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Operator: Ladies and gentlemen, thank you for standing by and welcome to the first quarter 2026 CVR Partners, LP earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during that time, press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star followed by the number one. As a reminder, today's call is being recorded. I will now hand today's call over to Richard J. Roberts, vice president of FP&A and investor relations. Please go ahead, sir. Richard J. Roberts: Good morning, everyone. We appreciate your participation in today's call. With me today are Mark A. Pytosh, our chief executive officer; Dane J. Neumann, our chief financial officer; Mike Wright, our chief operating officer; and other members of management. Prior to discussing our 2026 first quarter results, let me remind you that this conference call may contain forward-looking statements as that term is defined under federal securities laws. For this purpose, any statements made during this call that are not statements of historical facts may be deemed to be forward-looking statements. You are cautioned that these statements may be affected by important factors set forth in our filings with the Securities and Exchange Commission and in our latest earnings release. As a result, actual operations or results may differ materially from the results discussed in the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements whether as a result of new information, future events, or otherwise, except to the extent required by law. This call also includes various non-GAAP financial measures. Disclosures related to such non-GAAP measures, including reconciliations to the most directly comparable GAAP financial measures, are included in our 2026 first quarter earnings release that we filed with the SEC for the period. Let me also remind you that we are a variable distribution MLP. We will review our previously established reserves and current cash usage, evaluate future anticipated cash needs, and may reserve amounts for other future cash needs as determined by our general partner’s board. As a result, our distributions, if any, will vary from quarter to quarter due to several factors, including, but not limited to, operating performance, fluctuations in prices received for finished products, capital expenditures, and cash reserves deemed necessary or appropriate by the board of directors of our general partner. With that said, we will turn the call over to Mark A. Pytosh, our chief executive officer. Mark A. Pytosh: Thank you, Richard. Good morning, everyone, and thank you for joining us for today's call. To summarize financial highlights for 2026, net sales were $180 million, net income was $50 million, EBITDA was $78 million, and the board of directors declared a first quarter distribution of $4 per common unit, which will be paid on May 18, 2026 to unitholders of record at the close of market on May 11, 2026. In 2026, our ammonia plant utilization was 103%, with both plants running well and experiencing minimal downtime during the quarter. We also saw an increase in ammonia sales volume relative to the prior-year period, along with increased sales prices for UAN and ammonia. The tightness in the nitrogen fertilizer market that began in 2025 has only been amplified by the conflicts in the Middle East over the past two months, leading to higher prices for the spring. I will discuss further in my closing remarks. I will now turn the call over to Dane to discuss our financial results. Dane J. Neumann: Thank you, Mark. Turning to our results for 2026, we reported net sales of $180 million and operating income of $58 million. Net income for the quarter was $50 million, or $4.72 per common unit, and EBITDA was $78 million. Relative to 2025, the increase in EBITDA was primarily due to a combination of higher UAN and ammonia sales pricing and higher ammonia sales volumes. Ammonia production for the first quarter was 220 thousand gross tons, of which 70 thousand net tons were available for sale. UAN production was 335 thousand tons. During the quarter, we sold approximately 310 thousand tons of UAN at an average price of $343 per ton and approximately 73 thousand tons of ammonia at an average price of $687 per ton. Relative to 2025, total sales volumes were down slightly, primarily due to lower UAN production and sales volume as a result of some minor planned and unplanned outages at East Dubuque during the quarter. First quarter prices for UAN increased approximately 34%, and ammonia prices increased approximately 24% relative to the prior-year period. Direct operating expenses for the first quarter of 2026 were $63 million. Excluding inventory impacts, direct operating expenses increased by approximately $9 million relative to 2025, primarily due to higher natural gas and electricity costs and repair and maintenance expenses. Capital spending for the first quarter was $14 million, of which $8 million was maintenance capital. We estimate total capital spending for 2026 to be approximately $60 million to $75 million, of which $35 million to $45 million is expected to be maintenance capital. We anticipate a significant portion of the profit and growth capital spending plan for 2026 will be funded through cash reserves taken over the past few years. We ended the quarter with total liquidity of $178 million, which consisted of $128 million in cash and availability under the ABL facility of $50 million. Within our cash balance of $128 million, we had approximately $17 million related to customer prepayments for the future delivery of product. In assessing our cash available for distribution, we generated EBITDA of approximately $78 million and had net cash needs of $36 million for interest costs, maintenance capex, and other reserves. As a result, there was $42 million of cash available for distribution, and the board of directors of our general partner declared a distribution of $4 per common unit. Looking ahead to 2026, we estimate our ammonia utilization rate to be between 95% and 100%, direct operating expenses, excluding inventory and turnaround impacts, to be between $57 million and $62 million, and total capital spending to be between $28 million and $32 million. With that, I will turn the call back over to Mark. Mark A. Pytosh: Thanks, Dane. In summary, we had another strong quarter of operations with ammonia utilization over 100%, and the recent conflicts in the Middle East have caused prices to increase further for the spring. The spring planting season is underway, and it has gone well so far this year. The USDA is currently estimating approximately 95 million acres of corn will be planted in 2026. While this is a decline from the record levels of 2025, 95 million acres is well above the average level of corn plantings over the last five years. Yield estimates are approximately 183 bushels per acre, resulting in an inventory carryout level below 2025. Soybean planted acreage is expected to be approximately 85 million acres with a yield estimate of 53 bushels per acre, resulting in an inventory carryout roughly in line with 2025. December corn prices are approximately $4.75 per bushel, and soybeans are approximately $11.90 per bushel. The Trump administration and congressional leaders continue to discuss potential subsidy programs for farmers to help offset lower grain prices and higher input costs. As a reminder, the U.S. is a net importer of nitrogen fertilizers, resulting in domestic fertilizer prices being heavily influenced by changes in global fertilizer prices. Europe, Brazil, and India all compete with the U.S. for global fertilizer production. Geopolitical conflicts have impacted the global fertilizer industry for the past few years, beginning with Russia's invasion of Ukraine in 2022. The recent conflicts in the Middle East have caused further disruptions to global supply, with roughly 30% of nitrogen fertilizer production typically transiting through the Strait of Hormuz. In addition, multiple nitrogen fertilizer production facilities across the Middle East have been damaged or have curtailed production over the past few months due to limited natural gas supplies. Unfortunately, these events occurred at a critical time for farmers needing to secure crop inputs ahead of the spring planting season, as fertilizer inventory levels were already tight across the industry following the large planting seasons in the U.S. and Brazil in 2025. While it remains unclear how long these issues in the Middle East and Russia will persist, we will continue to focus on safely and reliably running our plants at high utilization levels to meet the needs of our customers during this challenging time in our industry. Natural gas prices in Europe have also increased amid the recent Middle East conflicts, currently trading around $14 per MMBtu, while U.S. prices have once again fallen below $3 per MMBtu. Damage sustained at LNG production facilities could take several years to repair, which would likely keep upward pressure on international gas prices relative to U.S. prices. The cost to produce ammonia in Europe has remained durably at the high end of the global cost curve, and production remains below historical levels, which has created sales opportunities for U.S. Gulf Coast producers to export ammonia to Europe for upgrade. We continue to believe Europe faces structural natural gas supply issues that will likely remain in effect through the next few years. The conflicts over the past few years in Ukraine and now Iran are a reminder of the value of U.S. production with adequate and secure feedstock availability. At our Coffeyville facility, we continue to work on a detailed design and construction plan intended to allow the plant to utilize natural gas as an alternative feedstock to third-party pet coke, in addition to increasing ammonia production capacity by up to 8%. We now believe we can achieve the feedstock diversification and capacity expansion of this project without investing the capital to source hydrogen from the adjacent Coffeyville refinery, which should significantly reduce the total capital spend associated with that scope of the project. We also continue to execute certain debottlenecking projects at both plants that are expected to improve reliability and production rates. These include the brownfield capacity expansion at East Dubuque that we intend to complete during the upcoming turnaround, in addition to water quality upgrade projects at both plants and the expansion of our DEF production and load-out capacity. The goal of these projects is to support our target of operating the plants at utilization rates above 95% of nameplate capacity, excluding the impact of turnarounds. If the two brownfield expansion projects are completed, we estimate our consolidated ammonia production capacity would increase by approximately 7%. The funds needed for these projects are coming from the reserves taken over the last few years, and the board elected to continue reserving capital in the first quarter. While the board looks at reserves every quarter, I would expect them to continue to elect to reserve some capital, and we anticipate holding higher levels of cash related to these projects in the near term as we ramp up execution and spending. We believe unitholders will see the benefits of these investments in the coming years as these projects are completed and brought online, improving reliability and performance. In the quarter, we executed on all the critical elements of our business plan, which include safely and reliably operating our plants with a keen focus on the health and safety of our employees, contractors, and communities; prudently managing costs; being judicious with capital; maximizing our marketing and logistics capabilities; and targeting opportunities to reduce our carbon footprint. In closing, I would like to thank our employees for their excellent execution, safely achieving a 103% ammonia utilization, and the solid delivery on our marketing and logistics plans, resulting in a distribution of $4 per common unit for the quarter. With that, we are ready to answer any questions. Operator: At this time, if you would like to ask a question, press star followed by the number one on your telephone keypad. If your question has been answered and you would like to remove yourself from the queue, press star followed by the number one. Again, as a reminder, to ask a question, press star followed by the number one on your telephone keypad. At this time, there are no questions. I will now hand the call back over to the presenters for any closing remarks. Mark A. Pytosh: Thank you, everybody. We appreciate you joining the call today, and we look forward to discussing our second quarter results in late July. Thank you very much, and have a good day. Operator: This concludes today's call. Thank you for joining. You may now disconnect your line.
Operator: Good morning, ladies and gentlemen, and thank you for standing by. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the NexPoint Real Estate Finance, Inc. First Quarter 2026 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. I would now like to turn the call over to Kristen Griffith, investor relations. Please go ahead. Kristen Griffith: Thank you. Good day, everyone, and welcome to the NexPoint Real Estate Finance, Inc. conference call to review the company's results for the first quarter ended 03/31/2026. On the call today are Paul Richards, executive vice president and chief financial officer, and Matthew Ryan McGraner, executive vice president and chief investment officer. As a reminder, this call is being webcast to the company's website at nrep.nexpoint.com. Before we begin, I would like to remind everyone that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management's current expectations, assumptions, and beliefs. Listeners should not place undue reliance on any forward-looking statements and are encouraged to review the company's annual report on Form 10-Ks and the company's other filings with the SEC for a more complete discussion of risks and other factors that could affect the forward-looking statements. The statements made during this conference call speak only as of today's date and, except as required by law, NexPoint Real Estate Finance, Inc. does not undertake any obligation to publicly update or revise any forward-looking statements. This conference call also includes an analysis of non-GAAP financial measures. For a more complete discussion of these non-GAAP financial measures, see the company's presentation that was filed earlier today. I would now like to turn the call over to Paul Richards. Please go ahead, Paul. Paul Richards: Thanks, Kristen, and good morning, everyone. I will walk through our quarterly results, cover the balance sheet, and provide guidance for Q2 before turning it over to Matt for a deeper dive on the portfolio and macro lending environment. For the first quarter, we reported net income of $0.42 per diluted share compared to $0.70 for Q1 2025. The decrease was driven by small mark-to-market declines on preferred stock and warrants, as well as a decrease in the change in net assets related to consolidated CMBS VIEs. Earnings available for distribution was $0.43 per diluted share in Q1 compared to $0.41 per diluted share in the same period of 2025. Cash available for distribution was $0.58 per diluted share in Q1 compared to $0.45 per diluted share in the same period of 2025. We paid a regular dividend of $0.50 per share in the first quarter, which is 1.16 times covered by cash available for distribution. On 04/28/2026, the board declared a dividend of $0.50 per share payable for 2026. Book value per share decreased slightly by 0.3% from Q4 2025 to $18.96 per diluted share, primarily driven by unrealized losses on our preferred stock investments and stock warrants. Turning to new investments during the quarter, the company funded over $30 million on two loans; both pay a monthly coupon in the mid-teens. I want to highlight what is, in our view, the most important development of the quarter and, frankly, of this week. We have successfully refinanced $180 million of senior unsecured notes that were maturing on May 1. We replaced those 5.75% fixed-rate notes with a new $242 million total return swap facility priced at SOFR plus 375 basis points with a three-year term and one-year extension option. This transaction does several things. First, it removes the largest near-term liability overhang on our balance sheet. Second, the floating-rate structure aligns with our floating-rate asset base and gives us refi optionality as the curve evolves. Third, the upsizing gives us approximately $45 million of incremental capacity to deploy into our pipeline at the double-digit coupons we are seeing today. And fourth, the facility allows back-lever optionality on eligible positions, which expands our origination capacity without requiring additional unsecured note issuances. We engaged more than 20 counterparties across bank and nonbank channels to optimize the structure, and the SOFR plus 375 pricing came inside comparable mortgage REIT executions in the high-yield baby bond and term loan markets. Importantly, we did this without diluting common shareholders at a discount to book. Combined with the $21 million we raised in our Series C preferred and the re-REMIC execution I will discuss in a moment, we head into the back half of 2026 with one of the cleanest, most flexible capital structures in the commercial mortgage REIT sector. Capital recycling and book value accretion: We executed a re-REMIC of our FRAN 2017-K62 B-Piece during the quarter. We sold the B-Piece to Mizuho at 92.7, having purchased it at 68.69 in 2021, and reinvested into the HRR tranche of the new structure at an 18.5% yield. That single transaction generated $0.46 per share of book value appreciation, reduced repo financing by $75 million, and is expected to drive approximately $0.34 per share of annual CAD accretion going forward. This is the kind of execution that does not happen by accident, and it speaks to the value we extract from a portfolio of seasoned, well-constructed credit positions. Moving to the portfolio and balance sheet. Our portfolio is comprised of 90 investments with a total outstanding balance of $1.1 billion. Our investments are allocated across sectors as follows: 39.4% multifamily, 35.9% life sciences, 17.1% single-family rental, 3.9% storage, 0.6% marina, and 2.1% industrial. Our fixed income portfolio is allocated across investments as follows: 19% CMBS B-Pieces, 22% mezz loans, 24.5% preferred equity investments, 15.6% revolving credit facilities, 10.1% senior loans, 4.2% IO strips, and 4.6% promissory notes. The assets collateralizing our investments are allocated geographically as follows: 28.7% Massachusetts, 17.6% Texas, 5.9% Florida, 4.9% Georgia, 5.2% California, and 4.7% Maryland, with the remainder across states with less than 4% exposure, reflecting our heavy preference to Sunbelt markets, with Massachusetts and California exposure heavily weighted towards life science. The collateral on our portfolio is 81.2% stabilized with 59.9% loan-to-value and a weighted average DSCR of 1.32x. We have $665.2 million of debt outstanding with a weighted average cost of 5.2% and a weighted average maturity of 0.8 years. Our secured debt is collateralized by $571.3 million of collateral with a weighted average maturity of 3.8 years and a debt-to-equity ratio of 0.7x. Moving to our guidance for the second quarter. Earnings available for distribution: $0.43 per diluted share at the midpoint, with a range of $0.38 on the low end and $0.48 on the high end. Cash available for distribution: $0.54 per diluted share at the midpoint, with a range of $0.49 on the low end and $0.59 on the high end. With that, I would like to turn it over to Matt for a detailed discussion of the portfolio and the current market environment. Matthew Ryan McGraner: Appreciate it, Paul. I am excited to walk through another strong quarter for NexPoint Real Estate Finance, Inc., and to thank our team and our partners for executing in what continues to be a noisy macro backdrop, including and especially the exciting and accretive financing completed with Mizuho that Paul just mentioned. Now on to the verticals. On the residential front, this is where we have our largest exposure at roughly 56% of the portfolio between SFR and multifamily. We are now firmly in the supply trough that I have been describing on these calls for several quarters. The thesis is playing out. We are coming off of a record national multifamily supply cycle. Net deliveries peaked at approximately 695,000 units in the trailing 12 months ended Q4 2024. For context, that compares to roughly 282,000 units of average annual deliveries since 2001. CoStar now forecasts 2026 deliveries to fall approximately 49% from their 2025 levels, with another 20% decline forecast for 2027. 