue as quickly as possible, and that gives us confidence in the full year guidance. Operator: We'll move on now to Nathan Jones with Stifel. Nathan Jones: I guess I'll start with a question on industrial vehicles. It's not one we talk about too much, and it's obviously been a tough market over the last few years for industrial vehicles. But it does seem like that market overall has kind of troughed out here and you're starting to see some growth. Some of the end customers there are starting to talk about increased production. I guess maybe a little bit more color on the order book, the growth in that. I know you kept the revenue outlook for general industrial flat for this year. Is that one of the areas that we might see some upside in the second half if things continue to progress on the same trajectory they are now? Lynn Bamford: Yes. We've had 2 good quarters of bookings, which is really nice to see. And I definitely always want to give a shout out to the team. It's been a couple -- 3 years that have had industry headwinds in them. I think we do feel optimistic that 2027, we will return to some growth in this end market and the trends continue to indicate that. You can see the reports out of our customer base of what's being built. But the team continues to do a good job with bringing new products to market and winning new content. So we're very well positioned as that growth does come back in this market segment that we will be there to position it. We focused on our content across the European markets where I think growth is predicted to be a little bit more accelerated. So we feel good about what we've done there. And it's still a watch item. So we're being cautious. We're not going to meet our 3-year Investor Day targets of low single digits in this market. But it's nice to think that we will -- we're feeling good that '27, '28 is going to be a better position. Nathan Jones: I guess just a follow-up on some of the delayed spending you've seen out of some of the stuff that's going on with budget approvals and continuing resolutions and stuff like that. The current administration has shown a real propensity to want to spend in these areas. How would you handicap the potential for that spending to get accelerated in the back half of the fiscal year, your 2Q, 3Q for the government and perhaps see some upside relative to some of the forecasts that you've put out there for continuing headwinds in those areas? Lynn Bamford: Thank you, Nathan. It's -- we're definitely -- you can see our book-to-bill across Naval and Power, 1.5x. I mean we're definitely seeing the aggression and the desire to spend and to get things moving. And if I gauge it, the chance for upside by our quote activity, our order activity, the analysis of the pipeline across our defense business, it's very strong. And you see what -- the shipbuilding is very visible. Our defense electronics is across so many platforms that it's not driven by any one target. But even taken within our A&I segment, Chris mentioned in his prepared remarks, the IFPC program. The number of IFPCs procured this year has more than doubled from last year, and it's expected to almost double in '27. And there's lots of examples like that around that are some really dramatic upticks that are going to drive revenue for Curtiss-Wright. It's too early to count on anything. The President's budget request at $1.5 trillion, there's a lot of hand wringing on that. And I was up on the hill just a couple of weeks ago, and lots of people have lots of opinions on it. But I would say universally, everybody thinks there's going to be a much larger than the $1 trillion defense budget this year or next year. And so between that and NATO countries ramping their spending, our prospects are very good. Operator: We'll move on now to John Godyn with Citi. Unknown Analyst: This is [ Bradley Eyster ] on for John Godyn. So I wanted to circle back on the defense aerospace side that you called out earlier in your prepared remarks. So you highlighted strong trends for the quarter that benefited both aerospace and industrial as well as defense electronics. And this has been a common theme we've heard across this earnings season. So I was hoping you could talk a little bit more about what demand signals you're seeing here in the military aviation side looking ahead for the year and how things are shaping up relative to your expectations even from a few months ago. Are there any platforms or platform types such as fixed-wing versus rotorcraft growing faster than the other? I appreciate any color that you can give here. Lynn Bamford: Yes. I mean it's definitely an area of great growth. And whether it's modernization programs, things like the C-17 that we were able to announce in Q1, but there's a lot of aircraft modernization programs going on, the F-15EX, the KC-46 to just name 2 others. And we're very active and are participating in those early days, but as some of the next-generation air dominance programs are being selected, whether that's the F-47, F/A-XX is supposed to be awarded finally, and we're well positioned, we think, with that. And the CCAs, there's just -- the demand is very heavy. And clearly, the current situation over in Iran, there is definitely driving a lot of sparing activity type of work that we're already beginning to see. So it's not any one platform per se, but good steady content and growth. And even another example is with the President's budget in '27, the number of F-35s from here in the U.S. alone is going to double. So we'll see where that takes us. Unknown Analyst: Got it. I appreciate the color. And then I want to circle up on the commercial nuclear side, specifically on the