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Operator: Good afternoon and welcome to 10x Genomics, Inc.'s First Quarter 2026 Earnings Conference Call. All participants are in a listen-only mode. After the speakers' remarks, we will conduct a question and answer session. To ask a question at this time, you will need to press star. As a reminder, this conference call is being recorded. I would now like to turn the call over to Cassie Corneau, Senior Director, Investor Relations and Strategic Finance. Thank you. Please go ahead. Cassie Corneau: Thank you, and good afternoon, everyone. Earlier today, 10x Genomics, Inc. released financial results for the first quarter ended 03/31/2026. If you have not received this news release or would like to be added to the company's distribution list, please send an email to investors@10xGenomics.com. An archived webcast of this call will be available on the company's website at 10xgenomics.com for at least 45 days following this call. Before we begin, I would like to remind you that management will make statements during this call that are forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated, and you should not place undue reliance on forward-looking statements. Additional information regarding these risks, uncertainties, and factors that could cause results to differ appears in the press release 10x Genomics, Inc. issued today and in the documents and reports filed by 10x Genomics, Inc. from time to time with the Securities and Exchange Commission. 10x Genomics, Inc. disclaims any intention or obligation to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. Joining the call today are Serge Saxonov, our CEO and Co-Founder, and Adam Taich, our Chief Financial Officer. We will host a question and answer session after our prepared remarks. We ask analysts to please keep to one question so that we may accommodate everyone in queue. With that, I will now turn the call over to Serge. Serge Saxonov: Thanks, Cassie, and good afternoon, everyone. What a really nice start to the year, with solid sales momentum, a step-change advance in our product roadmap, and strong execution across the business. Revenue for the first quarter was $151 million, representing 9% growth over Q1 2025 when excluding the nonrecurring settlement revenue in the prior-year period. In single cell, we again saw double-digit growth in consumable reaction volumes, driven by FLEX and FLEX Apex. As we have been seeing over the past several quarters, our new products with more accessible pricing have been unlocking new waves of single cell demand. Similarly, in spatial, we again delivered double-digit growth in consumables revenue, which was driven by Xenium momentum. Spatial biology remains in the very early stages of adoption, and the vast majority of the opportunity is still untapped. The biggest highlight since our last call is without question the launch of our new instrument platform, Atara. Atara represents the most significant product introduction in our history. Among many other benefits, it enables, for the first time, spatial whole transcriptome analysis with single cell sensitivity at scale. We believe Atara is poised to redefine how biology is measured and understood. We went into the launch expecting a very strong response from researchers and the broader scientific community, and what we have heard so far has been extraordinary. Before I talk about what Atara is and what it does, I want to spend a moment on why we built it. The central challenge of biology is that it is very complex. It is complex in just about every system, in just about every sample. Biological systems comprise massive numbers of molecules, themselves interacting with each other in a bewildering diversity of ways. Addressing this complexity requires tools that can measure biology at large scale and high resolution. Historically, technologies available to researchers have lacked the necessary scale and resolution. Furthermore, the toolset of biology has been very fragmented. We have used one set of technologies for analyzing tissues, another for measuring cells, and yet another for working with molecules. But that is not how biology works. It works by specific cells expressing specific molecules at specific locations within tissue. That has always been the promise of spatial biology. It represents the convergence of the different tools for analyzing biological systems. It entails measuring molecules, cells, and tissues together, preserving the full context at massive scale and incredibly high resolution. However, until now, despite many advances, spatial biology has been fundamentally constrained by the limitations of existing technologies. Researchers have been forced into frustrating trade-offs between the critical attributes they care about—throughput, specificity, sensitivity, scale, performance. If they gain in one area, they have to compromise in others. We built Atara to address all of these trade-offs and to unlock the full potential of spatial biology. Atara is the product of a long, helicon book about where biology needed to go and years of deliberate work to get there. It is poised to become the large-scale discovery engine—whether for basic research, AI-driven science, or translational applications. We believe that now spatial will increasingly become the default approach for analyzing biological samples. It is important to appreciate that Atara brings together a set of capabilities that until recently were not even thought possible for a single platform. It delivers very high levels of plex, including whole transcriptome, at sensitivity comparable to FLEX Apex, the gold standard for single cell analysis. Enabled by refined probe chemistry, it delivers high specificity and data quality—nonnegotiable for researchers and their collaborators to be able to trust the data. And Atara delivers step-change throughput, with a single instrument capable of processing up to 800 whole transcriptome, one-centimeter-squared samples per year—more than 3 thousand if using the targeted Atara Select panels. This increase in throughput now enables large cohort studies at a pace and scale that were not previously feasible. Equally important is the user experience. Atara builds on a proven Xenium workflow, which is already highly robust and widely and well regarded by our customers. Atara runs on standard, off-the-shelf glass slides, which makes the platform inherently scalable across labs and experiments and enables distributed sample collection. Using standard slides also allows customers to access archived samples from biobanks and other repositories. In addition, Atara uses a universal sample preparation approach that works across tissue types, supporting different sample types on the same slide to provide extra flexibility and scalability. We have also developed powerful computation and software tools so that customers can effectively