2027 and 2028 forecasts have been revised down meaningfully from prior estimates as well. On the supply side, multifamily construction starts are running approximately 70% below their 2022 peak, and that is locking in a multiyear supply trough. On the demand side, the structural backstop has not changed. The cost to own a home in our markets remains roughly three times the cost to rent, and there is no reasonable mortgage rate scenario that closes that gap quickly. Our on-the-ground leasing data is consistent with the inflection thesis. By putting it all together, we believe 2026 and 2027 will be meaningfully better than 2025 for residential operators and, by extension, for the residential debt collateral on our balance sheet. On life sciences, I want to spend a minute here because I know it is a sector that has attracted some discussion; I think the conversation deserves a little more nuance than it has been getting. Our exposure is concentrated, intentional, and increasingly de-risked. Our Alewife project is now 71% leased, anchored by Lila Sciences, a pioneering AI and life science company, on a long-term lease for 245,000 square feet with options to expand. The active pipeline of RFPs, LOIs, and leases on the project today represents approximately 92% of the remaining vacant square footage. This is a high-conviction underwrite into a project where leasing momentum and credit improvement are visible in the data, not aspirational. An additional and increasingly relevant point I want to drive home is the demand funnel of our life science collateral has widened materially because of AI, not in spite of it. AI companies need exactly the same purpose-built infrastructure that traditional lab tenants need: power density, cooling capacity, structural floor loads, ventilation, and vibration tolerances. They cannot retrofit older converted assets at any rent. They need the bones, and they will pay for the bones. Alewife is exactly that asset in the right submarket adjacent to MIT and the broader Cambridge cluster. Our life science exposure is not a generic bet on the sector. It is a concentrated bet on first-to-fill, infrastructure-grade assets in elite educational districts that are now also AI corridors. The credit profile of these assets is improving, not deteriorating, as the tenant universe widens. Moreover, our capital is largely placed in the last 12 to 18 months at a reset basis that primes billions of dollars of equity versus loans originated in the go-go days of the post-COVID liquidity craze where capital was much less discerning. On to self storage. Storage is in the cyclical bottoming process. Industry-wide second quarter earnings for the public REITs were consistent with guidance and largely in line with sell-side estimates. Expectation for the full year is roughly flat, with flat revenue and 50 to 150 basis point declines in NOI. Supply remains muted also. According to the data, facilities under construction are less than 3% of existing supply; that is the equilibrium benchmark. Forecasted deliveries over the next several years could be as low as 1% of existing stock, and combined with the difficulty of bank financing for new development, the cost of land and materials, and a higher-rate environment than the 2015 to 2020 development cycle, we expect supply discipline to persist and pricing power to return. Our NSP portfolio continues to outperform the industry meaningfully, with occupancy in the low 90s near the top of the industry, and rent growth and NOI performance materially ahead of the sector decline by almost 300 to 500 basis points. Moving to our pipeline. Today, it consists of approximately $190 million of NexPoint Real Estate Finance, Inc. investment across 11 active deals, three closed and eight under executed LOI, plus an additional $275 million of structured product opportunities, specifically across multifamily senior loans and CMBS pools. These are real deals at real spreads. The pricing power remains very much in our favor for disciplined capital providers like us. The pipeline's blended return profile is well in excess of our cost of capital and the new TRS facility that Paul mentioned, which is already driving modest increases in CAD, which we expect to see continuing throughout 2026. Before I close, I want to take a moment on something that I believe will be a meaningful differentiator for NexPoint Real Estate Finance, Inc. over the next several years. We are deploying AI across our underwriting, portfolio monitoring, credit risk, and operations functions, and we believe we are ahead of the commercial mortgage REIT peer group on this. On the underwriting side, we are piloting AI-assisted deal screening and diligence across CMBS, mezzanine, and preferred equity originations. The system ingests rent rolls, comps, and market data, and our target is a 50% reduction in underwriting cycle time. That means more deals are being evaluated, sharper credit work, faster execution, all without expanding headcount. On the portfolio monitoring side, we are deploying always-on surveillance across all 92-plus investments. Machine-learning-driven signals on occupancy, rent growth, debt service coverage ratios, and sponsor health flag risk before it shows up in the financials. We believe this will result in earlier identification of watch list assets and meaningfully tighten the feedback loop between credit underwriting and portfolio surveillance. We are also building predictive credit models for borrower default probability, LTV stress paths, and loss given defaults. This reinforces our existing disciplined underwriting with data-driven early warnings. It does not replace our investment committee process. In our operations and reporting, we are using generative AI to accelerate investor reporting, SEC filings prep, earnings supplemental drafting, and internal research, freeing our team for higher value analytical work. Our roadmap is the sequence foundation in Q2 and Q3 of this year, scale across the full portfolio by Q4, and full optimization throughout 2027. We expect this to translate into faster decisions, sharper risk management, and a more scalable platform for growth. A few closing points on capital and the balance sheet. Net debt to equity continues to run below 1x, among the lowest in commercial mortgage REIT space. Combined with the re-REMIC execution that Paul just mentioned and the new TRS facility, we do indeed have the capital structure flexibility to be opportunistic on origination and on our own stock. Speaking of which, at current levels, we continue to trade at a meaningfully deep discount to book value of approximately $19 per share. To be clear, we view buybacks at this discount as an accretive use of capital, and you should expect to see us continue to buy back stock opportunistically alongside funding the pipeline I just walked through. Given our liquidity position and having successfully refinanced near-term maturities, the two are not mutually exclusive. Our Series C preferred programs continue to provide flexible, nondilutive capital. Our book value is stable. Our dividend coverage is sound. Leverage is low, and the portfolio's credit profile is improving. That is a setup we feel very good about heading into 2026. To summarize, strong quarter on earnings and credit, a transformative refinancing on the liability side, a continuing supply-driven tailwind in the residential space, a de-risking and broadening demand picture in life science, a robust pipeline of accretive deployment, and an AI platform initiative that we believe will set NexPoint Real Estate Finance, Inc. apart over the coming years. As always, I want to thank the team here for their hard work, and now we would like to turn the call over to the operator to take your questions. Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. As a reminder, to ask a question, please press the star button followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. One moment please for your first question. Your first question comes from the line of Jade Joseph Rahmani of KBW. Please go ahead. Jade Joseph Rahmani: Thank you very much. Rates are trending higher year to date, and I was wondering what you think the impact to the CRE recovery outlook will be, particularly around multifamily as bridge loans taken out during the COVID years are up for maturity. Matthew Ryan McGraner: Yes, it is a good question. What I can say is in terms of the last, I would say, four to six weeks with rates going up as a result of geopolitical tensions, the processes that we have seen that started prior to that time, in terms of the capital markets transactions both on loan sales and investment sales, have all continued without, I would say, material disruption. There have been, I would say, some slight walkbacks in terms of buyers underwriting a 5.5% all-in rate on a Freddie or Fannie agency, and then the 10-year moves against them, and so they will seek a little retrace. So there is, I would say, a little disruption in the capital markets, but nothing that would halt it, and liquidity is still very, very plentiful on the multifamily side. And I think what is even more important than that is we, and I think the broader public REIT universe in the reporting yesterday and today, are really starting to see the fundamentals in the multifamily sector turn and firm up. Concessions are getting weaker. In our own portfolio, for example, concessions are down by 50% from Q4. All of that is offsetting, I think, any near-term interest rate rise as it relates to multifamily. Jade Joseph Rahmani: Life science update has been quite impressive, and I was wondering if you could give some thoughts. Do you view the Alewife exposure as unique to NexPoint Real Estate Finance, Inc., or are you also seeing green shoots elsewhere in the portfolio? And then overall, do you view NexPoint Real Estate Finance, Inc.'s exposure as better than the market? One of the commercial mortgage REITs downgraded a loan to risk five and took a quite large reserve on that. They are also expecting an REO in life science and much of it is vacant in the sector, so just looking for some additional thoughts there. Matthew Ryan McGraner: Yes, you bet. I think the important point on our project in Alewife is, again, it is brand new, it is purpose-built with incredible infrastructure. And the land that the asset is built on was assembled over years, three to five years; it was not just a spec build. It was very intentional and in the cluster submarket. I think that, for one, is unique. Our own investment in terms of the loan-to-cost is roughly 30%. That is our unique sponsor relationship there and the ability for us to provide capital at a time, like I said, in the last 12 to 18 months where there was literally no capital available in the life science sector. So I think the loans that I have seen as well that you are referring to were, again, originated in a more speculative environment with more hope to lease, on the outskirts of the cluster markets where we have exposure. Cambridge and the Longwood and Fenway districts are going to be the first-to-fill locations, and we are seeing real depth in the project leasing in terms of demand coming out of big pharma and the venture space. I think the green shoots you could point to are the biotech index nearing cyclical highs, venture capital at a high since 2021, and then, again, the AI spend and the assets that AI needs just widen the demand funnel for our assets. We are in the right locations where they want to be, and they have the critical infrastructure that is demanded by their compute and other real estate needs. So I do think we are different. I do think our exposure is different, and I think it is, again, more recent at a reset basis versus loans that were originated perhaps in 2020, 2021, and 2022. Gabe Poguey: Hey, guys. Thanks for taking the question. I want to actually piggyback on what Jade was just asking. It sounds like Alewife is doing great. Some other exposures, you know, Holly Springs and Vacaville, California. You guys have low attachment points, but it looks like the senior mortgages are due maybe by the end of the year. Just any color you can give on expectations for the underlying asset, whether it is a refi or a sale, etc., I think would be helpful as it pertains to life science exposure away from Alewife. And then one more kind of just on the accounting side. In the other income, the $17 million, can you guys break out the components of that for us before we get the 10-Q, or do we need to wait for the 10-Q for that? Matthew Ryan McGraner: Great question, and thanks for it, Gabe. So Holly Springs and Vacaville are both advanced manufacturing assets, which, if anything, is stronger in the last six months than life science. The Holly Springs underlying collateral, I believe, is now topped out, has a tenant, and I think we will likely be refinanced out of that deal. The tenant is a battery manufacturer for the Department of Defense. They are seeing a ton of growth right now, and I see that exposure being reduced by a loan payoff at some point this year. Same thing goes for Vacaville. It has eight to 10 project names in and around both semiconductor manufacturing and advanced manufacturing in the pharmaceutical side. To your point, the attachment is very low there, so I think there are a lot of ways to win, and I would say that we would probably be taken out of that asset in the next 12 months as well. And then one thing that is on the horizon that could be good and bad is Alewife being repaid. With the success of leasing there, going from zero to 71% leased, and the tenant quality and the clustering that is happening—like I said, there are RFPs and LOIs on that asset that almost get it to 100% full—we could see that capital come back to us in 12 months as well. Paul Richards: Yes, hey, Gabe. Great question. I think we wait until the 10-Q for that one. It will give you a good breakdown of the other income, and we can provide a breakdown in the supplement as well going forward for better analysis. Operator: There are no further questions at this time. And with that, I will now turn the call back over to the management team for final closing remarks. Please go ahead. Matthew Ryan McGraner: Thank you again for everyone's participation this morning, and we look forward to speaking to you next quarter and providing another good update. Have a great day. Thanks. Operator: Ladies and gentlemen, this concludes today's call. Thank you for participating. You may now disconnect your lines.
Operator: Good day, and thank you for standing by. Welcome to the Pulmonx First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. Now it's my pleasure to hand the conference to Brian Johnston with Investor Relations. Please go ahead. Brian Johnston: Good afternoon, and thank you all for participating in today's call. Joining me from Pulmonx are Glen French, President and Chief Executive Officer; and Derrick Sung, Chief Operating Officer and Chief Financial Officer. Earlier today, Pulmonx issued a press release announcing its financial results for the quarter ended March 31, 2026. A copy of the press release is available on the Pulmonx website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward-looking statements. All forward-looking statements, including, without limitation, those relating to our operating trends, commercial strategies and future financial performance, including long-term outlook and full year 2026 guidance, the timing and results of clinical trials, physician engagement, expense management, market opportunity, guidance for revenue, gross margin, operating expenses, cash usage, commercial expansion and product demand, adoption and pipeline development are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our filings with the Securities and Exchange Commission, including our annual report on Form 10-K filed with the SEC on March 10, 2026. Also, during this call, we will discuss certain non-GAAP financial measures. Reconciliations to these non-GAAP financial measures to the most directly comparable GAAP financial measures are provided in the press release, which is posted on our Investor Relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, April 29, 2026. Pulmonx disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. And with that, I will turn the call over to Glen. Glendon French: Thank you, Brian. Good afternoon, everyone, and welcome to our first quarter 2026 earnings call. Here with me is Derrick Sung, our Chief Operating Officer and Chief Financial Officer. Pulmonx delivered total worldwide revenue of $20.6 million in the first quarter of 2026. Since our last update, we are increasingly encouraged by continued operational momentum, and we remain confident in our ability to achieve our previously communicated revenue guidance of $90 million to $92 million for the full year 2026 with a return to global growth in the back half of this year. We are making good progress in our efforts to address internal operational and executional challenges that have led to recent underperformance, and we remain highly focused on 3 key priorities: First, reaccelerating U.S. sales growth; second, advancing our market-expanding clinical initiatives; and third, aligning our cost structure to drive profitability. Let me take each of these in turn, starting with our progress on driving U.S. sales growth. A foundational element of reaccelerating U.S. revenue growth is having the right people and the right culture in place, and I'm encouraged by our progress. We have filled with top talent all our sales leadership positions and substantially all our U.S. field sales roles. We are also seeing clear improvements in our commercial team culture. Further, sales turnover has stabilized over the last 6 months, a marked improvement from earlier in 2025. We expect turnover from here to be in line with industry standards. We believe this stabilization is a direct result of our efforts to increase leadership transparency and streamline selling priorities to focus on our highest impact activities. These priorities are grounded in our previously discussed near-to-far approach, specifically, one, setting up high-quality and efficient valve programs; two, engaging with COPD-oriented clinicians aligned with hospital systems offering Zephyr Valves; three, working together with our champions to educate service line administrators to ensure appropriate resourcing of their programs; and four, concentrating our direct-to-patient efforts on geographies with established treating centers that have the capacity to accommodate interested patients. We are encouraged by early feedback from the field force and from our customers on this approach, which reflects greater focus, stronger engagement and a more consistent execution model overall. As the newer members of our team become increasingly productive, we expect U.S. sales performance to improve over the course of the year with growth reacceleration in the back half of 2026. Turning to our second priority, growing our addressable market with our AeriSeal program remains a key focus. Our CONVERT II pivotal trial is progressing well, and we are especially encouraged by our pace of enrollment since bringing on new leadership within our clinical affairs organization. Today, we are highly confident in our ability to complete enrollment of this trial in 2027, bringing us one step closer to expanding our total addressable market by approximately 20% globally. We see meaningful potential for AeriSeal to serve as both a revenue driver and a market expander for Zephyr Valves over the medium to long term and look forward to providing updates on enrollment progress in the quarters ahead. On our third priority, we have made substantial progress in aligning our spending with our strategic priorities. As previously discussed, we executed a broad cost reduction initiative in the first quarter. With these actions, our underlying expense trajectory has significantly improved, and we remain on track to deliver meaningful operating leverage and lower cash burn while maintaining investments in our key growth drivers. In closing, we have greater conviction in our strategy to refine execution to further penetrate the substantial remaining market opportunity for our products. While 2026 is a year of execution and transition, we are confident in the progress we are making. We have a better understanding of what drove prior underperformance. We have taken meaningful steps to address those issues. And we have aligned the organization around initiatives that matter most. We remain confident in the underlying strength of the business, the size of the opportunity ahead of us and our ability to deliver sustainable, profitable growth over time. With that, I will turn the call over to Derrick to provide a more detailed review of our first quarter results. Derrick Sung: Thank you, Glen, and good afternoon, everyone. Total worldwide revenue in the first quarter of 2026 was $20.6 million, a 9% decrease from $22.5 million in the same period last year and a decrease of 12% on a constant currency basis. U.S. revenue in the first quarter was $13.3 million, a 7% decrease from $14.2 million during the same period of the prior year. We added 15 new U.S. treating centers during the quarter. International revenue in the first quarter of 2026 was $7.3 million, a 12% decrease from $8.3 million during the same period last year and a decrease of 21% on a constant currency basis. The decline in revenue was fully attributable to the absence of sales to our distributor in China. As a reminder, we are currently awaiting the renewal