AP1000. I'm just trying to get a sense of like when a customer or country finalizes an order or a deal, what's the timeline for when you guys could complete the product for these RCPs and start recognizing revenue? I'm just trying to get a sense like how the timing flows through these deals. Lynn Bamford: It's really a changing landscape right now. If you go back to our '24 Investor Day, we kind of laid out kind of the traditional approach to how the contractual situation has moved and how EPC contracts were led and how that led to us getting orders. But in the current environment, specifically more maybe here in the U.S. than across the European customers, with some of the funding that's being made available out of the government, it's less clear whether we're going to follow this traditional trajectory. And we really take our cues from Westinghouse. I mean, regardless of who's buying the plants, our customer is Westinghouse. And so we take our cues and work with them to understand when we can expect an order. And as I said in the prepared remarks, we do still expect that order this calendar year and our scenario playing a variety of things with Westinghouse to make sure we're ready to ramp with them and meet their needs so they can be successful in the marketplace. That's the most important thing for us is making them successful. And so we've talked in the past, we recognize the revenue over a 4- or 5-year bell curve. And so it will start a little slow at first as we -- there's work to be done that will drive revenue, but they started securing long lead material and things along those lines. So that's why we felt it was just prudent not to put any AP1000 revenue in our guide for this year's revenue because the exact timing of the order, we don't know and I don't want to try and predict it. And then whether it will have -- be in time for us to have meaningful revenue is TBD. Operator: We'll now move on to Louie DiPalma with William Blair. Louie Dipalma: Lynn, you mentioned F-47 and CCA. How are you positioned to potentially be involved for those next-gen platforms? Or have you already secured a spot in terms of content supplier relationships for those platforms? Lynn Bamford: So it's a little bit of both. There is content we have secured across those platforms, but there's absolutely content that we're still pursuing that there are still opportunities for us. So I think they will both provide solid revenue streams for us going forward. We're on both the winners of the CCA. We have nice content with both. So we'll see how that goes, whether they both wind up producing planes or just one of them. And when Boeing won the F-47, we were very pleased with that. We had strong content that we secured with them and some things that are still under work. So... Louie Dipalma: Great. And for the Navy, has the strength been broad-based across the nuclear pumps and valves that you provide in addition to electronics and R&D and perhaps overhaul? Or has anything stood out in terms of how you've been able to maintain the double-digit growth for the Navy for so long? K. Farkas: Yes. I would say, Louie, the vast majority of the Navy order book and backlog is really focused within the Naval and Power segment where we are embedded across the key naval nuclear platforms. And that's a very steady stream of work that continues to come on in. It gives us a very long-term view of where that market is headed. It's very durable revenues, and it's great cash flow. You may have noticed here in the first quarter that while it was an outflow for us in cash, it was better than what we had seen in prior years and even beat our expectations a little bit. That was really based upon the very strong orders that we had received across the submarine programs in Q1 and the related advances that come on into that. So great cash businesses as well. But we are seeing some uplift in other areas of the business for technologies such as EM actuation and various things that we do there on the ships. And then I think as you look across the Defense Electronics group, while it's not as significant a portion of their overall portfolio as, say, defense aero or ground defense, there's a lot of work that goes into the subs and surface combat ships for that business. So -- but the vast majority of what's happening there in the order book is really just kind of accelerating through the core of naval defense across the key platforms. I will say just maybe one last thing about naval, you can't forget about what's happening on -- with FMS. We are seeing a lot of naval aircraft handling system growth looking outwards. And then also, we mentioned, I think, in the prepared remarks, we're seeing a lot of good work with fleet overhauls and repair work. So those last few categories can be accretive to the overall margin profile of the naval defense work. Louie Dipalma: How significant is the overhaul work for the broader Navy segment? K. Farkas: Yes. I think when you look at just the RCOH as an example, I'll maybe just throw that out. And we do approximately $50 million in work every time one of those carriers comes in. We'll recognize that revenue over kind of a 4- to 5-year timeframe as they're doing the work on the ships. But beyond that, I mean, we talked a little bit too about some of the growth that's been embedded across the Virginia-class submarine programs more recently, initial spares provisioning that's happening there. We haven't given exact values. But with some of that work and then also the service centers that we have on the East and West Coast, it's really kind of opening us up to other opportunities to help get the fleet repaired and back onto the water. So