work with the data. To handle spatial biology at this unprecedented scale, the most computationally intensive part of the workflow—image processing—is performed directly on the instrument, driven by high-performance onboard GPUs and optimized algorithms. Data is processed efficiently at the source and translated into actionable biology in real time. From there, customers have the flexibility to use their own on-premise infrastructure or leverage our 10x Cloud platform for analysis and collaboration, ensuring that Atara is not just generating more data, but also making that data easy to use. We built Atara to be a long-duration upgradable platform, and we intend to continue delivering new capabilities over the years ahead. The roadmap on the platform includes workflow automation, designed to enable true sample-in/data-out capability; protein multiomics; in situ sequencing for spatial mutation and variant detection; and continued development of our 10x Cloud platform for multisample analysis and collaboration. As I mentioned, the early customer response has been extraordinary. We had high expectations coming into this launch, and the reception has exceeded even those expectations. One customer told us that this was the largest technology leap they had seen in their career. Another called the Atara data capabilities “the holy grail.” Others, to convey their enthusiasm, have used the kind of language that would not be appropriate for me to repeat in this forum. And this enthusiasm is translating directly into demand, as we take preorders ahead of initial shipments expected in 2026. Even in a challenging capital equipment environment, customer conversations have immediately centered on how to incorporate Atara into their research programs, not whether to buy it. In many cases, the discussion starts from the assumption that this is a must-have platform and quickly moves to multiyear programs, large cohort studies, and the scale of insight generation that is now within reach. Atara fundamentally expands our addressable market across three high-growth segments. In discovery research, initiatives like the Human Cell Atlas can now map entire organs and tissues at unprecedented scale and speed. In translational research, clinical cohorts can be comprehensively characterized to understand patient response patterns—something our collaborators are already validating, as shown by Carl June at AACR. And, critically, large AI models represent an entirely new opportunity, where Atara’s billion-cell-per-year capability enables creation of virtual models at a new level of scale and sophistication. Each segment unlocks distinct applications while reinforcing our position as the essential platform for spatial biology. As we have been saying for some time, we believe AI represents a significant and structural tailwind for our business. The potential to transform our understanding of biology is enormous, but progress depends critically on generating vastly more of the right kinds of data. From the beginning, we have built our platforms precisely for that purpose. Products like FLEX Apex and now Atara exemplify this imperative and are seeing intense interest from customers building AI models of biology. The partnerships we have announced over the past year reflect and reinforce these trends, including the Chan Zuckerberg Initiative on the Building Cell Project, the Arc Institute around the Virtual Cell Challenge, and Zira Therapeutics to build the largest perturbation dataset ever reported. And just last month, we announced a partnership with Biooptimus, an AI-focused biotech company. Biooptimus is building Stella, a global initiative aiming to profile up to 100 thousand patient tissue specimens across three continents. The goal is to build a data backbone for a world model of biology. The initiative is starting this effort on our Xenium platform and plans to expand to Atara over time. And just last week, the Chan Zuckerberg Biohub announced its new $100 million virtual biology initiative. The goal of the effort is to build AI models that can accurately simulate cells and tissues in silico. This initiative is an incredibly ambitious undertaking that would not have been conceivable even a few years ago. Now, because of progress in AI and in technologies for measuring biology, there is a path to that vision. There is increasing evidence that scaling laws apply in biology just like they do in other domains. What we now need is many orders of magnitude more data—specifically of molecules, cells, and tissues across vast numbers of contexts. This initiative is galvanizing the broader scientific ecosystem with an aligned view that this direction is the next grand challenge for advancing science and medicine, analogous to the Human Genome Project and its role in catalyzing the genomics era. Taken together, these programs are exactly the type of large, multiyear initiatives our single cell and spatial platforms are built to enable. AI is poised to fundamentally reshape how science is done, and large-scale, high-quality biological data sits at the center of that transformation. As AI models improve, we expect an exponential increase in the demand for the kind of data our technologies produce. This reinforces our conviction in the importance of what we are building and the vast size of the opportunity ahead. Building on another theme that has become increasingly prominent in our business, we are seeing growing interest in translational applications across both academia and biopharma. Customers are increasingly focused on identifying human-relevant drug targets and, critically, biomarkers of response for therapies that only work in subsets of patients. There is now a growing body of evidence of the value of single cell and spatial approaches in uncovering these signals. At the same time, our recent product advances have made these technologies far more practical to deploy in translational settings. In single cell, FLEX Apex has been a game changer for large-scale translational studies, because of strong performance on FFPE samples, streamlined workflows, and a cost profile that enables large cohorts. In spatial, Xenium has proven to be a robust and powerful platform for extracting meaningful insights from clinical samples. Atara is now poised to extend that momentum by enabling much larger studies with significantly more information content per sample. While our technologies are relevant across the drug development continuum, a particularly large opportunity lies in later-stage translational settings where biomarker strategies are essential to understand patient response and potential toxicity. This is where our solutions can meaningfully improve the probability of success and where we are increasingly focused. Over time, these trends also reinforce the potential for single cell and spatial in diagnostics applications. To realize that potential, the