of our Chinese registration certificate, which we expect to come in the second half of 2026. Excluding China, we continue to see solid performance across all our other international markets, which grew 22% as compared to the same period last year and 9% on a constant currency basis. Gross margin for the first quarter of 2026 was 78% compared to 73% in the prior year period. The year-over-year increase was driven primarily by the lower mix of distributor sales in our international markets. Looking forward, we continue to expect gross margin to be approximately 75% for the full year of 2026, trending higher in the first half of the year and lower towards the second half of the year based on the mix of distributor sales. Total operating expenses for the first quarter of 2026 were $29 million, a 6% decrease from the same period last year. Noncash stock-based compensation expense was $3.8 million in the first quarter of 2026. Operating expenses in the first quarter included approximately $1.4 million of onetime costs related to the restructuring initiative that we executed at the start of the year. Excluding stock-based compensation expense and the restructuring costs, operating expenses in the first quarter of 2026 decreased 8% from the same period of the prior year. We remain committed to decreasing spend in 2026 through our cost alignment efforts while maintaining investments in our key growth initiatives. To that end, we continue to expect full year 2026 operating expenses to fall between $113 million and $115 million, inclusive of approximately $19 million of noncash stock-based compensation expense. R&D expenses for the first quarter of 2026 were $4.9 million compared to $4.8 million in the first quarter of 2025. Sales, general and administrative expenses for the first quarter of 2026 were $24.1 million compared to $26.1 million in the first quarter of 2025. Net loss for the first quarter of 2026 was $13.7 million or a loss of $0.33 per share as compared to a net loss of $14.4 million or a loss of $0.36 per share for the same period of the prior year. An average weighted share count of 41.9 million shares was used to determine loss per share for the first quarter of 2026. Adjusted EBITDA loss for the first quarter of 2026 was $8.5 million, consistent with the first quarter of 2025. Excluding onetime restructuring charges, adjusted EBITDA loss was $7 million and 18% favorable to the same period of the prior year. We ended March 31, 2026, with $61.6 million in cash, cash equivalents and marketable securities, a decrease of $8.2 million from December 31, 2025. In the first quarter of 2026, we took meaningful steps to strengthen our balance sheet and extend our cash runway. First, we executed a cost restructuring initiative that reduced our ongoing operating expenses by over 10%. Second, we closed on a $60 million credit facility with a 5-year interest-only structure, extending the maturity of our existing debt out to 2031 and providing us with access to an additional $20 million in undrawn capital subject to certain revenue milestones. With these measures in place, we expect to burn roughly $23 million of cash for the full year 2026, which would be a substantial decrease from the $32 million of cash that we burned in 2025. Finally, turning to our revenue outlook for 2026. We are reiterating our full year 2026 revenue guidance of $90 million to $92 million. Our guidance contemplates sequential quarterly improvement in our year-over-year revenue trend with a return to year-over-year growth in both our U.S. and international businesses in the back half of the year. In the U.S., we expect our recently filled sales positions and our refocused commercial strategy to gradually drive improving sales productivity as the year progresses. Internationally, revenue growth through the first half of 2026 will continue to be negatively impacted by the lack of sales to our distributor in China. That said, we expect continued strength throughout the year from our remaining international markets with year-over-year sales growth in our international business resuming in the second half of the year. To conclude, we entered 2026 with a clear plan, and our first quarter reflects early progress. We remain focused on the work ahead, ramping our sales organization, advancing our clinical programs and delivering the financial leverage we've committed to. We are confident in the strength of our business and our team's ability to execute. With that, I'd like to thank you for your attention, and we will now open the call up for questions. Operator: [Operator Instructions] Our first question comes from Rick Wise with Stifel. Frederick Wise: Let me start off, if I could. I mean, obviously, getting the sales team in place, it sounds like it's largely in place critical. And it seems like you're seeing some good, encouraging, early progress here. Maybe talk to us about in more detail some of the points you made about going deeper in the accounts and some of the specific strategies you're using to see sales growth accelerate. And maybe just as part of that, help us -- maybe it's a question for Derrick, but help us understand what's dialed into the guidance in terms of productivity with these new people and today and what you're hoping for and what we might see? Glendon French: Rick, so we are -- well, first and foremost, we have been focused on narrowing the items that we're asking our U.S. sales force to do. I think one of the key things that we realized coming into this period was that last year, there were just too many balls in the air. So we've narrowed that focus, and it's in the areas that we commented on in the comments that just preceded. And we have, as you had mentioned, substantially filled all of our open positions. Our average tenure, as you might imagine, is not what it was a year ago, but we are bringing people up to speed quite quickly. We are focusing our activity on setting up high-quality and efficient valve programs, and we're doing that by engaging COPD physicians around these centers to be driving patients into those centers. We are looking to gain administrative service line level, administrative support to ensure that we have the resources to execute on that plan. And we're seeing positive impact from those efforts even in these early stages. But I think that one of the bigger issues for us is just getting our sales force up and running and trained and moving forward. And we are right where we expected to be at this point. So we feel good about the fact that we're full and that people are coming up the learning curve, and we certainly have some very bright spots with regard to the execution of the strategy that we've outlined. Frederick Wise: That's great to hear. Derrick, for you, maybe just help us just think through with the first quarter in hand, the 2026 growth cadence and thinking about the reaffirmed '26 guidance range you laid out, it implies 60 basis points for the year. This is sort of a transition. Are you -- do you feel like consensus has got it right in terms of the current sequencing? Should we be more back weighting it? I think consensus for the second quarter is like $22-ish million. And if that's the case, what gives you the confidence that the company can have the step-up needed from 2Q to 3Q, et cetera, to get to the numbers you've laid out? Derrick Sung: Sure, Rick, and thanks for the question. As it relates to guidance, we do expect to demonstrate a sequential quarterly year-over-year improvement in growth as the year goes on. And as Glen said, we feel very good about the performance in Q1. We're already demonstrating that, particularly in the U.S. Our year-over-year growth rate, while down 7% in Q1, is a meaningful improvement from our growth rate of -- our decline of 11% in Q4. And so we already feel like we've bottomed in Q4 in terms of year-over-year growth rates. And both in the U.S. and internationally, we expect to see -- and I think this is reflected to your question currently in consensus, but we expect to see that sequential improvement every quarter flipping to positive year-over-year growth in the back half of the year and even exiting the year with double-digit growth, both U.S. and international. In the U.S., what gives us confidence and the driver for that sequential improvement in year-over-year growth is, in fact, the addition of the new folks that we have brought in and the time that it takes to -- for the new reps to get up to speed and get up to productivity. So that does take some time, typically 6 to 9 months or so is what we've seen on average for new hires to get up to speed. And so as the year progresses and also as our focused strategies take hold in the U.S., we do expect to see that improvement sequentially across the year. On the international side, it's really a question of comps, frankly. So the decline that you're seeing in our international sales in Q1 is primarily all attributable to timing of sales into China. We are currently awaiting registration of our -- or renewal of our registration certificate in China. So there's a lack of absence of sales into China in the first -- this year, and we expect -- and in the first half of this year, certainly in last year, in the first half of 2025, there are a number of large orders that were placed into China. To put it into context, China is still a relatively small portion of our total sales, less than 5% of our total sales. But the timing of those sales drove tough comps in the first half of this year. So that's what's driving the optical declining growth rate and will drive that optical declining growth rate for the first half of this year. Our underlying business, as we talked about, is still strong. We grew 22% year-over-year reported in Q1. We've seen double-digit growth in our underlying direct international businesses for the past couple of years. We expect that trend to continue. And so in the back half of this year, that underlying strength of our OUS business, continued strength, will be more representative in our growth rates, and that's what we expect to drive the step-up in growth in our international business. Operator: Our next question is from the line of John Young with Canaccord. John Young: Appreciate the progress update provided today. I want to go to the U.S. accounts, 15 added in Q1. I think that was higher than any number that was added last year according to our model. I would love to know, is this due to the refocused sales team ramping quickly? And maybe how should we think about just the pace of account additions for the remainder of the U.S. for the year? And if I could ask my second question, too, related to the sales force, just what metrics are you guys focused on in monitoring the success of the revamped sales force? Glendon French: So 15 is, as you noted, a strong number relative to what we saw on a quarterly basis across last year. It's difficult to say whether that's anywhere close to the new normal. I think we're going to stand with the 10 per quarter expectation, which we laid out. But I'll let Derrick talk about that guidance if he wishes to. But that feels like the right sort of number. Some of these new accounts, I think, were lining up, perhaps, to happen late last year, maybe fell into this quarter. I think time will tell as to whether the mean is above 10, but I would keep that. With regard to metrics, at this point, we feel really good about the plan. We are focused on moving things in a fairly simplified basic way. And we're just trying to bring our people up to speed as quickly as we possibly can. We have some territories that are -- that did very, very well last year. They continue to be doing well this year, continuing to take advantage of the momentum that they established. And we see that in an array of different indicators. We've talked before about the importance of StratX and seeing that sort of coming through as the leading indicator for our performance, and we feel good about where we sit at this point. Operator: [Operator Instructions] It comes from Frank Takkinen with Lake Street Capital Markets. Frank Takkinen: I know this has come up on, I think it was the previous call as well, but wondering if you can speak to kind of bigger picture growth aspirations. I know you're only a few quarters into this. And I think last time, the context provided was substantially better, which obviously aligns with the cadence of revenue growth throughout 2026. But now that you've had a little bit more time with the organization, are you comfortable providing any type of -- we expect to be a double-digit grower commentary or something similar in nature to that as you think about a longer-term business? Glendon French: Yes, Frank, you want to take that, Derrick? I mean, I'll go ahead. I'll start. You can add to it, Derrick, if you wish. We fully expect -- I fully -- I will speak for myself. I certainly expect us to be a double-digit grower. I think everybody on the team expects us to be a double-digit grower. I think we're trying to figure out when you look about -- you look across the period where we weren't meeting that expectation or we are moving sort of rapidly in the direction of not meeting that expectation was particularly in the United States, we're trying to get to the bottom of that. We think we were doing too many things, and we think we lost too many sales reps, and we think we can get back into a double-digit range. Where exactly in that range is still to be determined. I believe, obviously, outside the United States, we've thrown up a couple of 20% in a row roughly in terms of our growth in 2025 over 2024 and 2024 over 2023. And absent the matters that Derrick outlined, we're in that same sort of neighborhood in the first quarter as well in some of our key markets. All of our major European markets are double-digit growers in the first quarter. We don't report that, but that's the case. So we feel good about that. They're executing on a plan that looks very much like the U.S. plan, which is no coincidence. And we've got TAM expanders on the horizon that we're working very, very hard to push forward. We are excited about AeriSeal and look forward to talking more about that as we move deeper into the year. Derrick, did you want to add something to that? Derrick Sung: Yes, I would simply add that also contemplated in our guidance even for 2025, as I just mentioned, is that we will exit the year growing double digits in both our international and U.S. markets. So I don't want to get ahead of ourselves and provide any more guidance than that beyond '25, but -- or '26, I'm sorry, in 2026, I meant to say, our guidance contemplates double-digit growth as we exit the year. And I don't want to provide any more guidance beyond '26, but I just did want to add that additional commentary. Thanks, Frank. Frank Takkinen: Perfect. Maybe just for my follow-up on the Chinese registration renewal. Is there a reliance on that to hit the second half expectations for OUS growth? And then related to that, what needs to happen for that renewal? Is this more administrative in nature? Is there some risk to this renewal maybe not occurring on time with your guided time lines? Derrick Sung: Yes. Thanks, Frank, for that question. I'll take that. This is Derrick. So we do continue to expect the renewal of our registration certificate to come in the back half of this year. It is, I believe, an administrative process that we're simply working through. So it will simply take some time. But at this point, we don't have any reason to believe that we won't get that registration certificate renewed in the back half of the year. Now when we do get that -- when that renewal comes, I would say that our expectation is that the resumption of sales into China will be very gradual. There'll be -- accounts will need to be restarted, et cetera. So we're not expecting a bolus of sales to come in. It will take some time. And to that end, our current guidance doesn't contemplate a significant contribution from China even in our back half. However, as I mentioned, we will be anniversarying those tough comps from our China sales in the first half of 2025. And so I think that will -- we'll expect to flip back to positive international growth. And as Glen and I just mentioned, you'll see our international growth rates just really be much more reflective of the strong underlying growth in our direct international businesses that we're currently experiencing. Operator: [Operator Instructions] And it comes from Joseph Downing with PSC. Joseph Downing: I guess as you kind of reprioritize the existing base of treating physicians, can you just help to quantify same-store productivity, say, in your top quartile accounts versus, say, the bottom couple of quartiles? And in this, I guess, how much of the 2026 U.S. revenue plan depends on what's in the bottom 2 quartiles versus this top 25%? Glendon French: Yes. We -- I would say that we are focused on -- to the extent that we have some -- we've got a mix of things going on here, Joe. We've got uncovered territories that are now covered. So we need to reestablish those connections and get those moving. We tend to have a bias toward the accounts that are performing best and trying to move them along and take full advantage of the near-to-far strategy in relation to them, make sure that they're leveraging all the best practices that we've talked about in prior calls. And so I would say the top quartile would be more of the area of focus as opposed to the lowest quartile. We are, however, bringing in some number of new accounts that -- and where our standards for bringing our accounts online have changed quite a bit. We really raised the bar and expect those accounts to invest pretty heavily in terms of their time and efforts to get up and running and have patients that are ready to go. So there's far fewer people who are recently trained who are not doing procedures. So we actually are quite optimistic about the newer accounts that are coming online and are doing procedures right out of the blocks. So those probably -- those would be what I would consider outside the first -- or the first quartile or the top quartile or lower quartile, but rather just new accounts on top of that. But first and foremost, we're getting our team up and running -- back up and running and just trying to support the strongest of our accounts most predominantly and some of our newer accounts will also make some good contributions. Joseph Downing: And then just for my follow-up, I want to touch on LungTraX real quick. I know it's kind of being refocused or deemphasized a little bit, whichever way you prefer to frame it. But I'm just curious like what percent of U.S. accounts right now, I think it's the larger ones you said are still -- it's more effectively used in those kind of accounts. What percent of the accounts are using it? And then kind of what, like, ROI threshold would lead you to kind of selectively expand it again versus keeping it kind of at this narrow scope? Glendon French: So we pulled back our -- we were spending what in retrospect looked like a disproportionate amount of our time pursuing Detect, what we call LungTraX Detect. And so we -- I think we brought that to a level of time and attention that it deserves. We learned a great deal during the period of time where we were heavily promoting Detect in that it really fits into a specific subset of our accounts. We did some pilots across the last year or so, and we -- and it revealed that the technology works well in certain types of accounts. And so we're tending to target Detect. I wouldn't call it a deemphasis at all. We're just -- I think it's just a more focused approach to Detect in situations where we have determined that there could be sort of a great return for the hospital that invests in Detect in terms of patient flow and so forth. So as far as what percent of accounts, I don't think we report that. But everything you've heard before, which is in certain accounts, it can be great. We definitely have data that suggests that. It takes longer to get set up than we, I think, anticipated last year that it would. And those that are up and running, it took a little time to get them up and running, but there seems to be -- all indications are that when that technology is up and running and being used, it's a pretty solid contributor to our efforts in that account. Operator: Thank you. And this will conclude the Q&A session, and I will pass it back to Glen French for closing remarks. Glendon French: Thank you very much, operator. In summary, we have a clear plan, and our first quarter reflects early progress executing this plan. We remain focused on the work ahead, specifically ramping U.S. sales, advancing our clinical programs and delivering the financial leverage to which we have committed. We are right where we expected to be at this point. We are confident in our business and in our team's ability to continue to execute. I want to thank you very much to -- I'd like to express a thank you to our employees for your focused and considerable efforts and thank everyone on this call today for your time and your ongoing interest in Pulmonx. Have a good afternoon. Operator: And this concludes our conference. Thank you for participating, and you may now disconnect.