it's good business for Curtiss-Wright. Operator: [Operator Instructions] We'll move on to Jan Engelbrecht with Baird. Jan-Frans Engelbrecht: Congrats on another strong set of results. I think I'll start off with if you can give us sort of the puts and takes over the next couple of years for the commercial nuclear franchise, how you're thinking about margins as you're sort of progressing through this decade? And just how we should think about sort of operating leverage on double-digit growth in the aftermarket and then SMR development ramping up, the impact of large reactors, AP1000 and then just the South Korean design, which I think you have around $20 million of content today. But if they can sort of figure out a way that there could be a domestic build of that as well, I would assume that you'd be in a great position as having the domestic facilities. Lynn Bamford: So important question and one that I don't know if we're being comfortable giving a ton of color on. I will say starting in the SMR space, we've been doing paid design work for 4-ish years now. And that's always some of your lower-margin business. And so as we begin to move as we were really pleased to be able to announce into a prototyping phase with X-energy and then some of our other content is in the same vicinity, but the only one we're really talking about is X-energy, that will be better margin business than the design work. And then we're still working on how we will move into early production quantities later this decade. So I feel like there's natural margin uplift as we get volume and move through that work tied to the SMRs. Relative to the aftermarket work, we make healthy margins on that business. It's more growing our content. And I don't know if there's any major margin changes coming in the aftermarket market work. I mean, as they do larger -- take on maybe some more sophisticated improvements that are being afforded as they contemplate not just the 80 years, but the 100 years. There could be a little bit of something there, but I don't think it's dramatic. And really, with the AP1000, we just need to work to support Westinghouse and it's a very active situation right now. And I just -- I don't think it's appropriate for us to make any comment on that. K. Farkas: And I would just add maybe to answer your question on the revenue growth. When we started the -- we had our last Investor Day back in May of '24, we put a slide up that showed the art of the possible, and we said that we would double our organic commercial nuclear footprint by 2028, which was taking $300 million of revenue to $600 million and then you can layer on the acquisitions and stuff that we've done since then. But it was a pretty reasonable outline of how we would actually achieve that. And while the slide said possible, I mean, certainly, some of the things that have been happening here in the industry since we had that Investor Day have given us increased confidence that the possible is looking really good. So I think as you're looking outward, we feel much better today about what's possible than we did back then. Jan-Frans Engelbrecht: That's very helpful. And just a quick follow-up, if I may. If you guys can just give us an update on the cockpit voice recorders franchise, sort of updates on the Airbus certification timeline? And then just how is it tracking the North American fleet sort of upgrading from 2 hours to 25 hours? I know there is a 2030 deadline, but what are you seeing so far? Lynn Bamford: So the work continues with Airbus, and we think we will achieve certification in the back half of this year. So that's good. I mean we're getting pretty close to having that achieved. I will say our deliveries remain pretty steady with Honeywell for new market build for Boeing. The aftermarket uptick has maybe been a little slower than we would have anticipated for retrofitting the existing fleet. But the good thing is as much as that was announced back in '24, it was actually signed into law February of this year. So I think that final step of making a legal requirement, it's just taking a little bit of time for the airlines to figure out how they're going to execute to that. So overall, that business is relatively flat year-over-year for us, but there's absolutely -- it will be a good growth driver for the Defense Electronics segment through the back end of this decade. So no concerns. It's just -- it's going to really start healthy growth next year. Operator: We'll move on now to Scott Deuschle with Deutsche Bank. Scott Deuschle: Lynn, there's obviously a lot of talk in the semiconductor industry about supply constraints and things like printed circuit boards and memory. I think this is something you've been pretty active about getting in front of and managing, but just curious for an update as to how you're thinking about managing those potential constraints and whether you see any impact to the business there? Lynn Bamford: There is definitely demand, and I really give a shout out to the team for their ability to manage their way through it. And we've talked about this. One of the areas that's a big focus in that team is the memory and storage chips has been a real focus, and they've done a great job of really working with our suppliers to secure supply. We tackle through so many different approaches. We work with our customers to fund the supply base for us. And in some cases, they're willing to do that. In some cases, it's more forecasted business and things we have to do. We definitely leverage government high-priority ratings where we can, which is a reasonable amount of the business, but not all. I'm not going to say that. But also just really from the