critical next step is the generation of robust clinical evidence on large patient cohorts. As we have discussed previously, we are pursuing two parallel paths: one, we are continuing to support our customers in their studies and will partner with them to enable clinical deployment in the future; and two, we are advancing our own internal efforts to generate clinical evidence for specific high-value applications. We are making progress in the two previously announced areas—tissue-based spatial profiling for oncology and blood-based single cell monitoring in autoimmune disease. Stepping back, this quarter has been emblematic of the great work by the whole 10x team. We launched a game-changing new platform, saw continued sales momentum, and engaged in powerful partnerships with our customers to drive the future of research and health care, all while maintaining laser focus on tight execution. This progress continues to reinforce our strategy and puts us in a great position for the opportunities ahead. With that, I will turn the call over to Adam. Adam Taich: Thanks, Serge. Before walking through the detailed financials, I want to reflect on the last 12 months. A year ago on our Q1 call, we were operating in a highly uncertain macro environment after drastic changes to government research funding that led us to withdraw our full-year guidance. Since then, and despite persistent challenges in the macro environment, we have consistently executed, improved our operating profile, and have grown our cash balance by over $100 million. The business is in a meaningfully stronger position today. With that, I will now walk through our first quarter 2026 financial results in more detail. Unless otherwise noted, all growth rates referenced reflect year-over-year comparisons. We had a solid start to 2026. Revenue for the first quarter was $150.8 million. Excluding the impact of nonrecurring settlement revenue in the prior-year period, revenue for the first quarter was up 9% year over year. This reflects continued momentum in the key drivers of our business, as well as some benefit from orders received late in the fourth quarter that shipped in early January. Total consumables revenue was up 13%, with growth in both single cell and spatial. Single cell consumables revenue was up 6%, supported by double-digit growth in reaction volumes, and FLEX continued to be the most popular assay by volume in the quarter. Spatial consumables continued to perform well in the quarter with revenue up 31%, driven by Xenium consumables. Total instrument revenue declined 24%, with Chromium instrument revenue down 12%, and spatial instrument revenue down 32%. Looking at revenue by geography, excluding the impact of license and royalty revenue in 2025, Americas revenue was up 9%. EMEA and APAC grew 165%, respectively. Turning to the rest of the P&L, gross margin was 70% for 2026, as compared to 68% for the prior-year period. The increase was primarily driven by lower warranty costs and lower inventory write-downs, partially offset by a decrease in license and royalty revenue. Total operating expenses decreased 15% in the quarter, primarily driven by lower outside legal expenses and lower personnel costs. As a reminder, Q1 2025 included a one-time gain on settlement related to patent litigation. Excluding this impact in the prior-year period, operating expenses decreased 20%. We ended the quarter with $540 million in cash, cash equivalents, and marketable securities, up $113 million year over year and up $16 million sequentially. Turning to our outlook for the rest of the year, we are maintaining our full-year outlook and expect 2026 revenue to be in the range of $600 million to $625 million. Excluding upfront revenue related to patent litigation settlements in 2025, this represents 0% to 4% growth over the full year 2025. At the midpoint, our outlook remains consistent with what we provided in February, including double-digit growth in both single cell consumables reactions and spatial consumables revenue. We built our initial outlook with the Atara launch in mind, reflecting our expectation that some customers may delay additional purchases of our current spatial products in anticipation of Atara. Looking at our quarterly cadence, as previously discussed, first quarter revenue represents a higher proportion of our expected full-year revenue, driven in part by orders received late in 2025 that shipped in January. We expect second quarter revenue to step down sequentially from Q1, reflecting lower spatial sales as customers wait for Atara to start shipping. We anticipate the third quarter to be broadly similar to the second quarter. In the fourth quarter, we expect Atara shipments to begin contributing meaningfully to revenue, though initial production capacity for Atara will be limited in 2026 as we ramp production. Looking ahead, we remain focused on customer success, disciplined execution, and strengthening our financial position, which support continued investment in innovation across our portfolio. With that, I will turn the call back to Serge. Serge Saxonov: Thanks, Adam. Before we open it up for questions, I want to pick up on Adam's earlier remarks and reflect on how much difference a year makes. While our internal conviction never wavered, the external circumstances a year ago put incredible pressure on our 10x team. Yet we executed with relentless discipline, met every challenge, and significantly improved our operating profile, all while launching multiple critical products including FLEX Apex, to change the world of single cell, and now Atara, the biggest product introduction in our history. To the 10x team, I could not be more proud or thankful for how you responded and what you have delivered. Thank you. Thank you for everything that you do. With that, we will now open the call for questions. Operator? Operator: Thank you. As a reminder, to ask a question, please press star. In the interest of time, we ask that you please limit yourself to one question. Thank you. Our first question comes from Patrick Donnelly from Citi. Please go ahead. Your line is open. Patrick Donnelly: Hey, guys. Thank you for taking the question. Maybe on Atara—you know, Serge, a lot of color there, appreciate it—could you talk about the early conversations in terms of the funnel? What end customer you are seeing the highest reception or interest level from, and then secondly, also on Atara, just how we should think about the launch timing and what that impact is on the portfolio? It sounds like you guys are preparing for some customers to delay other spatial purchases in Q2 and Q3. Would love just a little more color on how you are thinking about that. Thank you, guys. Serge Saxonov: Thanks, Patrick. Thanks for the question. Like I said earlier in my prepared remarks, we are really excited about Atara. We had really high expectations going into the launch, and it has been