Operator: Thank you for standing by. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to the TETRA Technologies, Inc. Q1 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. Press star one again. Thank you. I would now like to turn the call over to Kurt Hallead. Please go ahead. Kurt Hallead: Good morning, and thank you for joining TETRA Technologies, Inc.’s first quarter 2026 earnings call. Speakers on today’s call will be Brady Murphy, President and Chief Executive Officer, and Matt Sanderson, Chief Financial Officer. Before we begin, I would like to call your attention to the safe harbor statement in our Form 10-Q. Some of the remarks we make today may be forward-looking and are subject to risks and uncertainties as outlined in our SEC filings. Actual results may differ materially from those expressed or implied. In addition, we may refer to adjusted EBITDA, free cash flow, and other non-GAAP financial measures. Please refer to our press release for GAAP reconciliations and note that these reconciliations are not a substitute for GAAP financials. As such, we encourage you to refer to our 10-Q that was filed yesterday. After Brady and Matt provide their comments, we will open the line for Q&A. I will now turn the call over to Brady. Thank you, and good morning, everyone. Brady Murphy: Welcome to TETRA Technologies, Inc.’s first quarter 2026 earnings call. I will walk through the very positive first quarter highlights, TETRA’s position in this uniquely uncertain time, and the progress towards our 2030 targets before turning it over to Matt to cover more detailed financials and the balance sheet. Despite the backdrop of one of the most tumultuous periods in the history of the oil and gas industry, we started 2026 with one of the strongest first quarter performances in the company’s past ten years. If we exclude the benefit of the Gulf of America Neptune project in the first quarter of last year, revenue of $156 million and adjusted EBITDA of $26 million were ten-year highs, as were the first quarter results for both Brazil and the Gulf of America. In addition, the industrial chemicals and production testing subsegments each delivered ten-year high revenues with strong margin contributions. What encourages us most about our results is that the operational and financial fundamentals for each of our segments and many of our subsegments are improving, even before the benefit of current elevated oil prices and potential increased customer spending activity. At current oil prices, we anticipate offshore projects could be pulled forward and unconventional activity in the U.S. will eventually respond. Combined with the significant growth opportunities laid out in our One TETRA 2030 strategy, which we will update later on our call, we feel very good about how TETRA is positioned for 2026 and the coming years. Regarding the ongoing conflict in the Middle East, and given that this region has historically accounted for about 5% of the company’s revenue, we do not expect an overall negative impact on our financial results. That is because what we have seen so far is activity in our core business regions of the U.S., Europe, and Latin America will likely offset any reductions that may occur in our Middle East business. This applies to our supply chain as well, since all of our chemical manufacturing plants are located in the United States and Europe, and our elemental bromine is sourced from Arkansas, which is also the location of our critical minerals resources. Over the longer term, it remains to be seen how developments in the Persian Gulf and the Middle East will impact the global oil and gas markets and our business. In general, we believe it could boost investment in U.S. and international unconventional activity and provide tailwinds to an already robust offshore and deepwater outlook. Completion Fluids and Products, our industrial chemicals business, had a record-setting first quarter with revenue up 15% year over year and 13% quarter over quarter. For the first time since 2021, when energy services were suppressed due to COVID-19, it accounted for over 50% of total first quarter segment revenue. Higher-pressure gas plays in South Texas and the Western Haynesville supporting Gulf Coast LNG plants are driving higher volumes of higher-value completion fluids. Increasing pressures in West Texas due to disposal well pore space are also contributing to higher-density fluids for well workovers. Looking forward, we are well positioned heading into our traditional European seasonal second quarter peak. Q1 revenue and adjusted EBITDA in Brazil were at a ten-year high. Although we did not execute any Neptune jobs, our first quarter fluids business in the Gulf of America, excluding Neptune work in the first quarter of last year, also recorded a ten-year high in revenue and adjusted EBITDA. Regarding Neptune projects, we are very encouraged by the growing pipeline. The trend toward deeper, hotter wells in the Gulf of America continues, as evidenced by very strong first quarter revenues for our highest-density zinc bromide completion fluid. The Water and Flowback business, despite U.S. frac fleets down 24% year over year and a slow January due to freezing weather, delivered overall revenue up 1% year over year and 3% quarter over quarter. Our production testing subsegment reached a ten-year high in Q1 revenue as our automated SandStorm technology continues to gain market share across the unconventional land operations in the U.S., Argentina, and the Middle East. Our strategy to grow this segment internationally has been successful, and for the first time in the last ten years, international production testing revenue was over 50% of the total PT subsegment revenue. Looking ahead to the rest of 2026, significant uncertainty remains for oil and gas prices. However, given our geographic footprint, we believe any headwinds from the Middle East will be offset by strength of our other geographies. We expect to gain further clarity on customer activity offshore and outside of the Middle East as we move through the second quarter. For now, we are maintaining our prior 2026 guidance of single-digit revenue growth over 2025 with completion fluid margins between 25-30% and Water and Flowback in the mid-teens. Turning to our strategic progress towards our One TETRA 2030 objectives: At our Investor Day last September, we outlined a clear strategic path for the company. Although much has changed in the world since that event, our view of the company’s key growth trajectories across deepwater, specialty chemicals, electrolytes for battery energy storage, critical minerals, and desalination of produced water has strengthened. We expect bromine demand to support our deepwater completion fluids and battery storage electrolytes to double by 2030, driving the need for and reliable access to cost-effective bromine, a critical feedstock. This has become more evident with the current events in the Middle East, as well over 50% of the global bromine supply comes from that region. Our bromine plant project in Southwest Arkansas continues to proceed on time and on budget. Phase two of the project is underway with phase three slated for 2027, and first production at the start of 2028. The plant is designed to have an annual capacity of up to 75 million pounds, more than double our existing long-term third-party supply agreement. TETRA’s electrolyte revenue grew meaningfully in 2025, as U.S. Energy Information Administration reports that a record 15 gigawatts of utility-scale battery storage was added to the grid in 2025. The EIA projects another record 24 gigawatts planned for 2026, representing a 60% growth rate. As artificial intelligence and cloud computing drive rapid growth in data center power demand, scalable long-duration energy storage is becoming increasingly critical. TETRA’s proprietary PureFlow zinc bromide is a key input for these systems, supporting safe, nonflammable performance at utility scale. TETRA’s OASIS TDS end-to-end desalination of produced water for reuse continues to gain momentum, with multiple engineering efforts and customer commercial engagements. Since achieving 24/7 steady-state operations 60 days ago, our Permian Basin pilot project has operated at over 96% uptime and continues to meet our performance specifications. We believe that behind-the-meter power generation, access to affordable natural gas and land, and other factors will drive significant data center growth in West Texas and accelerate the produced water desalination market well ahead of our 2030 targets. Regulatory agencies continue to focus on understanding the technology, setting permitting standards, and encouraging the industry to bring solutions to the produced water disposal challenge. TETRA is honored to participate in the National Petroleum Council produced water committee and to support the recently announced U.S. Environmental Protection Agency Reuse Action Plan 2.0. Regarding TETRA’s lithium and magnesium critical mineral resources in Arkansas, we continue to advance relationships with technology providers and conduct engineering studies. We have formed a joint venture with Magrathea Metals to advance domestic magnesium metal production and monetize this asset. The JV will leverage our specialty chemical processing expertise and large-scale magnesium resource base combined with Magrathea’s proprietary electrolytic magnesium production technology, which has been partially underwritten by the U.S. Department of War. In April, Magrathea successfully converted TETRA’s MacOver brine, rich in magnesium, into a high-purity magnesium metal at its small pilot operation in the San Francisco Bay Area. The JV, named Arkansas Magnesium, is currently conducting engineering studies for a first-of-a-kind demonstration plant planned for co-location at the Evergreen Bromine site in Arkansas. For lithium, a strong rebound in lithium carbonate prices over the past six months has led us to look at options to accelerate the development of our Evergreen 585,000 metric ton lithium carbonate resources. As a reminder, Evergreen is a 6,900-acre brine unit in Southwest Arkansas on which TETRA owns 65% of the brine mineral rights and ExxonMobil owns 35%. The combination of current LCE prices of around $25,000 per metric ton and efficiency advances in direct lithium extraction technology are making this a very attractive option to accelerate. More to come as we look at ways to advance this opportunity. With that, I will turn the call over to Matt. Matt Sanderson: Thank you, Brady. Good morning, everybody. Completion Fluids and Products revenue of $92 million and adjusted EBITDA of $26 million increased 10-12%, respectively, relative to Q4 2025. The sequential increase was driven by higher sales volumes in our industrial chemicals business and ongoing deepwater projects in the Gulf of America and Brazil that Brady referenced earlier. Year over year, Completion Fluids and Products revenue and adjusted EBITDA decreased 12-3%, respectively. As a reminder, our first half 2025 results included high-impact TETRA Neptune projects we previously noted we do not expect to repeat in the first half of this year. That said, the pipeline of deepwater and high-pressure, high-temperature completion opportunities continues to grow. With our best-in-class service delivery and unique fluid chemistry solutions, we are well positioned to participate in the forecasted growth in offshore deepwater activity. As Brady mentioned earlier, geopolitical unrest in Europe and the Middle East has led to a rapid shift in global market dynamics. As a result, offshore activity in the Middle East has slowed, and logistics into the region continue to face higher costs and shipping delays. Our exposure in the region is relatively small compared with our overall business, but some of our Q2 2026 completion fluid sales in the Middle East could be delayed. However, as mentioned, our calcium chloride and bromine-based completion fluids are manufactured outside the Middle East. As such, our fluid production has been unaffected, and we are seeing an increased number of spot sales inquiries from regions and customers we have not historically supported, which could more than offset any delays. For Water and Flowback Services, revenue of $65 million increased 3% sequentially and 1% year over year. To put our performance in context, during the same twelve-month period, U.S. frac activity declined more than 24% year over year. Adjusted EBITDA of $9 million increased 20% sequentially and 9% from the prior year. The improvement in profitability was driven by cost reduction initiatives and continued market penetration of higher-margin automation technology. Outside the U.S., project startups in the Vaca Muerta Basin will enable us to double revenue in Argentina in 2026 at margins that are overall accretive to this segment. Compared with the broader market conditions, our outperformance highlights the strength of our service delivery, our differentiated technology, and our geographical diversification. As commodity prices have increased, and a twelve-month strip price remains above what the market projected at the start of this year, we are seeing our customers consider increasing their activity plans for 2026. Should this occur, we are well positioned to incrementally benefit from any increase in activity in U.S. shale basins that may result from higher oil and gas prices. Regarding our capital structure, we had $36 million in cash and total debt of $182 million at the end of the quarter, resulting in a net leverage ratio of 1.5x. Cash used in operating activities was $12 million. Total CapEx was $19 million, including $8.4 million for our Arkansas bromine project. Total adjusted free cash flow was a use of $32 million and base business adjusted free cash flow was a use of $23.5 million. The use of cash was driven by higher incentive compensation tied to our strong 2025 financial results, our three-year return on net capital invested, and our exceptional total shareholder return performance. Cash use also reflected a build in our AR balance at the end of the quarter, and the seasonal inventory builds in Europe, which will be monetized in Q2. We expect to generate positive base business free cash flow in 2026, with that cash being reinvested in our Arkansas bromine plant. Overall, we are off to a strong start and remain confident in our ability to deliver solid financial results this year while continuing to advance towards our 2030 targets. The global market conditions continue to evolve, but overall, they are providing modest tailwinds for the markets that we serve. I will now turn the call back to Brady for his closing comments. Brady Murphy: Thanks, Matt. Again, despite the continued uncertainty caused by the conflict in the Persian Gulf, the long-term outlook for our business appears to be even better than when we had started the year in 2026. Overall, we are very confident in TETRA Technologies, Inc.’s ability to execute in these market conditions, make prudent financial decisions to support our growth, and continue to make progress towards our 2030 targets. With that, we will now open the call for questions. Operator: At this time, if you would like to ask a question, press star followed by the number one. Your first question comes from Bobby Brooks with Northland Capital Markets. Bobby Brooks: Hey, good morning. Thank you for taking my question. It seems like OASIS commercial discussions are progressing well, and what really stuck out to me in the script was the “multiple engineering efforts and customer commercial engagements.” Could you pull back the curtain a little bit more about what that looks like, and add some comparison to what that looked like at the start of the year or six months ago? Brady Murphy: Good morning. Sure, Bobby, appreciate the question. We are very encouraged with the ongoing dialogue that we have. Remember, we mentioned in our last call that we were engaging in a 100,000 barrels per day plant. We actually now have several parallel engineering studies going on for a smaller-sized plant as well as a 100,000 barrels per day plant. Those engineering studies take time, and we are still on track to have what we need from those projects to get into more commercial discussions with our customers before the end of the second quarter. We are encouraged by what we see from the preliminary engineering studies in terms of OpEx and CapEx and socializing some of those discussions with customers, but we still have a ways to go to finish those efforts, and we will continue to do so. We are in the middle of engineering studies that we will need to complete before we can really get into any long-term contracts, Bobby. Thanks, Bobby. Bobby Brooks: Got it. And then on the customer discussion side, it seems like since the Investor Day there have been more folks reaching out, wanting to hear about the technology and learn more. Is that trend still continuing? Any color on that dynamic? Matt Sanderson: Yeah, Bobby, this is Matt. Absolutely. We cannot disclose the customers that we are engaged with, but those engagements, dialogues, and engineering studies, like Brady referenced, have increased. And as you say, you picked up on the fact that it is not one engineering effort. This is from different customers and multiple opportunities. We are very encouraged. We are also very encouraged by the performance of our technology, our patented OASIS offering, and the economics associated with it. I think, as you are well aware, some of the challenges with disposal and the costs associated with disposal continue to rise. As we continue through our engineering efforts, we are able to demonstrate that the TETRA OASIS solution is, in our view, very cost competitive with alternatives. Operator: Your next question comes from Martin Malloy with Johnson Rice. Martin Malloy: Good morning, and congratulations on a solid quarter. My first question is on the deepwater side. I know there are no Neptune projects in your 2026 guidance. Can you talk about what you are seeing in terms of conversations with customers for deepwater completion fluids, and particularly with respect to Neptune potential projects in the second half of this year or next year? Brady Murphy: Sure, Marty. We have been feeling good about the deepwater outlook going back to our Investor Day when we outlined strong compound annual growth as we march towards 2030. I would say the recent events have only strengthened that outlook. As you look at cutting off the amount of oil that is currently happening in the Middle East, projects that were already looking very strong financially for our customers are being evaluated for what can be pulled forward. We are hearing some of that churn. We actually picked up work outside of the Middle East that we have seen already will offset whatever impact we see from our Middle East business, even though it is roughly 5% of our revenue. We have seen opportunities already well overcompensate that potential loss. So yes, we are seeing some churn in that regard, but it has already been a strong outlook in terms of our base business deepwater completion fluids. Regarding Neptune, as we said, the pipeline continues to grow. The wells are getting hotter and more challenging. Zinc is still an option in the Gulf of America, but it has its own challenges as you get hotter with corrosion and as you deal with production facilities. We are seeing that pipeline continue to grow, and we are also seeing opportunities outside of the Gulf of America continue to build. You may or may not see a Neptune project this year, but I would say the probabilities for next year are continuing to increase pretty significantly. Martin Malloy: Great. Very helpful. And a follow-up: in your press release, you talked about evaluating options to accelerate lithium and magnesium development. Is there more you can share now? Would that be in conjunction with accelerating the bromine project, is it dependent on that, or is this separate, related to the Exxon joint venture? Brady Murphy: We are accelerating the bromine project at the fastest pace we can. That project is our priority, and we will prioritize that project to have completion by 2027 and start in 2028. The benefit is that all the upstream—brine wells, pipelines, and some of the pretreatment plant capabilities to take out H2S from the brine field—will be in place for whatever additional plants we put on that site. As we mentioned, we are currently doing engineering studies and plan to put a demonstration plant for the magnesium JV with Magrathea, and we have already done quite a bit of engineering for a lithium plant that will be on the same site. That will benefit from a lot of the infrastructure and investments that we have already made for bromine, so there are a lot of synergies. We are not ready to publish any financial information on those projects yet, but as we move forward, you can anticipate we will at the appropriate time. Operator: Your next question is from Tim Moore with Clear Street. Tim Moore: Thanks. My first question is about battery energy storage. EOS has had some supply/manufacturing hiccups, which seem temporary. Do you get a rolling update on that, and do you have enough feed supply for electrolytes to quickly get it to them if they start ramping up more seriously after the summer? How are you thinking about that logistically on the supply side? Brady Murphy: Yeah, Tim, we do not want to comment or forecast ahead of EOS, but we are very plugged into their forecasts so we can plan for not only the bromine but the full electrolyte production that we need to produce. We do have good visibility into that, but we cannot talk about specifics. As we have mentioned before, in addition to our long-term supply agreement, we have secured additional third-party bromine supply that is in place to meet the forecasts we are getting from EOS. That is not a concern. Once we have our own plant operating in 2028, if they continue their path to the 8 gigawatt-hours of production they have stated publicly, we will be in a great position to supply their requirements and the deepwater growth we have projected. Tim Moore: That is helpful, Brady. Switching gears, on the Arkansas bromine project, it was nice to hear production still expected early 2028. Could you walk us through some of the next construction milestones, and where you would anticipate CapEx to uptick in the coming quarters? Brady Murphy: Sure, I will take that one, and Matt can add anything. The project is on schedule. We completed phase one. Phase one was important because standing the bromine tower up on-site was a logistics challenge. It is a large 130-foot titanium structure. Having that up and secured was a really important milestone. A lot of the actual on-site construction around the bromine tower, the pipelines from upstream, and the pretreatment still have to be constructed. Yes, there will be more construction activity in 2027-2028. We are projecting good cash flows for the rest of this year and 2027, so we are looking to finance as much of that as we can from our free cash flow, and if we do need additional capital, we have very good options available. For now, we are funding from our cash flow, and that is the plan. Operator: Your next question comes from Analyst with Stifel. Analyst: Hey, it is Pat on for Stephen Gengaro. Thanks for taking the questions. Could you talk about the opportunity you have for magnesium production, including any sense you have for demand and any color on the joint venture? I believe I saw the JV partner referenced 7,000 tons per year by 2029. Brady Murphy: We are having ongoing discussions. We have finalized the joint venture, which is great. We had our first formal board meeting a week or so ago. We really like this technology. As you are probably aware, the U.S. really does not produce any magnesium. The world is heavily dependent on China for magnesium production. Being on the critical minerals list, it has the attention of the current administration and the Department of War. It is a little premature to state how large the first commercial plant will be; we are having discussions along those lines. We will have plenty of brine flow to make the plant as large as we want, but there are other considerations like offtake agreements well ahead of time and potential government funding support. The demonstration plant will be small-scale to prove out the technology. For commercial scale, we have not made any final determinations yet. Analyst: Okay, thanks for the color. Shifting gears a bit, thinking about fluids, it seems like the timing of completions versus rig activity in deepwater would lead to maybe sharply higher 2027 fluids demand. Is that reasonable, and any way you would translate deepwater rig additions to the demand? Matt Sanderson: Patrick, on the earnings call back in February, we gave some soft guidance around what to expect in Completion Fluids and Products this year. We highlighted that we came off a very strong performance in 2025, where a lot of the rigs in the markets we serve were in completion activity, and then we guided that we expected those rigs to move into more drilling activity in 2026, shifting back to 2027 for higher completion activity like you referenced. As Brady touched on, the geopolitical events highlight global demand and where that demand is fulfilled. We are seeing projects coming online, FIDs, and leasing activity. These tend to be deeper, hotter, more challenging environments requiring higher-density brines and more exotic chemistries, which plays to TETRA’s strength. We are very pleased with what we are seeing already in 2026—modest tailwinds and a strong Q1—and we expect that 2027 completion activity, and the type of completion activity, will really benefit TETRA. Operator: Your next question is from Analyst with CJS. Analyst: Good morning. Thank you for taking my questions. My first one is: could you talk about your partner’s lithium project FID status and whether you may need to pursue your own investments there to keep the bromine project on time? And if you do decide to drill your own wells, would that be feeding into your own production endeavors if you want to accelerate that? Brady Murphy: Let me clarify. The wells that we drill in the upstream for the brine contain lithium, bromine, and magnesium. All three minerals are within the same brine. The wells we will be drilling for our bromine project that will feed the bromine tower already have lithium and magnesium in them, so we do not need to drill additional wells to extract lithium or magnesium. That is the real benefit: we are getting three critical minerals from the same upstream investment. The plant itself is a different issue. We are building the bromine plant now. The lithium plant will come later. We are not at a point where we are ready to FID a lithium plant. There is still more technology evaluation and engineering work to be done before we are ready. But as I said, current lithium economics make it attractive enough for us to put accelerated time into that. Analyst: Right, thank you. Are you expecting your partners to drill the wells, or are you expecting to drill your own wells? Brady Murphy: When you say our partners, who are you referring to? Analyst: Standard Lithium and Equinor. Brady Murphy: They have their own project on our brine leases. That is a separate project. They have the Reynolds Unit that has been approved. We get a royalty on lithium off of that production. They are partners with each other, but we own the brine leases and we get a royalty off that production. Our Evergreen Unit is where we will be drilling and producing brine for bromine and future lithium and magnesium. They will be drilling on their Reynolds Unit, where we get a royalty off lithium, and we also get the tail brine from that production when we need it in the future, and we have the other mineral rights within that brine. Hopefully, that clarifies it. Analyst: It does. Thank you. And what is happening in calcium chloride markets? Is that being impacted by the conflict in Iran and how that flows through supply chains and industrial demand? Brady Murphy: The calcium chloride business for us continues to perform extremely strong. It is a big part of our industrial chemicals business that had a record first quarter, up significantly year over year and quarter to quarter. We are not seeing any material change due to the current conflict. We really do not have supply chain issues related to that market. We do not have a large presence selling calcium chloride into the Middle East. Our European business is very strong. Our U.S. business is very strong. We mentioned on our last call we saw some new emerging markets related to chip manufacturing requirements. That business is performing very well for us, and we fully expect it to continue. Operator: Your next question comes from Analyst with Daniel Energy Partners. Analyst: First one is on international production testing. You talked about revenues being greater than 50% internationally. Where do you see that going over time, and could you walk through some of the markets where you are seeing strength today and how recent events have potentially changed your outlook there? Brady Murphy: Thanks. As mentioned, we are seeing strong performance in Argentina, and we expect to more than double our revenue in 2026. We also have some exposure in the Middle East, although it is relatively small, and we see opportunities in those regions to continue to deploy technology and automation. We have been very successful in North America automating and bringing differentiated technologies such as SandStorm and automated drill-out to our customers, and these technologies can be exported and deliver value in international markets. We are pleased with our geographical diversification. As the world looks at where energy is produced and how to secure it, it is not just U.S. land; other markets are looking at securing their own energy, and we are pleased to participate. Analyst: On that point, has the game changed when we think about energy security longer term and the opportunity set across multiple business lines, international and offshore, as a result of what has happened over the last eight weeks? Are you having incremental conversations with customers you may not have been having eight to twelve weeks ago? Brady Murphy: When you look at the current situation and the future energy markets where you want to be positioned, offshore deepwater is clearly a key market for future barrels. Also, unconventional activity in the U.S. and Argentina, because relatively speaking, it is a short cycle time to get additional production as you put more rigs and frac crews into the unconventional markets. We are also seeing more unconventional activity start to grow in the Middle East. We will see how the current environment may or may not impact that activity. The markets where we want to be right now—strong positions in Europe, the U.S., and Latin America; offshore deepwater; unconventional—are where we really want to be to support security of future supply. Matt Sanderson: The other aspect we touched on is that we are seeing increased inquiries for spot sales from different customers and regions than we have historically served for our completion fluids. More than half of the world’s bromine is derived from the Middle East. The challenges in that region are well publicized. Some customers are having those conversations with us, asking about supporting their business with our fluids, with bromine-based fluids being manufactured in North America from Arkansas. We are pleased with that. More broadly, everyone is appreciating that the world needs all forms of energy, and it will need all forms of energy for a long time. Operator: Your next question comes from Bobby Brooks with Northland Capital Markets. Bobby Brooks: Thanks for letting me jump back in the queue. Turning to the domestic onshore completion fluids market, what are you hearing from customers on their back half 2026 activity outlook? Are they in a wait-and-see mode on whether these higher oil prices are here to stay? Brady Murphy: So, Bobby, you are asking about our U.S. land completion fluids business, right? Completion fluids for us are largely an offshore business. We do have some land business for our completion fluids, but it is generally small relative to our offshore and deepwater markets. We are seeing interesting trends on land: very high-pressure Western Haynesville and South Texas gas wells feeding LNG projects require heavier-density brine for completion work, and in West Texas, pore pressures are getting so high that additional workover activity also requires heavier brine. Those two areas are where we see most of the growing land opportunities for completion fluids. It is still relatively small versus deepwater, but it is starting to grow in a meaningful way. Operator: Your next question is from Martin Malloy with Johnson Rice. Martin Malloy: Thank you for taking a follow-up question. I wanted to focus on Argentina. You cited projects coming on later this year, giving you confidence in the outlook. Could you talk more about the services you are providing down there? Are you expecting demand for the early production facilities—historically pretty profitable—to be utilized there, or is this more on the flowback and testing side? Matt Sanderson: Really, all of the above. We did see continued interest and secured some early production facility projects for this year. Also, technologies such as SandStorm automation, which has been deployed and proven in unconventional plays in the U.S., are being deployed into Argentina. We have SandStorm down there today. Historically, our business there was more levered to early production facilities. Now we are seeing a combination: an increased number of early production facilities and deployment of our differentiated technology for operators in Vaca Muerta. We are quite pleased with how that business continues to progress. Operator: There are no further questions at this time. I will now turn the call back over to Brady for any closing remarks. Brady Murphy: Thank you all very much. We appreciate your participation in our call, and we look forward to talking to you at our second quarter earnings call. We will conclude the call now. Thank you. Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.