COVID time and how we work with our suppliers, it's really become much more sophisticated over the past couple of years. And whether that's the personal relationships we have or tools we have to be better monitoring lead times and doing advanced buys. I know I've talked directly with the team about how they feel about the needs for '26. I think we have that well in hand, and they're focused on 2027 and being able to have things in line. So we're prepared to continue the great growth trajectory in that area and not let that impact us. And the other supply area that we're -- if you say the 2 that are top of mind, rare earth minerals are an issue that we watch, and that's more across our surface tech and industrial businesses, and they're also doing a lot of creative things with qualifying alternative minerals and looking for second sources and just various approaches. There's never one silver bullet that it's worked, but the teams do a great job with it. Scott Deuschle: Got it. And maybe this is overreaching, but have you seen competitors have maybe greater issues with the semiconductor constraints such that your ability to secure these supplies actually creates a market share opportunity relative to competitors that maybe haven't managed these input constraints as well as you have? Lynn Bamford: Not anything that would be meaningful that I would make comment on. I mean we are always after market share, and we are doing things to take market share. I will assure you that. And there are things that we're doing product capabilities. We talk frequently about our Fabric100, that's 100 Gigabit Ethernet, and that's a unique offering to Curtiss-Wright. We're leveraging that to take market share. But we're -- if they stumble, so be it, but we will do it through technology leadership and creating great value for our customer base that nobody else can deliver. Operator: There are no further questions at this time. I'm happy to return the call to Lynn Bamford, Chair and Chief Executive Officer, for additional or closing remarks. Lynn Bamford: Simply, thank you all for joining us today, and we look forward to speaking with you again on the road or following the release of our second quarter results. Have a good day. Operator: Thank you. This concludes today's Curtiss-Wright earnings conference call. Please disconnect your line at this time, and have a wonderful day.
Operator: Good morning, and welcome to CION Investment Corporation's First Quarter 2026 Earnings Conference Call. An earnings press release was distributed earlier this morning before market open. A copy of the release, along with a supplemental earnings presentation is available on the company's website at www.cionbdc.com in the Investor Resources section and should be reviewed in conjunction with the company's Form 10-Q filed with the SEC. As a reminder, this conference call is being recorded for replay purposes. Please note that today's conference call may contain forward-looking statements, which are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described in the company's filings with the SEC. Joining me on today's call will be Mark Gatto, CION Investment Corporation's Co-Chief Executive Officer; Gregg Bresner, President and Chief Investment Officer; and Keith Franz, Chief Financial Officer. With that, I would now like to turn the call over to Mark Gatto. Please go ahead, Mark. Mark Gatto: Thank you, and good morning, everyone. I want to start this morning the way we have on prior calls by putting our quarterly results in the proper context before walking through the details. While this was not our strongest quarter from a headline numbers perspective, I want to make clear that the story underneath those numbers is more nuanced than the headline suggests, and we believe there is quite a bit to feel good about as we look at the underlying health of our portfolio. I think it is important that investors and analysts understand what actually drove our results this quarter and evaluate us not quarter-to-quarter, but on a more long-term basis. Let me start with investment income. We reported $0.25 per share for the first quarter, which is below our monthly base distributions totaling $0.30 per share for the first quarter. This shortfall was driven primarily by lower transaction fees recorded during the quarter due to lower repayment and investment activity and lower dividend income earned on our investments. This shortfall was also driven by higher interest expense during the first quarter due to the refinancing of our lower-yielding fixed rate notes and senior secured debt into higher-yielding fixed rate unsecured notes, and the timing of paying down our debt with the net offering proceeds received from the recent issuances of our new unsecured notes due to potential prepayment penalties as all of our debt is currently at their contractual minimums. As a result, we carried more excess cash on our balance sheet than we would have under normal operating conditions, essentially sitting on proceeds we could not deploy. This was attributable to a specific capital structure decision we made that we believe was in the long-term interest of our shareholders, which we do not view as a reflection of the underlying earnings power of our portfolio. Gregg and Keith will provide further context, but I want to be clear that we believe that the underlying earnings capacity of our portfolio remains intact, and we remain optimistic about the trajectory from here. Turning to NAV. Our net asset value declined 4.7% quarter-over-quarter to $13.11 per share from $13.76 at year-end. As we have discussed on prior calls, mark-to-market movements in our portfolio can introduce quarterly