incredibly gratifying to see the response from customers, which I would say has probably exceeded our really high expectations. As far as how that translates into demand and the preorders, that has been really encouraging and really strong, and the interest is coming from everywhere. I cannot point to any particular area of the market or any particular area of our customers that are not expressing interest in this. Our efforts are on customers who can quickly scale, serve demand for others like service providers, and generally evangelize the platform for the future. That is how we are approaching the market and the signal has been resounding. Now, as far as the second part of your question, obviously Atara is a really compelling product. We have known that for a long time. We have been anticipating and planning for this launch for a long time, and we also anticipated there would be some changes to ordering from our customers. Overall, it is going very much in accordance with our expectations. We have lots of experience with past product launches and new versions of things and new capabilities, and we have been prepared. Naturally, customers adjust their thinking about future projects in light of Atara, which puts some pressure on some of our spatial business like we talked about earlier, but all of that is incorporated into our guide. At the same time, while people are starting to contemplate the future with Atara, right now our customers are running their experiments because they have established workflows, ongoing studies, grants and budgets. They are used to the workflows and really like the data. Our spatial products are leading. There is a lot of great resonance with them among customers. Also, realistically, if people are just now deciding whether to go forward with Atara, they probably will not be getting their instruments until well into 2027, most of them. So the existing spatial products continue on a robust base consistent with our expectations. We feel really good about that, and I think all of that information has been incorporated into our guide pretty well. Operator: Our next question comes from Matthew Larew from William Blair. Please go ahead. Your line is open. Matthew Larew: Everyone—Serge, you called out one of the new TAMs around AI. I think last quarter you mentioned that was a relatively low percentage of revenue, but you referenced today a number of new initiatives you are involved in, both on the single cell and spatial side. As you have had those discussions and gotten some sense for how customers are going to be building out their plans, what is your sense for what ultimately that TAM could look like and how it might grow over time? Thank you. Serge Saxonov: That is a really good and really important question. A couple of things. We fundamentally believe and are seeing that AI is a structural tailwind to our business. With the progress in AI and the emergence of increasingly large models that are more powerful in making predictions and inferences, what they universally need is large amounts of data across many different kinds of contexts and, specifically, the right kinds of data. For biology, measuring the right biology means molecules, cells, and tissues, and being able to measure them at large scale and high quality is imperative. That is precisely what we have built. In fact, that is the central premise of the mission of the company. It is an exciting moment for us because the emergence of these models and AI capabilities resonates strongly with our mission and strategy from day one. As to how that translates into revenue and what the TAM is, the fact is when you look at our customers and how AI is used and what it is driving, it is really pervasive at this point across our customer base and applications. I do not think at this stage there is a large project where AI is not a big driver, if not the biggest driver. Even smaller-scale experiments are often performed with an eye toward feeding data into AI models and scaling up down the road. So when we look at our business, this AI wave is lifting all of it across products and applications, and in many ways, that is by design. Operator: Our next question comes from Douglas Schenkel from Wolfe Research. Please go ahead. Your line is open. Madeline Mollman: Hi. This is Madeline Mollman on for Doug. Gross margin in the quarter, I think, came in a little better than we and the Street were expecting. As we think about the full year, are you anticipating any impact to gross margin from increased inflationary pressures related to memory or petroleum-based plastics? And then thinking about Atara ramping up as the year goes on, should there be any dilution to margins from the Atara launch? Adam Taich: Hey, Madeline. Thanks for the question. We are absolutely monitoring costs closely—the couple that you mentioned, and other input costs that have inflationary pressure. The team is managing that quite well, so we are still anticipating margins for the year to be in the mid-60s. To your question on Atara specifically, as that launch progresses—we mentioned we start shipping units in the second half and it will be heavily weighted towards Q4—and as has been typical in our portfolio, the instrument margins will come in at margins that are less than that of our standard portfolio. I would anticipate as that starts to move in, particularly in Q4, we will see a little bit of margin pressure, but we still feel highly confident that we will end up in the mid-60s for the full year. Operator: Our next question comes from Mason Carrico from Stephens. Please go ahead. Your line is open. Mason Carrico: Hey, guys. Just wondering if you could provide a bit more detail on spatial instrument revenue this year. How material is the Q1 to Q2 sequential decline? How many Atara instruments do you ultimately expect to place in Q4? And then as a follow-up, how many placements do you think production will be able to support in 2027 as you ramp production? Adam Taich: Sure. As I mentioned in the prepared remarks, we are anticipating a step down from Q1 to Q2 and Q3. We will continue to sell Xenium, but it will be at a lower rate than what we saw last year, particularly over the next two quarters. We built that into the guidance, as Serge mentioned earlier. As it relates to total number of Atara, we are ramping up production right now and anticipate between Q3 and Q4 we will sell approximately 40 units. That is all factored into the guidance range we have provided, and those will be mostly weighted towards Q4. Operator: Our next question comes from Barclays. Please go ahead. Your line is open. Analyst: Great, thanks for the question. I want to talk about the pricing strategy and positioning with Atara versus Xenium and the rest of the spatial portfolio. You are calling it the biggest launch in the history of the company. As you look toward spatial, is this where you will launch