Operator: Good day, everyone. Welcome to the NNN REIT, Inc. First Quarter 2026 Earnings Call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Stephen A. Horn. The floor is yours. Stephen A. Horn: Thank you, Kelly. Good morning, and thank you for joining NNN REIT, Inc.’s first quarter 2026 earnings call. I am joined today by our chief financial officer, Vincent H. Chao. NNN REIT, Inc.’s disciplined, efficient, and self-funded growth strategy continues to deliver results. Our proven long-term operating platform and consistent capital allocation focused on sufficiently accretive acquisitions remains central to our approach. We are committed to long-term value creation, navigating market conditions with discipline, and capitalizing on opportunities to support durable growth. As detailed in the press release this morning, NNN REIT, Inc. delivered a strong quarter. We closed 15 transactions comprising 41 properties for a total investment of $145 million, with an initial cash yield of 7.5%. At the same time, we maintained significant balance sheet flexibility, ending the quarter with $1.2 billion of total liquidity and an industry-leading weighted average debt maturity of nearly 11 years. Reflecting our consistent performance and visibility into the remainder of the year, we are raising our 2026 AFFO per share guidance to a range of $3.53 to $3.59. This increase underscores the strength of our portfolio and the effectiveness of our multiyear growth strategy. One additional item before I get into operations: if you have not reviewed our updated investor presentation released during the quarter, I encourage you to visit the website and take a look. Turning to operating performance, our portfolio of approximately 3,700 freestanding single-tenant properties across all 50 states continues to perform well. During the quarter, we renewed 36 of 43 lease expirations, consistent with our historical renewal rate of approximately 85%, and rental rates were 2% above prior levels. Additionally, we leased seven properties to new tenants at rent rates about 10% above previous levels, demonstrating the continued demand for our assets and the outstanding job our asset management team is executing at high levels. Our tenant base remains healthy with no material credit concerns currently. Occupancy increased sequentially by 30 basis points to 98.6%, now above our long-term average. This improvement reflects the strong execution of our leasing and disposition teams, who are actively repositioning vacant assets to maximize value. In several cases, the team has secured high-quality investment-grade tenants, further enhancing asset value and contributing incremental value creation. With only 53 assets remaining and active solutions underway, combined with the solid overall performance of the portfolio, we expect occupancy to continue trending upward in the near term. On the acquisition front, as I said earlier, we invested $145 million across 41 properties with a cash cap rate of 7.5%, and, more importantly, with a weighted average lease term of 19 years. The sale-leaseback nature of our transactions continues to provide accretive, risk-adjusted returns with long-duration, predictable cash flows. Regarding market conditions, cap rates in the first quarter remained largely consistent with recent quarters. While we are seeing some modest compression early in the second quarter, we expect relative stability going forward. As always, our platform is designed to operate effectively across many macro environments. We do benefit from a stable interest rate backdrop, and the 10-year has remained fairly range-bound, which continues to support transaction activity. We had elevated volume in 2025, and we are seeing a good amount of investment opportunity for the first half of the year. During the quarter, we sold 25 properties, including 16 vacant assets, generating $36 million in proceeds for redeployment. Dispositions of income-producing assets were primarily non-core, and we executed approximately 30 basis points below our acquisition cap rate. As discussed previously, we expect to take a more proactive approach to asset sales in 2026 to further optimize portfolio quality for the long term. As you know, tenant credit evolves, markets shift, and consumer behavior changes, which results in active portfolio management becoming essential to maintaining high-quality, durable cash flow. Our balance sheet remains one of the strongest in the sector. We ended the quarter with just $80 million drawn on our credit facility and maintained a weighted average of debt maturities, as I said before, of nearly 11 years. NNN REIT, Inc. is well positioned to fund the remainder of the 2026 acquisition pipeline and support continued growth. With a robust pipeline, strong financial position, and proven leadership, we are confident in our outlook. We remain committed to our self-funded model, disciplined capital allocation, and delivering sustainable long-term value for our shareholders, targeting mid-single-digit earnings growth plus a dividend we have increased for 36 consecutive years, one of only three REITs. I will now turn the call over to Vincent H. Chao for the financial results and updated guidance. Vincent H. Chao: Thank you, Stephen. Let us start with our customary cautionary statements. During this call, we will make certain statements that may be considered forward-looking statements under federal securities laws. The company’s actual future results may differ significantly from matters discussed in these forward-looking statements, and we may not release revisions to these forward-looking statements to reflect changes after the statements are made. Factors and risks that could cause actual results to differ from expectations are disclosed in greater detail in the company’s filings with the SEC and in this morning’s press release. Turning to results, this morning we reported core FFO of $0.86 per share and AFFO of $0.87 per share, each flat over the prior year. As disclosed on page 8 of today’s earnings release, we booked $739 thousand of lease termination fees this quarter versus $8.2 million a year ago, representing a $0.04 headwind, without which AFFO per share growth was a solid 4.8%. Results were modestly ahead of our internal projections, with upside driven primarily by lower-than-expected bad debt and net real estate expense. Bad debt represented about 15 basis points of quarterly ABR and was better than our 75 basis point assumption. Our NOI margin was 95.9% in the first quarter, reflecting the efficiency of our triple-net lease structure. G&A as a percentage of total revenue was 5.9%, in line with our expectations, while our cash G&A margin was 4.2%. Annualized base rent grew 7% year over year to $935 million, driven by our strong acquisition activity, while free cash flow after dividend was about $52 million in the first quarter. Regarding our watch list, as Stephen mentioned, we are not currently tracking any significant near-term credit issues in the portfolio, and we are optimistic that we can outperform our bad debt assumptions for the year. That said, we remain proactive portfolio managers and will continue to look for ways to de-risk the portfolio ahead of potential future issues without incurring unwarranted dilution. Included in this quarter’s dispositions was one AMC as well as an entertainment property. Our occupied dispositions had only three years of remaining lease term and, despite the de-risking nature and shorter term of the properties sold, we were still able to generate an economic gain of over 6% on the sales, given our low cost basis in the assets, which is a key component of our risk controls. Turning to capital markets, during the quarter, we drew down the full $300 million available to us on our delayed draw term loan. The rate on the term loan has been swapped to a fixed all-in rate of 4.1%. We also sold roughly 1.7 million common shares on a forward basis through our ATM at just under $45 per share. We did not settle any forward equity, leaving us with expected future net proceeds of $74 million as of March 31. Our next debt maturity is our $350 million unsecured note due in December. As a reminder, we have an accordion feature that allows us to expand our existing term loan by $200 million, and IG credit spreads have recently revisited historical lows following a brief widening in the immediate aftermath of the Iran conflict. This gives us multiple options with which to address our pending maturity as well as financing our investment plans on a leverage-neutral basis. Moving to the balance sheet, our Baa1-rated balance sheet remains a competitive advantage that provides us with the flexibility to fund future growth while protecting against downside risk. At the end of the quarter, we had no encumbered assets, $1.2 billion of available liquidity, and just 1.6% of our debt tied to floating rates. Including the impact of our unsettled forward equity, pro forma net debt to EBITDA was 5.6x, unchanged from last quarter. Our debt duration remains the highest in the net lease space at 10.5 years, well matched with our lease duration of 10.1 years. On April 15, we announced a $0.60 quarterly dividend, representing 3.4% year-over-year growth, equating to an attractive 5.7% annualized dividend yield and a conservative 69% AFFO payout ratio. I will end my opening remarks with some additional color on our updated 2026 outlook. Based on our better-than-expected first quarter performance and our growing pipeline of investment opportunities, we are raising the midpoint of both our AFFO and core FFO per share guidance by $0.01 to new ranges of $3.53 to $3.59 and $3.48 to $3.54, respectively. The midpoint of our increased AFFO per share guidance represents an acceleration of year-over-year growth to 3.5% from 2.7% last year. Line item guidance, which is summarized on page 3 of our earnings release, remains unchanged, although I would highlight that we are tracking to the low end of the $14 million to $15 million range for net real estate expenses and towards the high end of our $550 million to $650 million acquisition guidance, based on our near-term pipeline visibility. With expected free cash flow of about $212 million, $130 million of expected dispositions, and $1.2 billion of available liquidity, we are well positioned to fund our acquisition plans for the year. From a credit loss perspective, we are lowering our bad debt assumption for the full year from 75 basis points to 60 basis points, reflecting the outperformance in the first quarter. Our assumptions for the balance of the year are unchanged, but as I mentioned earlier, given year-to-date trends, we are hopeful we can outperform our bad debt projections in the coming quarters. We will now open the call for questions. Operator: Can you hear me? Vincent H. Chao: Yes, we can hear you, Kelly. Operator: Okay, sorry about that. The floor is now open for questions. If you have any questions or comments, please press 1 on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold just a moment while we poll for questions. Your first question is coming from William John Kilichowski with Wells Fargo. Please pose your question. Your line is live. William John Kilichowski: Hi. Good morning. Thanks for taking my question. Very helpful color in the opening remarks on the funding for the acquisition guide. If I think about the incremental $74 million that you have raised and the term loan, it sounds like you have capacity to go well above the guide here and you are trending up. What is keeping that acquisition guide sort of consistent here in 1Q? Stephen A. Horn: Hey, John. I will take that. We have a very robust pipeline and opportunity set that we are looking at currently, but the old adage applies: you do not want to count them until they are done. We are actively in negotiations, trading paper, but until they are in a well-advanced closing stage, we do not want to get above our skis here. Vincent H. Chao: Yes, but, John, you are correct in the sense that the $74 million of equity does give us a little bit of additional capacity. So at our typical 60/40 equity/debt mix, it would be about $125 million of additional capacity. William John Kilichowski: Very helpful. Thank you. And then the second one is just on the credit loss guide. Appreciate the updated color on the 60 basis points. Of that, what is pure conservatism versus what is something you feel like you have an outlook on? And maybe an extension of that would be the 7‑Eleven headlines on store closures. Have you had any discussions with them? Is there any impact to you that would be in that guide? Vincent H. Chao: As far as the credit loss assumption, there is very little in terms of embedded or something that we expect to happen other than there was a small amount—15 basis points—in the first quarter. Beyond that, there is really nothing material that is known that we would put into that number. Stephen A. Horn: As far as 7‑Eleven, we have never done quote business directly with 7‑Eleven. They acquired a lot of our large regional operators that we did business with over the years. Our average cost basis in our 7‑Eleven portfolio is about $2.2 million. We completed a significant renewal in 2025 with 7‑Eleven, and our average lease term with 7‑Eleven is about eight and a half years. We are very confident. We have not had any discussions indicating concern, and none of our stores are on the closure list. Operator: Your next question is coming from Analyst with Bank of America. Analyst: Morning. Following the recent ATM issuance, could you characterize your current overall WACC and your investment spreads today? Vincent H. Chao: The WACC does change on a daily basis, but if you are talking about near-term AFFO yields and debt mix, we are probably in the high-6% area—call it 6.75% to 6.8%. Analyst: And then for my next question, last quarter you expected cap rates to compress more in 2Q and 3Q. Is that still your view, or is it a higher-rate environment and reduced competition? Stephen A. Horn: My view is the same on cap rates as it was in the first quarter, and it is coming into reality. Our first quarter cap rates were in line with the past many quarters, and we expected second-quarter compression. I still expect that for the deals I see being priced, and then I see them staying at that compressed level. For modeling purposes, we always have a watch list—we are always watching tenants. Case in point, AMC is on our watch list; we have talked about that before. We were able to sell one in the quarter, and we were pretty pleased with that outcome given the nature of AMC sales. On net for the quarter, we came out with an economic gain—not a GAAP gain—for our occupied properties. That is the kind of thing we are going to look at. So yes, in the near term—meaning this year—we are not seeing any material concerns worth calling out. That does not mean we do not have tenants that we think are maybe medium- to longer-term ones that we are watching a little more carefully, and we will look to address some of those as we can. I will just add one more thing. Our active portfolio management is not just focusing on credit. You always have credit risk; credit changes. More importantly, you might have real estate risk and the probability of renewal at the end of the term. We are trying to get ahead of that, looking years out, and making the portfolio a more stable platform because things do change. Analyst: Thanks for the color. And then you also mentioned you leased seven properties to new tenants in the quarter. Are you able to share details on what industries these tenants operate in? Stephen A. Horn: It was a combination primarily of quick-service restaurants and convenience stores. I think there was one car wash in there. Analyst: Okay. Great. Thank you. Your next question is coming from Analyst with Citi. Analyst: Hi. This is Nick Kerr on for Smedes. Morning. Thanks for taking the question. Are you seeing or hearing anything from any of your tenants that might suggest any changes in underlying consumer spending habits, maybe across the restaurant or more of the experiential touch bases? Vincent H. Chao: Many of our tenants—about 10%—are public, so we do get those reads, and we also have our own conversations privately with our tenants. There is nothing I would say that is a broad-strokes takeaway. Certain restaurant tenants are doing better than others. To the extent there is continued pressure on the consumer, you would expect that to pressure some of the more cyclical businesses, but nothing has bubbled up that is a meaningful broad-stroke takeaway. Analyst: Got it. Thank you. And then you mentioned you are trending towards the high end of your acquisition guidance. Could you just remind us what your visibility into your pipeline is like from today, and then any color on what that quarterly cadence of acquisition volume would look like through the balance of the year? Stephen A. Horn: I encourage you to look at volume on an annual basis because quarter to quarter it can be very volatile. As I said in the opening remarks, our acquisition opportunity set is really healthy currently, and, as Vincent mentioned, we are trending to the high end of our range currently—if everything closes. Operator: Your next question is coming from Jenny Leeds with Morgan Stanley. Please pose your question. Your line is live. Jenny Leeds: This is Jenny on for Ron. First question on sale-leaseback: you talked about a lot of the acquisitions from longstanding relationships. Are you seeing any acceleration in sale-leasebacks given the current macro environment? Stephen A. Horn: I think that is reflected in our pipeline. There is a big opportunity with sale-leasebacks currently. It is elevated this year versus 2025, even though we had record volume in 2025. It feels like there are a lot of sellers using sale-leaseback for debt refinancings and balance sheet management. Jenny Leeds: That is helpful. Thank you. Second, can you confirm the latest status of Frisch’s and Badcock? Are they all cleaned up? What is the current status? Stephen A. Horn: All our Badcock assets are currently accounted for and cleaned up, and we had near 100% recovery—so we are in great shape there. For Frisch’s, we are well on our way. All the Frisch’s are within our 53 vacant assets, and we are working all the assets currently. We have a tremendous amount of interest in those assets, and I am expecting some really positive outcomes as we move through the year. Vincent H. Chao: With occupancy back to 98.6%, above our long-term averages, there is not strong pressure to fire sale anything or move too quickly. We are in a good position and can be a little bit pickier. Operator: Your next question is coming from Alec Feygin with Baird. Alec Feygin: Hey, thanks for taking my question. First one: what is the term income currently assumed in guidance? Vincent H. Chao: We do not give lease termination fee guidance per se. We have commented that we think this year will be a normalized year, typically between $3 million to $4 million. Again, not guidance, because these things are episodic. If it is the right thing to do for the business to take a lease termination fee because we can solve a future problem and get a fee on top of it, we will do that. Historically, $3 million to $4 million is about what we averaged—maybe a little less—and what we did in the quarter is pretty consistent with that. Alec Feygin: Got it. And second for me: are there any categories currently seeing a bid from private market participants where you can be opportunistic in asset sales—not from a real estate or credit perspective, but just seeing a high bid? Stephen A. Horn: There is not a particular segment with a distinct high bid right now. We are looking to sell about $130 million of assets in the market, and there is no big private capital market bid for those. If pricing were super attractive, we would consider it, but that is not what we are seeing at the moment. Operator: Your next question is coming from Michael Goldsmith with UBS. Michael Goldsmith: Good morning. Thanks a lot for taking my question. You touched a little on expected cap rate compression from the first to the second quarter. Is that just broad compression, or are there specific asset categories where you are seeing that compression? Stephen A. Horn: It is broad across our opportunity set. As you know, we do a lot of mining of our portfolio. The auto service and convenience store sectors are primarily where we are seeing minimal compression—around 15 to 25 basis points. Michael Goldsmith: Anything specific you think is driving that? Stephen A. Horn: As I always say, in the first half of the year people want to do deals, so the competition gets a little more aggressive and is willing to compress their spreads. Michael Goldsmith: And then in terms of specific categories, you mentioned that you leased to a car wash. Can you talk about your comfort level in that category? I think you mentioned that you sold an AMC. Are you able to provide the cap rate on where theaters are trading right now? Stephen A. Horn: We do not provide cap rates on individual deals. Overall, our income-producing dispositions were about 30 basis points inside our acquisition cap rates. Regarding car wash, to clarify, we did not buy a car wash this quarter—it was one of the seven assets we leased. That said, I am very comfortable with our car wash holdings. We have done them since 2005, our basis is extremely low, and we did not get into the “pie-eating contest” when there was a lot of availability for car washes over the years. Michael Goldsmith: Got it. Thank you very much. Good luck in the second quarter. Vincent H. Chao: Thanks, Mike. Operator: Star 1 at this time to enter the queue. Your next question is coming from John James Massocca with B. Riley Securities. Please pose your question. Your line is live. John James Massocca: Good morning. Sticking with the theme around cap rate compression you are potentially seeing in the pipeline and on the horizon for the remainder of the year, is that changing at all based on any changes in the competitive environment? With interest rates moving around and maybe some dislocation in certain other capital sources, are you seeing less competition outside of other REITs, and if you are, are other REITs filling that gap? What is the overall competitive environment for your potential partners here? Stephen A. Horn: For the 20-plus years I have been doing this, it has been a highly competitive environment. The names have come and gone, and a couple of us REITs have been around for the 20-plus years. Private capital has always been involved. It was non-traded REITs; now financial institutions are raising money and creating REITs. It is highly competitive—it always is. The names change. I do not view there as being more competition; I view it as people wanting to do more deals right now in the first half of the year. John James Massocca: Have you seen any pullback in non-REIT capital over the course of year-to-date, given some of the changes in that environment? Stephen A. Horn: Most of the non-REIT capital is playing in segments we do not play in—large industrial—so they can deploy vast amounts of money at one time. They are not buying a Taco Bell in Terre Haute, Indiana, with a franchisee. John James Massocca: Fair enough. And then I know you do not want to disclose the cap rate on the AMC asset sale, but can you maybe talk about who the buyer was? Was it another landlord, a tenant, someone looking to redevelop? Was this a true theater-to-theater transaction? Stephen A. Horn: It was somebody looking to redevelop the asset. John James Massocca: Okay. Alright. That is it for me. Thank you very much. Operator: There are no further questions in queue at this time. I would now like to turn the floor back over to Stephen A. Horn for closing remarks. Stephen A. Horn: Again, thanks for joining us on the call. NNN REIT, Inc. is in really good shape going forward. We are optimistic and look forward to seeing many of you in the next few weeks at NAREIT. Thanks, and good day. Operator: Thank you, everyone. This concludes today’s conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.