volatility, and this quarter was no exception. Importantly, over 80% of the downward movement in our marks this quarter were unrealized in nature and driven by market level influences, movements in comparable public company valuations and broader credit spread widening, and not by a fundamental credit deterioration at our portfolio companies. This is an important distinction and one that gives us confidence in the underlying resilience of the book. I also want to address something directly that I know has been a topic of conversation in the BDC space broadly, the scrutiny around private credit marks and valuation rigor. We welcome that conversation because we believe that we have an extremely disciplined and transparent valuation process. We utilize 4 independent third-party valuation providers, and the vast majority of our portfolio is subject to full independent review and scrutiny every quarter. We believe that process is comprehensive and rigorous, and we are committed to maintaining that standard. At the same time, the incorporation of third-party macro assumptions and market level inputs can at times introduce marks on certain assets that may not fully reflect the underlying credit fundamentals of those positions, particularly given the secured and senior nature of our first lien holdings, which represents approximately 81% of the portfolio at the end of Q1. We believe that the heightened focus on software credit quality across the private credit industry may have contributed to a broader tightening of third-party valuation assumptions that given the sector-wide nature of that scrutiny could have affected our portfolio in a manner disproportionate to our actual exposure. With software representing just 1.8% of our portfolio, well below the 20% to 25% average reported across many private credit portfolios, we do not believe the degree of mark-to-market pressure we experienced this quarter is fully consistent with our underlying fundamentals. On credit quality more broadly, I am pleased to report that our portfolio continues to hold up very well. Our first lien book remains the core of our strategy and continues to perform well. Weighted average interest coverage across the debt portfolio was a healthy 2.08x for the quarter, a level we view as consistent with the defensive construction of our portfolio. Weighted average net leverage on our debt portfolio was 4.62x, essentially flat with 4.7x in the prior quarter. From an internal risk rating perspective, our weighted average risk rating was essentially unchanged at 2.08% versus 2.09% in the prior quarter, and our risk rated 4 names improved quarter-over-quarter to 1.55% of the portfolio at fair value, down from 1.9% in Q4. Our risk rated 5 names remained a very small portion of the portfolio at 0.54%. We had 7 upgrades and 8 downgrades in the quarter, a largely balanced picture that we believe reflects no meaningful deterioration in the overall composition of the book. On nonaccruals, I am pleased to share some positive news. Our nonaccrual percentage on a fair value basis improved to 1.53% as of March 31, down from 1.78% in the fourth quarter. The principal new addition to nonaccrual status this quarter was Lux Credit Consultants, which was in the midst of a sale process through quarter end. And I'm glad to report that subsequent to quarter close, that sale was successfully completed. As a result, we expect that Lux will be removed from nonaccrual status in Q2. Generally, our nonaccruals for the quarter were stable and consistent with our historical levels. More broadly, despite the volume of commentary out there about stress in private credit, we are simply not seeing broad-based deterioration across our middle market borrowers. And that is an important message. We believe that the domestic economy, while not without risks, continues to demonstrate underlying resilience. Our portfolio companies, the majority of which serve B2B end markets continue to operate in line with or close to our expectations. We remain mindful of the ongoing geopolitical developments and the uncertain macro backdrop, but our ground level view across 89 portfolio companies in 23 industries reflects a book that we believe is performing well and does not support the broad distressed narrative that circulates private credit portfolios in the press. Finally, we repurchased approximately 1.1 million shares during the quarter at an average price of $8.71 and we believe current prices represent a compelling opportunity to acquire our shares at a meaningful discount to fair value. We intend to continue such repurchases while seeking to simultaneously reduce our overall leverage through debt repayments, a combination we believe will position CION well for the remainder of 2026. Keith will provide additional details on our capital structure and distribution activity. With that, I will now turn the call over to Gregg to discuss our portfolio and investment activity during the quarter. Gregg Bresner: Thank you, Mark, and good morning, everyone. Prior to covering our investment and portfolio activity for Q1, I would like to expand on Mark's comments regarding our nominal level of software exposure within the portfolio. We have 3 software portfolio companies totaling approximately 1.8% of portfolio fair value or 2% on an amortized cost basis. We have no ARR loans in the portfolio. As a firm, we've historically not invested in software as we were unwilling to lend against an ARR growth methodology with negative EBITDA profile at closing. In terms of our Q1 investment activity, we remained highly selective with new portfolio investments and focused on transactions within our portfolio companies and