Atara and then cannibalize or essentially put all the other platforms and applications that customers use onto one box? Or are you trying to segment the market here? It seems like there is risk of cannibalization versus Xenium. Serge Saxonov: Thanks for the question. First, yes, calling this the most significant launch in our history was intentional, and I am very aware of our history and success with single cell. I do think this is a platform that will change how we measure biology and will fundamentally reshape many aspects of science. As far as where this is headed, in the short term we planned carefully for the dynamics and incorporated them into the guide. We feel confident about that and about what Atara opens up as we look into next year. Atara is poised to break open a lot of markets, opportunities, customer samples, and new users by removing constraints that kept existing spatial users from running more and others from entering spatial. To list a few technical enablers: whole transcriptome capability addresses constraints around customization and tissue types—people can move forward confidently across applications; throughput has been a huge constraint—now you can run full large cohorts and studies; and with off-the-shelf slide capability, there is access to archived samples and biobanks that multiply the availability of samples. This feedback is consistent with what we are hearing from customers and points to a fundamental expansion of TAM and potential for these platforms. Our pricing thinking is consistent with enabling this expansion across discovery, translational research, and AI-driven applications. People really like Xenium and Visium—powerful products and capabilities—and we expect them to be robustly used for the foreseeable future. Further out, more applications, customers, and samples will migrate to Atara, and that will be a great thing for us. Operator: Our next question comes from Dan Brennan from TD Cowen. Please go ahead. Your line is open. Analyst: Hey, good afternoon. This is Kyle on for Dan. Thank you for taking my question. I wanted to ask on your OpEx. OpEx was down quite materially year over year and quarter over quarter. You mentioned it a few times, but can you talk about where the jumping-off point is for OpEx going forward, given SG&A and R&D were down quite a bit year over year? Adam Taich: Sure. We have been managing our costs in a very disciplined way and are on a good trajectory. Keep in mind last year had the one-time gain on settlement. Excluding that, OpEx is down 20% year on year. We are still anticipating, and giving ourselves some flexibility, to continue to invest in the business, and we anticipate that OpEx year on year will be roughly flat. Operator: Next question comes from Kyle Mikson from Canaccord. Please go ahead. Your line is open. Kyle Mikson: First, could you talk about the spatial instruments in the quarter? It seemed a little bit weaker than what we had, and I thought I heard you had some benefit in January or something like that. How should we think about that line going forward, especially with potential market freezing? And secondly, Adam, on the guidance for Q2, are you talking about a mid-single-digit decline quarter over quarter or more like a low single digit? Thanks. Adam Taich: Let me take the second part first. Think about a low single-digit decline quarter over quarter—that is how we are thinking about Q2, and then fairly similar for Q3, with the balance getting us there on the guide in Q4. For spatial instruments in Q1, there was significant anticipation regarding what we were going to announce in April. As you may recall, we did a campaign at AGBT, word started to spread, and we were working with early-access customers under NDA to make sure we were going down the right track. Customers that would have been adding either a new Xenium or to their Xenium fleet decided in Q1, and will decide, to wait for Atara. We do not see the macro backdrop being meaningfully different for CapEx than where it has been—it is still fairly constrained—but the predominant rationale for Q1 spatial instrument performance was anticipation of the product launch. I would also echo what Serge said earlier: the enthusiasm around Atara is extremely high. Even in a constrained capital environment, customers are finding CapEx. We have orders, and this is the type of launch where folks go out and find money. We were thoughtful about timing to ensure it is built into budgets, whether for customers with fiscal year-ends in the fall, customers that need to get this into grant submissions, and to ensure customers are well positioned as they think about their 2027 budgets and earmark funds for Atara. Operator: Our next question comes from Michael Ryskin from Bank of America. Please go ahead. Your line is open. Analyst: Hi. This is Ivanka on for Mike. Thank you for taking our question. On Atara manufacturing capacity, you noted initial production would be limited in 2026. What are the primary bottlenecks to scaling from here, and how quickly do you think you can ramp toward meeting the level of demand you will see? Thank you. Serge Saxonov: The question is around scaling up production of instruments. This is a really sophisticated instrument, and we want to be very smart and measured around how we build and test it. We are very careful with these kinds of launches. We feel good about what we can do in 2026, and we will keep ramping production as we exit the year into next year. Operator: Our next question comes from Subhalaxmi Nambi from Guggenheim Securities. Please go ahead. Your line is open. Thomas VonDerVellen: Hi, guys. This is Thomas on for Subbu. Thanks for taking our question. There has been a lot of focus on spatial—some on single cell here. Can you share any color on what pricing headwind you may have experienced, if any, in the quarter from Apex, and what you are anticipating for the second quarter? Thank you. Serge Saxonov: The general trend has been similar to what we saw in Q4 as far as mix and pricing dynamics around FLEX Apex. I would point out it is still very early in the launch—we only have a partial Q4 and then Q1, so just a bit over one quarter. We are very happy with the progress—great feedback from customers and large scaling up of volumes. Overall, we feel good about single cell and how it is proceeding. It is still early, but all in all, a really strong trajectory. Operator: Our next question comes from Deutsche Bank. Please go ahead. Your line is open. Analyst: Hi. This is Sam Martin on for Justin Bowers at Deutsche Bank. I want to ask a couple of quick questions around the Visium platform. I think last quarter you mentioned Xenium had become the spatial platform of choice. Now with the launch of Atara, another upgrade within the spatial realm, can you share your updated thoughts on customer demand for Visium year to date with the launch of Visium HD just