Operator: Thank you for standing by. Welcome to the Benchmark Q1 Fiscal Year 2026 Earnings Call and Webcast. [Operator Instructions] I would now like to turn the conference over to Paul Mansky, Benchmark Investor Relations. You may begin. Paul Mansky: Thank you, operator, and thanks, everyone, for joining us today for Benchmark's First Quarter 2026 Earnings Call. With us today are David Moezidis, our President and CEO; and Bryan Schumaker, our CFO. After the market closed, we issued an earnings release pertaining to our financial performance for the first quarter of 2026, along with a presentation, which we will reference on this call. Both are available under the Investor Relations section of our website. This call is being webcast live, a replay of which will be available approximately 1 hour after we conclude. The company has provided a reconciliation of our GAAP to non-GAAP measures in the earnings release as well as in the appendix to the presentation. Please take a moment to review the forward-looking statements disclosure on Slide 2 of the presentation. During our call, we will discuss forward-looking information. As a reminder, any of today's remarks which are not historical statements of fact are forward-looking statements, which involve risks and uncertainties as described in our press releases and SEC filings. Actual results may differ materially from these statements. Benchmark undertakes no obligation to update any forward-looking statements. For today's call, David will start with an overview, followed by Bryan's further detail of our Q1 results and guidance. We'll then turn the call back to David to share his perspective on sector trends and closing remarks. If you please turn to Slide 4, I'll turn the call over to our CEO, David Moezidis. David Moezidis: Thank you, Paul. Good afternoon, and thank you for joining us today. In the first quarter, we delivered revenue of $677 million and EPS of $0.58, both coming in towards the higher end of our expectations. Our first quarter performance reflects solid execution across the business and meaningful progress in our strategic priorities. As we look ahead, the combination of improving end-market conditions and our momentum in Semi-Cap and AC&C and the operational discipline we've been emphasizing gives us greater confidence in our outlook for the year. We now expect full-year revenue growth to be in the 9% to 10% range, up from our prior expectations of mid-single-digit growth. We also expect EPS growth to outpace revenue as we remain focused on execution and disciplined expense management. Turning to Slide 5. During the quarter, we saw evidence of improvement across a broad cross-section of our end-markets, reflecting the benefits of our well-balanced portfolio. Medical revenue continued to accelerate year-over-year and Semi-Cap returned to double-digit sequential growth. Within AC&C, the AI-related wins we've discussed on prior calls have begun to ramp, and our confidence continues to improve. Meanwhile, performance across the rest of the portfolio was in line with our expectations. These are early but clear signs that the customer-first initiatives we began implementing over the past 2 years are taking hold. That shows up in more disciplined customer engagements, clearer program prioritization and more consistent execution across the portfolio. We also delivered another quarter of solid bookings performance. This consistency reinforces our confidence in both the pacing of the year and the sustainability of our growth outlook. Operationally, we continue to drive leverage, with both operating income and earnings growing faster than revenue year-over-year. At the same time, our sustained focus on working capital efficiency drove another quarter of strong free cash flow despite stepped-up investments to support future growth. While we remain mindful of the broader environment, demand signals are stronger today than they were 90 days ago. Regardless, our priorities do not change; stay close to our customers, execute with consistency and continue to build a more resilient operating model. In short, we're encouraged by how the year has started and by the momentum we're seeing as we move forward. With that, I'll turn the call over to Bryan to walk through the financial details for the quarter. Bryan Schumaker: Thank you, David, and good afternoon, everyone. Please turn to Slide 6. Revenue in the quarter was $677 million, up 7% year-over-year and above the midpoint of our prior guidance of $655 million to $695 million. Non-GAAP EPS was $0.58, which was at the higher end of our prior guidance range of $0.53 to $0.59. As a reminder, our non-GAAP results exclude stock-based compensation, amortization of intangible assets, restructuring, impairment and other items as detailed in Appendix 1 of this presentation. For the first quarter, non-GAAP gross margin was 10.3%, improving 20 basis points year-over-year and decreasing 30 basis points sequentially, primarily due to volume. Non-GAAP operating margin of 4.8% was also up 20 basis points year-over-year, but down 70 basis points sequentially, driven by lower revenue and higher variable compensation. Our first quarter non-GAAP effective tax rate was 27.4%, slightly above our prior guidance range, driven by jurisdictional mix. Please turn to Slide 7 for the first quarter 2026 revenue performance by sector. Semi-Cap revenue, while down slightly year-over-year, increased 12% (sic) [ 2% ] sequentially, reflecting improved momentum as we progress through the quarter. As expected, industrial and A&D moderated year-over-year, down 3% and 2%, respectively. Meanwhile, medical revenue grew 24% and AC&C grew 41% year-over-year. Please turn to Slide 8 for our trended non-GAAP financials. Year-over-year, we saw a consistent improvement across revenue, profitability and earnings. This reflects continued discipline in execution and mix. Although these metrics were sequentially down this quarter due to seasonal volume and variable expenses, we expect both sequentially and year-over-year improvement for revenue, profitability and earnings throughout the balance of 2026. Please refer to Slides 9 and 10 for a discussion of our balance sheet, cash flow and working capital trends. In the first quarter, we generated $47 million in operating cash flow and $29 million in free cash flow despite investing in both inventory and capital equipment to support our future growth. As of March 31, we were $120 million net cash positive. Our cash balance was $325 million, representing a $3 million sequential increase. We had $145 million outstanding on our term loan and $60 million outstanding on our revolver, leaving $486 million in available borrowing capacity. We invested approximately $18 million in capital expenditures during the quarter. Our fourth PT building in Penang remains on track to begin operations in Q3. Based on the momentum we are seeing in the business, we expect full-year 2026 capital spending to track to the higher end of the 2.0% to 2.5% range. Demonstrating our continued commitment to return value to shareholders, we distributed $6 million in cash dividends and repurchased $6 million in stock during the quarter. At quarter end, we had approximately $117 million remaining under our share repurchase authorization. Our cash conversion cycle for the quarter was 67 days, which is a 19-day improvement year-over-year and consistent with our strong fourth quarter performance. A key contributor to that progress was disciplined inventory management. Inventory days declined 14 days year-over-year even as we grew the top line over the same period. This discipline translated into an improvement in turns to 4.8 as compared to 4.0 in the prior year period. Please turn to Slide 11 for our second quarter guidance. For the second quarter of 2026, we expect revenue to be within a range of $700 million to $740 million, representing 12% year-over-year growth at the midpoint. We expect non-GAAP gross margin to be between 10.4% and 10.6%, and non-GAAP operating margin to be between 5.1% and 5.3%. We anticipate GAAP expenses will include approximately $6.1 million of stock-based compensation and $0.8 million to $1.2 million of non-operating expenses, including amortization, restructuring and other charges. Our non-GAAP diluted earnings per share is expected to be in the range of $0.65 to $0.71. Interest and other expenses are expected to be approximately $3.5 million. We continue to advance initiatives aimed at structurally improving our tax rate over the long term. However, for the second quarter and full year, we expect our effective tax rate will be in the range of 26% to 27%. Finally, for the quarter, our weighted average share count is expected to be approximately 36.3 million. With that, I would like to turn the call back over to David for our outlook by market sector and closing remarks. David Moezidis: Thanks, Bryan. Let's turn to Slide 12 for our outlook by sector. Within Semi-Cap, since late last year, we've been sharing our view that a potential recovery in 2026 was showing more promise. This became more evident in the first quarter as revenues were stronger than expected, increasing double digits sequentially. Over the past several years, we supported existing programs, secured new wins and invested in capacity, including investments such as our Penang 4 facility in anticipation of an industry upturn. Looking ahead, we expect this to translate into both sequential and year-over-year growth throughout the year. Within industrial, revenue was in line with our expectations, and we see modest growth in 2026. Within the sector, we're seeing good performance from transportation and agriculture, while automation and HVAC saw softer conditions. Overall, we remain positive on the outlook for the sector longer term. Turning to aerospace and defense. Our commercial air business continues to perform well. After 2 years of double-digit growth, we expect A&D to moderate in 2026, driven primarily by program timing within defense. Importantly, bookings activity across defense and space remains strong, positioning the sector for a return to growth as these programs are expected to ramp later in the year and into 2027. Medical delivered another standout quarter in Q1, and we expect this performance to continue over the next several quarters, supporting our growth for the year. I'm particularly encouraged by the breadth of the growth drivers in medical, which includes our competitive wins, strong end-markets and new program ramps. Lastly, in AC&C, we delivered exceptional year-over-year results in the quarter, driven by the initial ramp of AI-related wins we've discussed over the past several quarters. These wins were enabled in part by our liquid cooling capabilities, which supported our HPC programs and are now seeing traction in clustered AI solutions. While still early in the ramp, our visibility continues to improve, leading us to expect strong growth from this sector in 2026. As a validation that our customer-first initiatives are working, I'm pleased that we were recently named HP Enterprise's 2026 Manufacturing Partner of the Year, a meaningful acknowledgment from a strategic customer. In summary -- turning to Slide 13. We are pleased with our first quarter performance and how 2026 is taking shape. The progress we're seeing did not start in Q1. It reflects the work we've put in over the past several years, which gives us the confidence to raise our full-year revenue outlook to 9% to 10%, with operating income and earnings growing faster than revenue, both sequentially and year-over-year throughout the remainder of the year. At the same time, we remain committed to investing in the business with customer satisfaction as our central focus. This includes continued capacity expansion around the world, as well as ongoing investment in our leadership and capabilities. Whether capacity, talent or manufacturing efficiency, these investments share a common objective to deepen customer engagement, accelerate innovation and support the opportunities ahead of us. With that, I'd like to thank our customers, our shareholders and the entire Benchmark team around the world for their continued trust, dedication and execution. Operator, we can now open for questions. Operator: [Operator Instructions] And your first question comes from the line of Max Michaelis with Lake Street Capital Markets. Maxwell Michaelis: Congrats on the quarter as well as the guide. First one for me, kind of want to stick to semi here. With Penang 4 opening up in Q3, can you remind me how much capacity -- excess capacity that will bring online? David Moezidis: Max, we don't discuss kind of how the capacity online is. But what we can tell you is the additional capacity that is coming online is setting us up to serve our customers inside of 2026 and positioning us for further growth in 2027. Maxwell Michaelis: Perfect. And then sticking with semi, I mean, when we think about this strength here going throughout 2026, are you seeing this broad-based strength across your entire customer base? Or is it kind of a onesie-twosie deal? David Moezidis: No, no. This is broad-based. This is definitely broad-based. And we started hearing the signals at Semicon in October, and I shared that information in one of our earlier calls. And those signals started materializing into orders. And now we're up and running, as you could see with our performance. Maxwell Michaelis: And then last one, just with AC&C. You talked about strong momentum with enterprise AI clusters as well as on-prem cloud infrastructure. Any other use cases you can touch on, or maybe potential visibility into future orders that you're in conversations with right now? David Moezidis: Well, what I can say is those are the 2 key drivers, but we're also anticipating as we exit the year and enter 2027, HPC is going to actually start picking up on its own and contributing nicely as well. Operator: And the next question comes from the line of Steven Fox with Fox Advisors. Steven Fox: I had a couple of questions as well. I guess, first of all, I was wondering if you could dial in on the operating leverage you're seeing as per the guidance for Q2. I was wondering, first of all, if there's any sort of unusual headwinds like as you ramp capacity that maybe is limiting that? And as your mix shifts, how do we think about operating leverage as you get into the second half of the year? And then I had a follow-up. Bryan Schumaker: Yes. So if you look at our operating leverage -- Steven, thanks for the question. As we've referenced, I mean, we expect kind of the bottom line to kind of grow to 1.5 to 2.0 is what we're thinking on dropping to the EPS, so as you get throughout the year. Now the current operating margin will be impacted a little bit as we've expanded kind of the overall growth by some variable compensation and a little bit of impact from just other corporate expenses due to some ramp and some other things. But overall, I mean, we feel good about the back half and being able to leverage up on the operating margin as we continue throughout the year. So, you see some of that from Q1, our guide in Q2 and then kind of throughout the remainder of the year, you'll see that coming through. Steven Fox: Great. That's helpful. And then just as a follow-up, David, I mean, you mentioned new programs that you've been working on for years, capabilities, et cetera, in the Semi?Cap space. Can you give us a better sense of like what's coming to fruition now that maybe changes the mix or supports the growth? I'm just trying to get a sense for how some of those efforts are paying off maybe in the next 6 to 12 months. David Moezidis: Yes. I would frame it into 2 areas. One is we're increasing our share of wallet with our existing customers. And two, we're actually winning new share with some new customers, so newer brands, newer logos, if you will. So it's contributing from both fronts. And from our perspective, this is an area that we made investments in over the course of the last several years, and we're starting to see the fruits of those labors. Steven Fox: And if I could just follow up on that real quick. When you talk about some of these wins, like does the product or the services you're providing in the future, is it similar mix to what you would say you've done over the last 2 to 3 years? Or there's any changes on that front? David Moezidis: Yes, Steven. I would say it's very similar for the most part. Now, you'll see products change with regards to the level of complexity, but how we serve our customers in the semiconductor capital equipment space is a combination of our precision technology solutions as it relates to machining and such, as well as electronic, mechatronics, system integration and PCBA assembly. So it's really the total breadth of services that we're able to bring to bear for our customers. Operator: And the next question comes from the line of Anja Soderstrom with Sidoti. Anja Soderstrom: Congrats on the quarter here. So, I'm just curious, in the Semi Cap, you say you expect sequential growth, but do you expect the second half to be much stronger still or... David Moezidis: Yes. Anja, this is David. We do. And we're looking at -- we don't typically go out and start providing specific sector growth rates, but we decided that for this sector specifically because there's been a lot of questions for us to share with you that we'll be somewhere around the mid-teens from an overall growth in this space. Anja Soderstrom: Okay. And then also for AC&C, how should we think about that? That was very strong for the quarter. And do you expect that to step up? Or is it going to be on the same sort of level as the first quarter? David Moezidis: Yes. I would say, as we continue our ramp, we expect it to continue to improve. Now to what extent, we'll report back at that on that next quarter. Anja Soderstrom: Okay. And then just remind me again for Penang, is that higher margin business? Or is it corporate average? Bryan Schumaker: Yes, Anja. This is Bryan. So yes, it is higher margin. So it's primarily focused on precision technology Semi-Cap. So, that's why it is bringing the higher margin. So just to take that into consideration and then you look at our overall portfolio, you have the growth that we're seeing in the Semi-Cap space and you also have the AC&C, which is the lower end that kind of offset. But yes, as far as PT goes and that expansion, it is on the Semi-Cap, the higher end. Operator: [Operator Instructions] Your next question comes from the line of Anja Soderstrom with Sidoti. Anja Soderstrom: Sorry, I just had one more. I wanted to squeeze in. Do you see any sort of difficulty in the supply chain or component availability at all? David Moezidis: Yes. Anja, we're starting to see select lead times increasing in pockets. And we're seeing the same challenges as pretty much everybody in the memory space. And really, we're doing our very best to get in front of it and make sure that we manage the supply chain properly. Operator: And we do have a follow-up question coming from the line of Steven Fox with Fox Advisors. Steven Fox: I was just curious, maybe some of this takes a little time to matriculate, but how do you think the conflict in Iran is impacting defense program run rates, maybe not this quarter but over the back half of the year? Is that something we should think about beyond just sort of the secular trends that you're writing? David Moezidis: Yes, Steven. Our view on that is even if you have immediate resolution, defense is going to perhaps remain strong for the next 12, 18 to 24 months as those investments will need to really be there for replenishment purposes. That's probably -- and that's my opinion on that. But from an order perspective and market share and bookings, we continue to see momentum there. We're winning defense programs. And as I shared in my script, we're also winning in space. So, we remain very positive in this sector, and we see it picking back up in 2027. Operator: I'm showing no further questions at this time. I would like to turn it back to Paul Mansky for closing remarks. Paul Mansky: Thank you, operator, and thank you, everyone, for participating in Benchmark's First Quarter 2026 Earnings Call. For updates to upcoming investor conferences and events, including a replay of this call, please refer to the Events section of our IR website at bench.com. With that, thank you again for your support, and we look forward to speaking with you soon. Operator: And this concludes today's conference call. You may now disconnect.