the repurchase of our shares. We also work to balance the timing of investments versus repayment amounts while working to reduce leverage towards our targeted net leverage range. Overall, we had fewer exiting repayments for the quarter versus our Q4 level as certain repayments slipped into Q2. During the quarter, we continued to pass on new investment opportunities based on credit and pricing considerations. While secondary credit market conditions remain choppy based on macro concerns and potential cracks in private credit, there remained a significant bifurcation from the new issue market. New issue cohort pricing continued to be driven by the hangover of record 2024 and 2025 private debt fundraising, which translated into lower coupon spreads, higher leverage levels and looser credit documents in the new issue market. We focused our Q1 investment activities on incremental opportunities with our portfolio companies. We believe our continued investment selectivity and proportional deployment levels help us to invest in first lien loans at higher spreads when compared to the overall private and public loan markets. The weighted average yield for our new direct first lien investments for the quarter based on our investment cost was the equivalent of SOFR plus 6.1%. As we discussed in previous quarters, the majority of our annual PIK income is strategically derived from either highly structured first lien investments or where PIK income is incremental to our cash coupon. Together, these categories represented approximately 82% of our total PIK investments in Q1, up from 75% in Q4 of 2025. Over 99% of our PIK investments are in first lien assets. As a result, we believe this PIK income does not compare to restructured PIK income resulting from a deterioration in credit. Turning now to our Q1 investment and portfolio activity. Our Q1 investment activity consisted of investments in 2 new portfolio companies, Anchor QEA and Dependable Acquisition, both specialty business service providers, and incremental add-on investments and secondary purchases in existing portfolio companies, including American Clinical, Carestream Health, Coinmac, David's Bridal, HealthWay, Juice Plus, STATinMED, Stengel Hill and WorkGenius. During Q1, we made a total of approximately $69 million in investment commitments across 2 new and 9 existing portfolio companies, of which $54 million was funded. We also funded a total of $12 million of previously unfunded commitments. We had sales and repayments totaling $38 million for the quarter, which consisted of the full repayment of our first lien holdings in INW and The Men's Warehouse. As a result of all of these activities, our net funded investments increased by approximately $28 million during the quarter. As Mark referenced, our NAV decrease during the quarter was driven primarily by declines in the unrealized mark-to-market value of our portfolio. This was in large part driven by reductions in market multiples and resulting valuations due to macro headwinds ranging from the Iranian war and widespread market concerns regarding potential crack in private credit, most specifically the software concentrations within the private capital sector and potential AI impact to those investments. For the quarter, the ratio of mark-to-market declines versus mark-to-market increases for our investments was approximately 2:1. Our largest unrealized declines for the quarter were from our investments in Lux Credit, FuseFX, LAV Gear which is also known as 4Wall Entertainment, SIMR STATinMED and the common equity of David's Bridal. Lux Credit represented our largest decline as the sale process for the company resulted in final bids well below the initial indications of interest based on the company's significant asset base and EBITDA profile. Rather than the lenders restructuring and recapitalizing the company with additional investment, the majority of lenders decided to pursue a cash sale transaction and move on rather than restructure and invest. The sale closed early in the second quarter. The mark value of our investments in FuseFX and LAV Gear were negatively impacted by reduced trailing EBITDA performance and lower multiples as the sector rebuilds event and production pipelines from the writers' strike that delayed the release queue of new scripts and production content throughout the industry. Through January and February of 2026, LAV Gear's performance demonstrated stronger-than-projected recovery that we expect to continue into Q2. The unrealized decline in the mark of our SIMR STATinMED term loan was driven by both the relative increase in value to priority senior tranches where CION has a larger pro rata interest and lower revenue multiples derived from quasi comparable large-cap biopharma service companies impacted by AI and software concerns. As we have mentioned on previous quarterly calls, we expect to see significant quarter-to-quarter volatility in the marks of David's Bridal equity due to the larger overall relative size of our investment as well as the highly seasonal nature of the company's operations and working capital profile. In the face of difficult macro market sentiment, we also had a number of portfolio companies where the marks increased for the quarter due to stronger financial performance and projected outlook, including Longview Power, Hollander, TriMark, Avison Young and Services Compression (sic) [ Service Compression ]. From a portfolio credit perspective, our nonaccruals decreased from 1.78% of fair value in Q4 to 1.53% at the end of Q1. On an amortized cost basis, the number increased from 4.32% of cost to 5.35%. We added one new name to nonaccrual, our term loan investment