over two years ago? And your thoughts on the future of the Visium platform and whether it still has a place in your portfolio? Thank you. Serge Saxonov: As I have been saying for the past several quarters, there is clearly a trend in the market toward imaging-based readout and, in particular, toward Xenium. There has been huge resonance for the Xenium platform within spatial. With the launch of Atara, we anticipate that trend to be reinforced. That said, Visium has its place as well. Many customers absolutely love the platform and run it very robustly and consistently across large numbers of samples. We expect it to continue to have its place. It is a great assay for many applications and well regarded by many of our customers. We will continue to support it and ensure customer success. Operator: Our next question comes from Puneet Souda from Leerink Partners. Please go ahead. Your line is open. Puneet Souda: Hi, Serge. Thanks for taking my questions. Does the Atara launch have any additional impact or maybe accelerate a decline in Visium usage? If so, what can you do to mitigate that before the launch? And is there a desire from customers to pull the launch forward given the high level of interest? Serge Saxonov: There is going to be some effect—Atara is a spatial platform, and there has been a trend of converting toward Xenium that will continue with Atara’s arrival. There is definitely a place for Visium—customers really like the data and will keep running it. While the launch of Atara will put pressure on both spatial platforms, including Visium, that is all incorporated into our guide. One thing people sometimes underestimate is the built-in stickiness with products—ongoing projects, established workflows, and data customers are used to and really like. That is what we are seeing in the field—robust use of these products and capabilities. As for Atara and demand, customers are very interested, and the team is working really hard to deliver the instrument to the world as fast as possible. We are being very deliberate and rigorous, and we are excited to get it out there. Operator: Our next question comes from Jefferies. Please go ahead. Your line is open. Analyst: Hi, guys. This is Priya on for Tycho. Thanks for taking our question. On clinical adoption, you mentioned Atara can analyze up to 3 thousand core biopsies per year. What is the specific feedback from biopharma partners regarding the platform's readiness for integration into large-scale phase 2 and phase 3 clinical trials? Thank you. Serge Saxonov: When I talked about the number of samples a platform can process, I specifically referred to one-centimeter-squared areas. It is possible to put more samples onto a slide if you are doing tissue microarrays and similar formats, so there is additional scaling depending on biopsy format and measurement interests. The platform enables really massive scaling. Conversations with biopharma have been very encouraging. Both Apex and Atara have been resonant by opening up translational applications, sample types, and scaling. All are very enabling, and we feel this will be a big driver, especially as we think about next year and beyond. Operator: And last question today comes from Dan Arias from Stifel. Please go ahead. Your line is open. Analyst: This is Paul on for Dan. Thanks for the questions. There has been some messaging of Atara as providing sensitivity at the level of single cell sequencing. Obviously there will still be lots of use cases for single cell, but on the margin, do you expect any FLEX volumes over time to potentially move to Atara? And on a related point, you mentioned in your prepared remarks that the double-digit Chromium reaction volume growth was driven by FLEX Apex. Just wondering if reaction volume is growing at what kind of level excluding FLEX Apex? Serge Saxonov: As far as single cell relative to Atara, it is a reasonable question, but not something we are expecting to be an issue in the near term, nor is it anything we are hearing from customers. The configuration of the products, capabilities, pricing, and workflows are sufficiently different. We do expect in the long run there will be really massive experiments with single cell that will be possible with Atara that had not been previously possible, but we see that as the future. We are not seeing any effect on our single cell business at this stage or in the near term. In terms of reaction growth, we are seeing it across multiple applications. Since this was the last question, I want to finish with a couple of closing thoughts. I am personally very excited about the setup we have for 2027 and beyond. Through the product lens, 2027 will be the first full year of Atara—really the year of Atara. For FLEX Apex, by that point it will have gained widespread adoption and pricing on the single cell side will stabilize, so growth in volume will naturally translate into growth in revenue. Through the market lens, we expect an exponential increase in AI-driven research and scaling of translational cohorts to really take off as we look to next year. From the macro perspective, at the very least we will have good compares, and to the extent conditions improve, we should see an acceleration to all the other trends. Operator: This will conclude today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good morning, and welcome to the Tronox Holdings First Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Jennifer Guenther, Chief Sustainability Officer, Head of Investor Relations and External Affairs. Thank you. Please go ahead. Jennifer Guenther: Thank you, and welcome to our first quarter 2026 conference call and webcast. Turning to Slide 2. On our call today are John Romano, Chief Executive Officer; and John Srivisal, Senior Vice President and Chief Financial Officer. We will be using slides as we move through today's call. You can access the presentation on our website at investor.tronox.com. Moving to Slide 3. A friendly reminder that comments made on this call and the information provided in our presentation and on our website include certain statements that are forward-looking and subject to various risks and uncertainties, including, but not limited to, the specific factors summarized in our SEC filings. This information represents our best judgment based on what we know today. However, actual results may vary based on these risks and uncertainties. The company undertakes no obligation to update or revise any forward-looking statements. During the conference call, we will refer to certain non-U.S. GAAP financial terms that we use in the management of our business and believe are useful to investors in evaluating the company's performance. Reconciliations to their nearest U.S. GAAP terms are provided in our earnings release and in the appendix of the accompanying presentation. Additionally, please note that all financial comparisons made during