Operator: Greetings, and welcome to the Regency Centers Corporation First Quarter 2026 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Christy McElroy. Please go ahead. Christy McElroy: Good morning, and welcome to Regency Centers' First Quarter 2026 Earnings Conference Call. Joining me today are Lisa Palmer, President and Chief Executive Officer; Mike Mas, Chief Financial Officer; Alan Roth, East Region President and Chief Operating Officer; and Nick Wibbenmeyer, West Region President and Chief Investment Officer. As a reminder, today's discussion may contain forward-looking statements about the company's views of future business and financial performance, including forward earnings guidance and future market conditions. These are based on the current beliefs and expectations of management and are subject to various risks and uncertainties. It is possible that actual results may differ materially from those suggested by these forward-looking statements we may make. Factors and risks that could cause actual results to differ materially from these statements may be included in our presentation today and are described in more detail in our filings with the SEC, specifically in our most recent Form 10-K and 10-Q filings. In our discussion today, we will also reference certain non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials, which are posted on our Investor Relations website. Please note that we have also posted a presentation on our website with additional information, including disclosures related to forward earnings guidance. Our caution on forward-looking statements also applies to these presentation materials. As a reminder, given the number of participants we have on the call today, we respectfully ask that you limit your questions to one. Please rejoin the queue if you have additional follow-up questions. Lisa? Lisa Palmer: Thank you, Christy. Good morning, everyone, and thank you for joining us. We are off to an outstanding start to the year, building on the positive momentum from last year. In the first quarter, we delivered strong same-property NOI and earnings growth driven by robust operating fundamentals and accretive capital allocation. Our results demonstrate the durability of our portfolio the strength of our platform and the execution of our team. Our tenants are performing well in our centers, supported by the resiliency and spending power of consumers in our strong suburban trade areas, as well as our focus on essential retail anchored by top-performing grocers. It is this combination of high-quality trade areas and our concentration of necessity-based value-oriented and convenience retail, that positions our portfolio to perform consistently, even in uncertain macroeconomic environments. We also continue to see significant momentum across our investments platform. Our track record of success in ground-up development is 1 of Regency's greatest differentiators and is a key driver of our external growth strategy. In an environment with very little new retail supply, our ability to source, execute and deliver high-quality developments across the country really sets Regency apart. Our project deliveries will translate into meaningful NOI contribution in 2026 and beyond, boosting total NOI growth and driving earnings and NAV accretion. As we look ahead, I'm really energized by our strong start to the year and by the opportunities in front of us. I want to reiterate just how distinct Regency's growth story is. Our portfolio of high-quality, grocery-anchored neighborhood and community centers located in some of the strongest trade areas in the country, has consistently delivered durable cash flows across economic cycles. Our leading national development platform is creating meaningful value for shareholders at a time when few others can compete with our expertise, relationships and proven results. Our strong balance sheet gives us flexibility and the capacity to be opportunistic with low cost and substantial access to capital. And most importantly, we have the best team in the business. With this foundation, Regency is exceptionally well positioned to continue delivering strong and sustainable growth for our shareholders. Alan? Alan Roth: Thank you, Lisa, and good morning, everyone. We delivered another excellent quarter to start the year, following what was a record-breaking year for us in 2025. The fundamentals across our portfolio remain strong, and I couldn't be more proud of our team's execution. Tenant demand continues to be robust across nearly all categories and regions, spanning both anchor and shop space. Grocers, restaurants, health and wellness concepts and off-price retailers are among the most active, but the breadth of engagement across our portfolio is really impressive. The availability of high-quality space is increasingly scarce, both at our centers and in our trade areas, and that dynamic is working in our favor. Our same-property percent leased, which is approaching 97%, was up 10 basis points over the fourth quarter. A sequential uptick in Q1 is seasonally unusual, and it really speaks to the strength of the demand we're experiencing and to the durability of our occupancy. Leased occupancy is now close to our prior peak, though I am confident further upside is achievable, particularly in anchor leasing, where we continue to have meaningful engagement with leading national retailers. What is especially encouraging is the nature of our activity today. We continue having success proactively leasing occupied space, upgrading merchandising, bringing in new and vibrant concepts and replacing outdated or underperforming uses. Our same property commenced rate also increased 20 basis points in the quarter as we made meaningful progress commencing tenants within our SNO pipeline. The pipeline continues to be a significant tailwind to future NOI growth, representing approximately $42 million of incremental base rent. We achieved robust cash re-leasing spreads in the first quarter and cash spreads were near a record high. These results reflect our ability to achieve compelling mark-to-market rent increases in addition to embedding meaningful contractual rent [ steps ] into our leases. That success is the basis for our ability to drive strong, sustainable rent growth within our portfolio over the long term. Same-property NOI growth of 4.4% in the first quarter was reflective of these strong operating trends, along with the substantial progress we've made raising occupancy and completing redevelopment projects. In closing, the trend we are seeing in leasing activity, tenant sales, collections and foot traffic remained very favorable. We are positioned for success and continued growth ahead and I'm excited about what our team will accomplish. With that, I'll hand it over to Nick. Nicholas Wibbenmeyer: Thank you, Alan, and good morning, everyone. We continue to have significant momentum within our investments platform, evident in an active first quarter of accretive investment activity. Our team is successfully executing on and delivering projects within our in-process pipeline, and we continue to source attractive new ground-up projects. During the first quarter, we completed $42 million of projects, including Oakley Shops at Laurel fields, a safeway-anchored neighborhood center we developed ground up in the Bay Area. Our team did an exceptional job bringing this project to fruition in less than 18 months, 1 of the quickest ground-up deliveries that I can recall. We also started another $73 million of new projects this quarter, including Crystal Brook Corner, redevelopment on Long Island. We acquired this underutilized piece of real estate and are transforming it into a Whole Foods anchored neighborhood center. This project demonstrates our ability to look at acquisition opportunities through a differentiated lens, leveraging Regency's platform, our relationships and our development expertise to drive near-term value creation. Our in-process pipeline now exceeds $600 million, with exceptional leasing momentum and blended returns above 9%. The team has been executing these projects on time and on budget, which I want to emphasize as a direct result of the substantial risk mitigation we undertake before we break ground. Within our ground-up development platform, we continue to see remarkable results. An example includes Ellis Village in Northern California, which we started in the second half of 2025. The project is already 100% leased with an anticipated anchor opening later this year. Our Sunbed and Stonebridge ground-up projects in the Northeast each celebrated Whole Foods openings during the first quarter, both with strong community reception. As Lisa discussed, ground-up development remains a substantial differentiator for Regency, and our brand as a developer has never been stronger. We are the only national developer of high-quality grocery-anchored shopping centers at scale and an environment of otherwise limited new supply. Our teams are actively sourcing new projects, and we continue to have visibility to a potential of more than $1 billion of project starts over the next 3 years. Leading grocers across the country remain engaged in a year to expand with us and shop tenants are excited to be part of our projects. Landowners trust us to deliver given our proven track record and the strength of our grocery relationships, particularly among master plan developers, where our retail projects are providing a significant amenity and value to their communities. This positive momentum continues to enhance our success, strategically positioning us to capitalize on additional opportunities. We are creating real value for shareholders at meaningful spreads to market cap rates, and we are excited about the opportunities for continued growth in our investment platform. Mike? Michael Mas: Thank you, Nick. Good morning, everyone. Regency delivered another strong quarter to start the year, a testament to our team's continued execution on our strategy and the favorable conditions of our markets. Same property NOI growth was 4.4% in the first quarter including 3.5% of base rent growth. Recall last quarter, we discussed that Q1 would be above and that Q2 would fall below our full year guidance range. With this quarter driven by the uneven nature of other income, and next quarter driven by a tough comp relative to last year's favorable expense reconciliation performance. Most importantly, base rent continues to grow at very healthy levels, benefiting from increasing rents, commencing our SNO pipeline and delivering on our accretive redevelopment projects. Looking through the variables in first and second quarters, we are maintaining guidance for full year same-property NOI growth of 3.25% to 3.75% as well as for growth in core operating earnings and NAREIT FFO per share each at 4.5% at the midpoint. We continue to expect total NOI growth north of 6%, reflecting meaningful contributions from ground-up development deliveries and the substantial acquisitions we completed last year. We did make a few minor assumption changes within our outlook. We modestly increased development and redevelopment spend as a result of increased starts expectations as well as our acquisitions guidance to now include known transactions. These changes reflect continued strong investment activity and support positive momentum in external growth and value creation. The strength of our balance sheet is an important element of this ability to accretively allocate capital. We have worked strategically over time to position the company with low leverage, strong liquidity and pendable access to attractively priced capital. In February, we issued $450 million of 7-year unsecured notes at a 4.5% coupon, achieving the lowest credit spread in Regency's history. This execution represents 1 of the most favorable cost of debt capital in the REIT sector and is a direct reflection of our A credit ratings from both Moody's and S&P. Leverage remains near the low end of our target range of 5 to 5.5x, and we have nearly full availability on our credit facility and our strong free cash flow generation allows us to fund our development pipeline with no current need to raise equity or sell properties. In closing, we are gratified by another strong quarter and look forward to continued success as our teams execute our differentiated strategy through the balance of the year. With that, we welcome your questions. Operator: [Operator Instructions] And our first question will come from Cooper Clark with Wells Fargo. Okay. With that, moving on to Michael Goldsmith with UBS. Michael Goldsmith: Mike, can you walk us through the sort of the [indiscernible]guided to [ $51 million ]of prorate [indiscernible] first quarter? So can you just kind of recognizes... Unknown Executive: Michael, before you finish, for some reason, you're breaking up. If we can you could start from the beginning, that would be great. Michael Goldsmith: Lisa, sorry about that. Is this any better? . Lisa Palmer: It's much better. Michael Goldsmith: Great. Yes. So I want to walk through the noncash revenue component, you guided to $51 million for the year. So prorated that would have been -- if you split it by 4 probably would have been at $12.75 million for the first quarter. You came in at like [ 97%-ish ] so can you kind of walk through what drives the difference there from the kind of the prorated number, the lumpiness that is natural with the noncash revenues and how you expect the rest of the year to play out. Michael Mas: Thank you, Michael. I appreciate the question. As you just said, noncash can be on the uneven by future and straight lining of our guidance range would have led to a little bit of a higher expectation for Q1 and a couple of things going on. One, we did make an adjustment to a single tenant, 1 lease where we move that lease to a cash basis. So that, in effect, results in a reserve on straight-line rent that's booked in the quarter. And that's probably the largest component that you're seeing drive that variance today. We haven't taken our eyesight off full year guidance. obviously, at $51 million. And I'd also say last year, just as a reminder, you can get fits and starts with tenant out and the acceleration of below-market rents. That can also be a driver of changes to the cadence of noncash. So just to make sure you keep a look out for that going forward. Little quickly, say, another commercial for why we use core operating earnings to really tell the story of how we grow cash and cash flow at Regency, we eliminate noncash, we eliminate nonrecurring. I think that core operating earnings number is really valuable as we think about the earnings potential of the company. Operator: Our next question comes from Samir Khanal with Bank of America. Samir Khanal: Maybe to start kind of high level, grocers are stable? I mean, I guess, maybe provide color on kind of small shop tenant health, given the macro and higher prices. Talk about occupancy costs? And have you seen any differences on categories amongst the shop tenants, the discretionary retail or restaurants, given higher prices in the macro. Lisa Palmer: Thanks, me. I'll start, and then I'll have Alan cover it up with specific to our portfolio. But as you've heard us say many, many times, and we are really well positioned to perform throughout economic cycles, because of the format of our shopping centers, necessity, value, convenience is even tougher times. So we're well aware of the pressures on consumers with the rise in gas prices. Then there's even a trade-down effect oftentimes, and Alan can color that up with our foot traffic. So we start to see even more traffic at our centers as a result of that. And then on top of that, layer in the trade areas in which we operate. And our consumers are more resilient and more able to withstand these price increases and pressures. So our tenants are healthy. We're seeing that in every metric within the portfolio. And I'll let Alan color that up a little bit more. Alan Roth: so talk about the tenants being healthy that Lisa just said. I think the first place I'm going to look at their sales, and they do remain healthy within our portfolio. The next spot I'm going to look is at our collections, and we're continue to be near record lows there. And then as Lisa mentioned, foot traffic, it's very resilient. We look at the Q1 results, we are up 2.3%. But to your point of the recent sort of macro environment and higher fuel prices, what does April look like. And when we look at the portfolio in April, foot traffic is actually up 3%, more than it was in Q1 during this time period of increased fuel prices. So Look, we continue to feel good, and I would bring that back to Lisa's comment of the consumers and the trade areas in which we are operating. But we're going to continue to keep a watchful eye on things, but things remain certainly positive from all metrics that we have access to. Operator: Moving on to Craig Mailman with Citi. Craig Mailman: One. You guys had bumped the increased start expectations a bit here. Can you talk about which projects are now slated to start this year? And just the overall kind of leasing activity? And maybe anything else on the horizon that wasn't included in these new starts, but maybe could potentially start later this year, kind of just talk about the overall environment of your different projects. Michael Mas: Craig, I appreciate the question. Let me start and I'll give it to Nick real quick because I want to just clear up something. We guide on development spend. We are -- but we are highlighting that. We have some added visibility to add it starts that will drive that spend this year. But I want that to be clear that the spend guidance, not starts guidance. And then Nick will take it from there. Nicholas Wibbenmeyer: Yes, Craig. I appreciate the question. As we said in our opening remarks, we feel really good about our ground-up development program. And so -- as you've seen over the last 3 years, we've started just over $800 million. And as we look forward, we expect our investment platform to invest over $1 billion over the next 3 years. And so you can just see continued upward momentum as our team does a tremendous job uncovering these opportunities around the country. And so we continue to be bullish about that opportunity set. Therefore, we are raising our eyesight regarding what that spend will be based on an expectation of higher starts and previously anticipated. Operator: We'll go next to Juan Sanabria with BMO Capital Markets. Juan Sanabria: Just piggybacking off with Craig's question. Just on the greenfield new starts, you mentioned master client communities being a good source of opportunities for you. But just curious if with the uncertainty on a single-family build for rent with the [ Road Housing Act ] if that's free in the temporary pausing by some of the developers for homes? And has that any changes to the prospects of like that line of business going forward for Regency's future development pipeline? Nicholas Wibbenmeyer: Yes. Greatly appreciate the question. And that's a really insightful question. The reality is our program to date has not been heavily involved in the build-to-rent type communities. And so the master plan does we are working with and continue to work with around the country are single-family for sale communities and/or they have other aspects of townhomes or apartment buildings. And so we haven't seen any impact to the master plan communities we're working on in terms of their appetite and desire to continue to push forward to build retail within their communities at this point. Operator: And Todd Thomas with KeyBanc Capital Markets. Todd Thomas: I guess sticking with that a little bit in terms of the ground-up development. Can you talk about the cadence of starts, how that looks during the