in Lux Credit Consultants. Given the sale of the company in early Q2, Lux Credit will be removed from nonaccrual next quarter. On an absolute basis, nonaccruals continue to be in line with historical experience, and we are pleased with the continued credit performance of our portfolio, particularly in the current macro environment. Overall, our portfolio remains defensive in nature with approximately 81% in first lien investments. Approximately 98% of our portfolio remains risk rated 3 or better. Our risk rated 3 investments, which are investments where we expect full repayment but are either spending more engagement time and/or have seen increased risk, the initial asset purchase increased from approximately 11.5% in Q4 to 12.9% in Q1. I'll now turn the call over to Keith. Keith Franz: Okay. Thank you, Gregg, and good morning, everyone. During the first quarter, net investment income was $12.9 million or $0.25 per share compared to $18.3 million or $0.35 per share reported in the fourth quarter. Total investment income was $49.5 million during the first quarter compared to $53.8 million reported during the fourth quarter. The decrease in total investment income was driven primarily by lower transaction fees recorded during the first quarter due to lower prepayment and investment activity and lower dividend income earned on our investments when compared to the prior quarter. On the expense side, total operating expenses were $36.7 million compared to $35.5 million reported in the fourth quarter. The increase in operating expenses was primarily driven by higher interest expense due to an increase in the average debt balance outstanding and a higher weighted average cost of our debt capital during the quarter. These increases were driven as a direct result of refinancing our lower-yielding fixed rate notes and the repayment of a portion of our lower-yielding senior secured debt using the proceeds from our newly issued higher-yielding fixed rate baby bonds. The increase in our operating expenses was partially offset by lower advisory fees earned due to lower investment income recorded during the quarter. At March 31, we had total assets of approximately $1.8 billion and total equity or net assets of $660 million with total debt outstanding of $1.2 billion and 50.3 million shares outstanding. Our portfolio at fair value ended the quarter at $1.7 billion, and the weighted average yield on our debt and other income-producing investments at amortized cost was 10.4%, which is slightly down from 10.7% in the fourth quarter. At March 31, our NAV was $13.11 per share as compared to $13.76 per share at the end of December. The decrease of $0.65 per share or 4.7% was primarily due to unrealized mark-to-market price decreases in our portfolio and underearning our distributions during the first quarter. The decrease in NAV was partially offset by the accretive nature of our share repurchase program during the quarter. We ended the first quarter with a strong and flexible balance sheet with about $1.3 billion in unencumbered assets, a strong debt servicing capacity with an interest coverage ratio of about 2x and solid liquidity. We had over $100 million in cash and short-term investments and another $100 million available under our credit facilities. In terms of our debt capital, at March 31, we continue to have a healthy debt mix with about 75% in unsecured and 25% in senior secured bank debt. About 60% of our debt capital is in floating rate, which aligns well and creates a natural hedge with our mostly floating rate investment portfolio. Our well-diversified debt structure is focused on unsecured debt in order to maximize our balance sheet flexibility and at the same time, creates a strong buffer for our financial covenants. At the end of the quarter, our net debt-to-equity ratio increased to 1.62x from 1.44x at the end of December. And the weighted average cost of our debt capital was about 7.52%, which is slightly up from the fourth quarter. The increase in our weighted average cost of debt capital was directly due to refinancing our lower-yielding unsecured fixed rate debt and increasing our higher-yielding unsecured debt mix during the quarter. The increase in our net leverage ratio was primarily impacted by the quarterly decrease in our NAV and an increase in the average debt outstanding during the quarter. During the quarter, total debt increased by $35 million due to the timing of paying down a portion of our senior secured debt with a portion of the net proceeds raised from the new unsecured baby bond offering completed in February. During the quarter, on February 9, we completed a public baby bond offering, issuing $135 million of new senior unsecured notes with a fixed interest rate of 7.5% due 2031, which listed and commenced trading on the New York Stock Exchange under the ticker symbol CICC on February 12. A portion of the net proceeds from this offering was used to repay $100 million under our JPMorgan credit facility at the end of March. We expect to use the remaining proceeds from this offering, along with proceeds from recent and expected repayment and sales activities to further reduce our leverage level over the next few quarters. In addition, we will also consider rightsizing our leverage levels when we refinance our near-term maturity wall. In terms of our 2026 debt maturities, we continue to work with our banking partners and debt investors on refinancing our 2026 maturities over the next few months. Now turning to distributions. As previously announced, we changed the timing of paying base distributions to our shareholders from quarterly to monthly beginning in January 2026 to better align with our