the call are on a year-over-year basis unless otherwise noted. It is now my pleasure to turn the call over to John Romano. John? John Romano: Thanks, Jennifer, and good morning, everyone. We'll begin this morning on Slide 4. But before turning to our first quarter highlights, I want to address the situation in the Middle East. First and foremost, we offer our thoughts to those affected. Since the conflict began, the safety of our employees has been our top priority. With respect to our operations in Saudi Arabia, our teams continue to operate safely and responsibly throughout the quarter, and I want to recognize their focus and professionalism during this challenging period. While the situation remains fluid, we're seeing significant impacts across the chemical sector and specifically the TiO2 industry. While various costs such as natural gas, diesel, freight and insurance are rising, one of the most meaningful cost increases has been sulfur and sulfuric acid. I mentioned on our Q4 earnings call that sulfur prices in China had increased approximately 160% since the end of 2024 due to supply tightening and demand increases. Now that figure is almost 300% as the conflict has exacerbated impacts to the industry. This is having significant impacts on TiO2 producers that produce sulfate TiO2 predominantly in China, where approximately 80% of the production capacity is sulfate technology. This challenge is not only increasing costs, but also availability, which we believe will have a negative impact on Chinese producers' ability to produce and ship TiO2, the extent of which will depend on how long the conflict lasts. While many TiO2 producers are challenged by various aspects of the recent conflict with our broad geographic footprint and more than 90% of our capacity being chloride technology, Tronox is well positioned to reliably supply our customers despite the challenging geopolitical backdrop. We'll review this in more detail throughout the call. Turning to the quarter. We delivered a strong and better-than-expected top line performance and achieved EBITDA above the midpoint of our guidance. Volumes exceeded our expectations across both TiO2 and zircon with TiO2 reaching its highest Q1 level since 2022 and zircon delivering its strongest performance since Q4 of 2021. This is the result of disciplined commercial execution, enhanced customer engagement and the strategic positioning of our products in key markets supported by our global presence. We continue to see meaningful structural benefits from antidumping measures in protected markets, particularly in Europe, Brazil and Saudi Arabia. With the announcement of antidumping investigations against Chinese TiO2 in the U.K. and Australia, we hope to build on the gains we are seeing in countries that have already acted to strengthen their domestic producers. These measures are having a significant impact on trade flows and positive volume trends for Tronox. Combined with our global footprint and reliable supply, this allowed us not only to serve our customers effectively, but also capture the upside as the supply dynamic shifted. While Asia Pacific volumes were impacted by the temporary stay on duties in India, performance in the region was more resilient than we expected, reflecting the value customers place on Tronox as a key supplier to the region. On pricing, we saw a clear inflection during the first quarter. TiO2 price actions took effect as planned, and we announced additional pricing actions and targeted surcharges that are beginning to roll through in the second quarter. Zircon pricing was stable in Q1, and the announced price increases for Q2 are being implemented as communicated on our last earnings call. Planed and unplanned production curtailments in the industry have led to tighter supply dynamics, supporting price momentum, which we expect will continue throughout the year. From a cost perspective, we continue to see the benefits from actions underway, including our cost improvement program, which remains on track to deliver $125 million to $175 million of run rate savings at the end of 2026. These benefits helped to offset a portion of the headwinds we faced during the quarter, including higher sales volumes pulling forward sales of higher cost inventory. That was the direct result of deliberate actions we took late last year to preserve cash and manage inventory, some of which continued into this year, including lowering operating rates and idling 2 mines in one of our furnaces in South Africa. In Q1, we ramped up operating rates at our pigment plants to meet the increased demand for our products, which we will touch on a bit later in the call. In addition, we saw higher cost inflation late in the quarter as the conflict in the Middle East impacted raw material prices. Our commercial team has implemented increases through surcharges, though there will be a lag between when these take effect versus the more immediate impact to our operations. We will continue to assess cost headwinds and take the necessary targeted actions as needed to avoid margin erosion. We continue to prioritize free cash flow and working capital efficiency, reducing inventory by approximately $75 million in the quarter. Due to our strong commercial performance, we upsized our AR securitization facility by $25 million in the quarter and added an additional $20 million earlier this week. We expect free cash flow to improve in the second quarter, largely offsetting the seasonal cash used in Q1, and we expect to deliver meaningful positive cash flow for the full year 2026. I'll speak to our expectations for the second quarter and the full year in more detail in the call. But for now, I'm going to turn the call over to John to review our financials for the first quarter in more detail. John? John Srivisal: Thank you, John. Turning to Slide 5. We generated revenue of $760 million, an increase of 3% versus the first quarter of 2025, driven by higher TiO2 and zircon volumes. Loss from operations was $41 million. Net loss attributable to Tronox is $103 million. These results include $15 million of restructuring and other charges, net of taxes, primarily related to the closures of Botlek and Fuzhou. Adjusted diluted earnings per share was a loss of $0.55. Adjusted EBITDA was $62 million, and our adjusted EBITDA margin was 8.2%. As is typical for the first quarter, free cash flow was a use of $135 million. Capital expenditures were $67 million. Now let's move to the next slide for a review of our commercial performance. As John mentioned, volumes were stronger than anticipated across both TiO2 and zircon and pricing increased in line with our expectations. Sequentially, TiO2 revenues increased 7%, driven by a 4% increase in volumes and a 3% increase in average selling prices, including mix. Volumes exceeded our expectations, driven by stronger demand on the back of the structural shifts that John