balance of the year and also discuss how yields are trending on new projects, new ground-up projects that you're underwriting relative to the yields and whether or not future master plan starts would sort of look similar or potentially have a different yield profile? Nicholas Wibbenmeyer: I appreciate the question, Todd. In terms of your first question on timing, if you want to talk about lumpy developments where it gets the lumpiest in terms of timing. And that's because -- our focus is not hitting some time line. Our focus is absolutely making sure we derisk these opportunities before we close. And so we want to make sure we're fully through entitlements. We want to make sure we have pre-leasing done with our anchors. We want to make sure we have drawings done and bids in hand. We want to make sure we have visibility to executing on these projects. And -- as you can appreciate, that's an extremely complicated process. And we always laugh here always 1 phone call away from a delay from any different outside input on that process. And so we're excited about that program. It is building, but it will always be lumpy. But that being said, we continue to have good visibility to an increased amount of starts this year, and that's why we did increase our projected spend because although lumpy and a little back-end weighted likely this year, we still feel really confident in the overall trajectory of that. Michael Mas: And let me just come back in there because I want to double down on Craig's question, too. That guidance is spend, I would consider that to be ratable throughout the year from a spend standpoint. And then to Nick's point, we do think starts are growing and they'll probably be more back-end loaded, which is setting us upgrade for deliveries in '27 and beyond. Lisa Palmer: And we're not -- I was going to -- yes, the second half of the question on yields. I'll let you take it. Nicholas Wibbenmeyer: Yes. And then on the yield side, we're not changing our eyesight. And so as you've seen, our development yields are firmly in that 7% plus range, and that's where our eyesight continues to be. And so we feel really good about achieving those returns. Operator: We'll go next to Michael Griffin with Evercore ISI. Michael Griffin: Alan, I appreciated your comment on the leasing pipeline and looks like it's another strong year ahead with high, both same property leased as well as commenced occupancy. Your comment on the rent bumps that you're embedding. I realize that's probably more on the small shop side. But has anything been able to change in terms of the leverage that you have when it comes to those anchor leases. I realize that a lot of these grocers will be effectively flat leases with multiple option periods. So whether it's being able to take back control of the site earlier through shorter options, whether it's embedding greater escalators please. Can you talk about maybe the leverage on the negotiating side as it relates to particularly the anchor boxes and where you're able to push rents there? Alan Roth: Yes, Chris, thank you for the question. And you're right. The shops in fact, just to give you the stat on that, I know you didn't ask for it. 90% of our new shop leasing did, in fact, have 3% or greater embedded rent steps at about 1/4 of them had 4% or greater. So you're absolutely right, we're leaning in there. In terms of leverage, what I would tell you is we're not seeing a dramatic shift in terms of the embedded steps on the anchor front. But there is still pricing power there and whether that's having better control over work letters, lower TIs whether it's getting more rent upfront, there are levers there for sure. Not seeing much in the way of options being less. Look, I think for us, we're willing to align as long as it's the right quality anchor retailer that can be sustainable for our project. And -- the pipeline is strong. We signed a public deal for a redevelopment in the first quarter. We signed a PGA Superstore. We are bringing our first [ Tessa Life ] to a Virginia project that they're on rapid expansion throughout. And then a lot of the obvious names that you hear about Ross, TJX, Burlington, Ulta, et cetera. So it's robust. I feel really good about where those anchor transactions are. And as I said in my opening remarks, that's where the real opportunity, I think, lies for us to get back to those peak levels, which we're not at in terms of driving continued occupancy. Lisa Palmer: And I do believe it's that last statement. It's supply/demand. And when we are able to reach that peak occupancy and there's no space available for anchors. We already have pricing power and more leverage in times when there's even more vacancy out there. Right now, there's not a lot. As that continues to move in our favor, we incrementally will have more pricing power and incrementally have more leverage to push a little harder. But as long as they have other options and alternatives, and it also needs to be a win-win. We have to look at their businesses, their margins. I also believe as these tenants and our retailers get more efficient, and they are learning operational efficiencies through technology through artificial intelligence, that's going to enable them to pay more rent. And I'm really optimistic about that. Operator: We'll go next to Handel St. Juste with Mizuho Securities. Ravi Vaidya: This is Ravi Vaidya on the line for Handel. I hope you guys are doing well. Can you identify the tenant that was moved to a cash basis? Was that a bankruptcy? And how should we think about the current debt range, especially since you've utilized only less than 10 bps so far the current reserve. Michael Mas: Sure. I'm not going to name the tenant by name. It's 1 lease in over well over 9,000 leases where we made a judgment call on their ability to meet the terms of their future lease obligations. Remember, they're still current they're paying rent in the near term. Core operating earnings is unimpacted. This is an accounting treatment of future rent increases. From a ULI perspective, listen, we had a really good quarter. We largely met our expectations. We're operating at below historical averages. We plan to operate at around to slightly below historical averages, and we're meeting that expectation today. So still eyes are still pretty high, and we still feel really confident about the health of our tenancy. I feel good about the prospects for ULI going forward, which is a different comment from bankruptcies. Bankruptcies are move-outs. We are -- still find ourselves in the middle of some ongoing bankruptcy filings. Bread crumbs are out there that would indicate potentially we have some good opportunities to come out of those okay, but we're not done with those. And bankruptcies are an uncertain process. And we just need a little bit more time to have some more clarity there, but a normal part of our business. Operator: Moving on to Floris Gerbrand Van Dijkum with Ladenburg Thalmann. Floris Gerbrand Van Dijkum: Good morning. Lisa, great to hear your voice. You guys are -- you've obviously built over the last decade, a track record as being sort of best-in-class shopping center developer out there. It really differentiates your platform, as I think you alluded to. How should we think about -- you -- as I recall, you also don't have a big land bank. So how do you protect yourself from rising land values, which is a big input in your developments? And maybe talk about your option strategy versus -- and how long in advance do you have to work on getting hold of land or getting land under option before you start to activate developments typically? Lisa Palmer: Lars, thank you. Let me I'd like to set it up before I pass it over to Nick to speak more specifically and to say thank you for acknowledging what I know is the best development platform in the business nationally. And a lot of what Nick is going, how Nick will answer the question has a lot to do with why we are the best. It's the team, it's the relationships, and it's the experience and track record, all matter and all make a difference in our success. It is a virtuous cycle. So with that, I will pass it over to Nick. And again, thank you, really appreciate the comments. Nicholas Wibbenmeyer: Absolutely for us. And so -- and I also appreciate you noticing we're doing this very efficiently, meaning we are not driving a large land bank that we're sitting on in order to drive this development program. We are definitively working with the land sellers, optioning their property and working through the process. As I articulated earlier, derisking that process before we close and a really, really, really hard part of our job is sitting down with landowners and having conversations about the value of their land and educating them. And that is what we do every day. And so -- and it is the most difficult part of, I would say, the development business is sitting down with landowners, you may have 1 value in mind and educating them on the realities of the market. But that's what our teams do every day. And given our track record, given our access to information, given our retailer relationships, we win more than our fair share of those conversations and jump both with landowners for exactly that reason. And I expect it to continue, but it's never easy. It's always a challenge. Operator: Moving on to Ronald Kamdem with Morgan Stanley. Ronald Kamdem: I was just wondering, you guys bought back the slide in the presentation about sort of the run rate for occupancy upside, which I thought was interesting because it shows that your lease occupancy is already at peak, has already exceeded sort of the previous peak, but the commence hasn't. So my question is, do you think commenced occupancy can get to a new sort of peak this year? And maybe some commentary about what kind of tailwind that does for same-store NOI going forward. Michael Mas: Well, I appreciate you noticing our great disclosure, Ron. And yes, I think we feel really optimistic about the prospects for this portfolio in this current environment that we see. We have set new records on percent leased. We have room to run on percent commenced. Our plan and expectation for the year is that we will continue to shrink that gap between leased and commenced. We will continue to drive outsized base rent growth as a result, and there will be some amplifying factor through recoveries as well. And we think that -- we think that will run through the balance of this year. Where we go from there is to be determined. I mean, I think we're also an active asset manager. We really aspire to invest into our own portfolio through redevelopment. Sometimes that means managing some vacancy and taking on some vacancies. So we're not -- Alan would say this, we don't -- we're not leasing for occupancy, we're leasing to maximize NOI over the long run. And so that's the approach we're going to take from here. Alan Roth: And Ron, the only thing I would double down on is we executed 1.5 million square feet in Q1, and our teams are full speed ahead. They hit the ground running. I'm really proud of what they accomplished. It's more GLA than we executed in Q1 of '25, despite being at these peak levels. So they're going to continue to grind and find opportunities not just for vacant space, but to continue to lean into better operators and upgraded merchandising where we're leasing occupied space. Appreciate the question, Ron. Operator: We'll go next to Hong Zhang with JPMorgan. Hong Zhang: I guess could you just touch on how you're viewing potentially tax, sorry, potentially tapping the equity market today, given that your stock price is higher than when you tap the last year? Lisa Palmer: I'm going to say we've also grown NOI since that time. We always take an opportunistic view of issuing equity, and currently, we have more than enough balance sheet capacity, free cash flow to meet our needs. And if we were to have an opportunity that was visible to us that we could fund accretively with equity, we would take advantage of that. And I think we have a pretty good track record of issuing equity judiciously and accretively. So certainly, it is a tool in our toolbox and 1 that we will access when the opportunity presents itself. Operator: [Operator Instructions] We'll hear next from [indiscernible] from Deutsche Bank. Unknown Analyst: Yes. I hope this is a fair question, but I think the -- sometimes you guys are doing very well over a long period of time that people always tend to expect more and more and more. And I think, again, you're kind of having a great quarter, solid outlook, but the stock is down today. So I guess when people are kind of looking overall at your name of a stock that should be owning in their portfolio relative to their peers, they may be seeing the premium valuation, which is warranted, but again, a really good operating backdrop for the entire industry. So in that world, I guess, the question I have is, how do you guys kind of think about still being able to kind of outperform versus peers in that environment? What are investors possibly underestimating about your story that you can provide evidence of that we should still give investors confidence that, again, you can put up superior earnings growth, which validates the premium valuation. Lisa Palmer: I learned from my predecessor who often quoted a very wise investor that in the short term, the market is a weighing to see and starting to see in the long term, it's a weighing machine. And when you take the combination of what we refer to as our strategic advantages because they are. So the quality of our portfolio, the development platform, the balance sheet and our team. That -- the combination of those is truly unique. And over the long term, I have 100% confidence that we will be at or near the very top of the sector in same-property NOI growth. And I think if you were to look back at 5, 10 years, you're going to see that that's the case. You're -- and that's using less capital than the rest of the sector to get that growth. And then if you look back and look at investments and the accretion from investment and use of whether it be equity, new debt growth, just new incremental capital, again, the returns on that are at or very near the top of the sector. So I do believe that because of those 4 things, quality of the portfolio, which was going to generate very strong same-property NOI growth, a development platform that is unequal that is going to continue to create meaningful value for our shareholders over the long term. The balance sheet to fund it and the people to execute it. So that's -- I believe that it's the right strategy and 1 that will deliver and have delivered over the long term. Operator: And we'll hear next from Cooper Clark with Wells Fargo. Cooper Clark: Awesome. That is great to hear. Okay. I was hoping you could talk about portfolio trends you've seen historically during periods of higher oil prices and the impact that has on traffic levels and consumer spending trends. Lisa Palmer: The last time we had gas prices this side was probably when it was in the middle of COVID. So it was a little bit different. So I don't think that that's necessarily a relevant historical point to look to. But generally, I would again speak to -- and I've been with the company for 30 years in the modern era of Regency, we have seen a decline in same-property NOI really twice, once was the global financial crisis and the other was during COVID. . Our property type, the format of our shopping centers, neighborhood community centers really are defensive and they produce consistent, durable, steady cash flows through all cycles. And again, I'm certain half is probably listening. He's going to love that I've actually referred to him twice. I do remember that when I was much, much early in my career, the '98 mini recession, the '01 tech bubble, he kept saying, we choose not to participate, because we really -- we grew right through it. And so again, when you think about the quality of the portfolio, the format of the shopping centers, the trade areas in which we operate, we're able to grow right through it, and that's the expectation. Operator: And this now concludes our question-and-answer session. I would like to turn the floor back over to Lisa Palmer for closing comments. Lisa Palmer: Thank you all. Appreciate your time, and thank you to the team as well. Have a great day. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.
"I don't care. If he stays on he stays on,” President Donald Trump says when asked about his thoughts on Federal Reserve Chair Jerome Powell's decision to stay on the Fed Board of Governors after his term as chair is over.
Chris Harvey, CIBC, joins 'Closing Bell' to discuss Harvey's thoughts on equity markets, the earnings story and much more.
Jerome Powell said Wednesday he plans to remain on the board of the Federal Reserve after his term as chair ends next month “for a period of time, to be determined,” saying the “unprecedented” legal attacks by the Trump administration have put the independence of the nation's central bank at risk.“I worry these attacks are battering this institution and putting at risk the things that really matter to the public,” Powell said in remarks at a press conference after the Fed announced its decision to keep its benchmark interest rate unchanged.Powell's decision to stay — the first time a Fed chair will remain on the board as a governor since 1948 — denies President Donald Trump a chance to fill a seat on the central bank's seven-member governing board with his own appointee.
‘The Big Money Show' panel sounds off on Jerome Powell's decision to stay at the Federal Reserve, as tensions rise with President Donald Trump and incoming Chair Kevin Warsh over interest rate policy. 0:00 - Jerome Powell's Shock Announcement 1:10 - "Sticking it to Trump": The Politics of Staying 2:17 - The Warsh Rebellion?
Thiel Capital Managing Director Jack Selby sat down with CNBC's Robert Frank to discuss the Middle East's capex spending on AI and AI infrastructure.
When the Federal Open Market Committee gathers again in mid-June, it will mark the first time a sitting and former chair conduct central bank business together in nearly 80 years. The meeting with the incoming Chair Kevin Warsh and outgoing Jerome Powell likely will be less antagonistic, though still with high stakes for policy.
Peter Schiff, Chief Economist and Global Strategist at Euro Pacific, warns the U.S. market is a ticking time bomb and breaks down where he believes investors should invest instead.
Australia's Woodside Energy is struggling to sell liquefied natural gas volumes from its planned Louisiana LNG export facility because it is seeking liquefaction fees above prevailing U.S. market rates, two people familiar with the matter told Reuters.
U.S. President Donald Trump said on Thursday that he would be removing tariffs and restrictions related to Scotland's ability to work with the state of Kentucky on whiskey and bourbon.
Middle East investors account for roughly a quarter of global investments committed to AI over the next five years, said Jack Selby, managing director of Peter Thiel's family office, Thiel Capital. If the war in Iran drags on, and the United Arab Emirates, Saudi Arabia and other countries divert their investments to rebuilding at home, the lost capital could ripple through data centers as well as public and private tech companies, he said.
Bullish sentiment decreased 7.9 percentage points to 38.1%. Neutral sentiment increased 2.6 percentage points to 22.2%.
Lawmakers voted to ban themselves from trading on platforms including Kalshi and Polymarket following concerns over insider trading.
National Economic Council Director Kevin Hassett says that he is disappointed in Jerome Powell's decision to stay on as a governor after his term as Fed chair ends.