shareholder expectations. During the first quarter, we paid monthly base distributions to our shareholders totaling $0.30 per share. We also declared our second quarter monthly base distributions totaling $0.30 per share, which were paid or will be paid at $0.10 per share per month for each of April, May and June. As a result, the trailing 12-month distribution yield through the first quarter based on the average NAV was about 9.8% and the trailing 12-month distribution yield based on the quarter end market price was 20.2%. As announced this morning, we declared our third quarter base distributions totaling $0.30 per share, which is the same as the second quarter. The third quarter base distributions will be paid monthly in July, August and September at $0.10 per share per month. Okay, with that, I will now turn the call back to the operator, who will open the line for questions. Operator: [Operator Instructions] Our first question comes from the line of Erik Zwick with Lucid Capital Markets. Erik Zwick: I wanted to start with a question on your commentary about kind of gradually reducing leverage. Wondering if you could potentially provide just maybe a little kind of quantitative thoughts there in terms of where is your target to get there? And potentially, what is the time frame to achieve that target? Keith Franz: Yes, Erik, it's Keith. Yes, we're focused on getting those and driving those leverage levels down over the course of the remaining few quarters. We've got a few tranches that are in the queue to be repaid or matures this year. So we're going to take the advantage -- take advantage of either a combination of both rightsizing leverage through refinancing and/or using sales and repayments to reduce and drive down the leverage levels. Erik Zwick: Okay. But no specific kind of... Keith Franz: Time line? Erik Zwick: Quantitative target at this point? Or just in terms of where you'd like the debt-to-equity ratio to kind of where you feel comfortable having that today? Keith Franz: Yes, for sure. With the majority of our debt capital and unsecured, I think our leverage range is around 1.30, 1.35. Obviously, we're way above that. So it's going to take some time and some wood to chop to get us back there. But just looking at how our portfolio churns each and every year, at least 25% that generates an enormous amount of capital. So we intend to use that and other levers to drive the leverage levels down over the next couple of quarters. Erik Zwick: That's helpful, Keith. And then just curious with regard to Lux Credit Consultants and the sale there. Was the final sales price consistent with the 3/31 fair value mark? Keith Franz: Yes. Erik Zwick: Okay. Okay. So no, nothing shouldn't be any additional kind of, I think, put in there. Okay. Great. And then one kind of -- just curious about the -- you had a strong quarter of originations in 1Q. How is the pipeline looking at this point? And what are you seeing in terms of spreads and how that compares to the existing portfolio yield? Gregg Bresner: So Erik, we ended the quarter -- the quarter was [ S6 10 ] profile of our new investments. I would say we're being very careful. There is definitely a disconnect between the new issue market and the secondary and public markets for direct. I think there's still a cohort of a lot of fundraising that happened over the last 18 months where they're specifically targeted to the new issue cohort. So I would say we're still trying to maintain our S6 target. So we're being incredibly choosy because we see better opportunities candidly in the secondary markets in the portfolio and to buy back our stock compared to seeing spreads still relatively tight in new issue specifically. Erik Zwick: Gregg, and how does the pipeline look in terms of opportunities? Is the kind of global and macroeconomic uncertainty impacting things at all? Or are you still seeing quite a few attractive opportunities to invest in? Gregg Bresner: No, we're still seeing attractive opportunities. But proportionately for us, I think it's -- we don't have to do a massive amount of deals to proportionately deploy money. But I will say that the environment has definitely affected M&A. We are seeing reduced M&A activity because of macro as well as where interest rates are. So -- but with our proportional deployments, we're still seeing a pretty rich opportunity set. It's just a question of picking the best ones. Erik Zwick: Got it. And last one for me. I appreciate the commentary about David's Bridal and the seasonality there. One, I guess, could you just remind me, I think, kind of typically the second and third quarters are the strongest for them given the traditional wedding season. But also curious if you could provide an update on the -- I believe it's the Pearl? Is that the online initiative that had been introduced over the past year or so and how that's progressing? Gregg Bresner: Sure. So you're exactly right. Q2 and Q3 are the seasonally strongest quarters for David's Bridal. And the Pearl Marketplace segment is ramping -- is accelerating. So we've been very pleased with the ramp in that particular part of the business. And strategically, that is the focus for Bridal today as we move more and more of our business to digital. And so that's been a good growth part of the business. Operator: And this concludes our Q&A session. I will now turn the call back to management for final comments. Michael Reisner: I wanted to thank everybody for joining us today. We appreciate your support and interest in our CION Investment Corp., and we look forward to speaking to you next quarter. Operator: Thank you. And this concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.