mentioned earlier. Zircon revenues increased 14% sequentially, driven by higher volumes predominantly driven by customers realigning suppliers in a capacity-constrained environment. Zircon pricing remained stable during the quarter, in line with expectations and price increases were announced in the first quarter that will take effect in the second quarter as we referenced on our last earnings call. Revenue from other products decreased 27% sequentially and 35% compared to the prior year, mainly driven by timing of pig iron bonds, which we will recover in Q2. Turning to the next slide, I will now review our operating performance for the quarter. Our adjusted EBITDA of $62 million represented a 45% decline year-on-year as a result of unfavorable pricing, including mix, exchange rate headwinds, higher production costs and higher freight costs. This was partially offset by the increase in sales volumes and SG&A savings. Year-over-year production costs increased $7 million, driven by deliberate actions taken over the last year to improve cash generation, along with a higher mix of higher cost tons released from inventory as sales volumes increased. Sequentially, adjusted EBITDA increased 9%. Favorable pricing, including mix, higher sales volume and improved production costs were partially offset by exchange rate headwinds, higher freight and SG&A costs. Turning to the next slide. We ended the quarter with total debt of $3.3 billion and net debt of $3.2 billion. Our weighted average interest rate in Q1 was 5.95%, and we maintained swaps such that approximately 74% of our interest rates are fixed through 2028. Importantly, our next significant debt maturity is not until 2029. We do not have any financial covenants on our term loans or bonds. We do have one spring financial covenant on our U.S. revolver that we do not expect to trigger. Liquidity as of March 31 was $406 million, including $126 million in cash and cash equivalents. This amount excludes the GBP 50 million Emirates Revolver, which is undrawn and not expected to be renewed following its expiration in June. We also repaid our $40 million Saudi EXIM facility in the first quarter. We have been in discussions with Saudi EXIM and are confident in getting a renewal. It just has taken a bit more time given the conflict in the Middle East. This amount has not yet been included in our liquidity figures. Additionally, as we have said in the past, we will continue to be proactive with our capital structure. And towards that end, as John mentioned, we upsized our AR securitization facility by $25 million in the first quarter by an additional $20 million earlier this week. Working capital was a use of approximately $59 million in the first quarter, excluding $19 million of restructuring payments related to the closures of Botlek and Fuzhou. First quarter working capital was better than expected, driven by stronger-than-anticipated sales lines and better-than-planned inventory reductions from targeted working capital initiatives. Capital expenditures of the $67 million in the quarter were primarily related to maintenance and safety, and we returned $8 million to shareholders in the form of dividends during the quarter. And with that, I'll hand it back to John to review our capital allocation priorities. John? John Romano: Thank you, John. Turning to Slide 9. Our capital allocation priorities remain unchanged and focused on cash generation. We continue investing to maintain our assets, our vertical integration and projects critical to furthering our strategy, including rare earths. As the market recovers, we'll resume debt paydown, targeting long-term net leverage of less than 3x. We'll do that the same way we navigated this downturn, by staying focused on what we can control and influence, reinforcing the business through cost reduction and cash improvement actions. While prioritizing cash has meant a near-term trade-off to EBITDA, these actions strengthen the foundation of the company. With that, I'd like to turn to 2026 guidance and walk through some of the assumptions that will drive our performance for the year. So turning to Slide 10. For the second quarter of 2026, we expect TiO2 volumes to increase sequentially in the high single-digit range. The volume momentum we're seeing is primarily driven by the structural shift in supply dynamics in addition to seasonal demand improvement. This is supported by our ability to reliably serve customers across our global operational footprint. On pricing for TiO2, we saw an improvement in the first quarter, and we expect that momentum to build through the second quarter. We're now gaining significant traction on announced increases in every region. We expect TiO2 pricing to increase in the mid-single-digit range in the second quarter compared to the first quarter, and we will continue to evaluate additional price actions and targeted surcharges depending upon the supply-demand dynamics and the evolving situation in the Middle East. We expect zircon volumes levels to moderate slightly due to inventory availability following a very strong first quarter. On zircon pricing, our previously announced increases have been implemented in the second quarter. And as John mentioned earlier, the zircon market has seen increasing capacity constraints, which we do not expect to abate in the near term. As a result, we expect the pricing momentum to carry through into the third quarter. From an operational standpoint, as planned, our west mine and 1 furnace in Namakwa as well as our Wonnerup in Australia remained idled. We also had 2 meaningful planned outages in the second quarter, one on the pigment side and one on the feedstock side to conduct statutorily required and routine maintenance. These actions will carry a near-term cost impact to EBITDA. This will be partially offset as we start selling through lower cost tons in Q2 that were produced in Q1. The net effect of these changes will be a $10 million to $15 million cost headwind in Q2 versus Q1. As a result, we expect second quarter adjusted EBITDA to be in the range of $65 million to $85 million. We expect free cash flow to be positive in the second quarter, clawing back a large majority of the cash used from the first quarter. With our pricing momentum, combined with our inventory reductions and continued operating discipline, we are well positioned as we move into the second half of the year. Based on what we know today, we are confident that we will generate meaningful positive free cash flow for the full year 2026. Incorporated into our positive cash flow guide for the year are the following assumptions on cash. Net cash interest of approximately $190 million, net cash taxes of less than $10 million, capital expenditures of approximately $260 million, and we expect working capital to be a source of cash well in excess of $100 million. Turning to Slide 11. From a broader perspective, we're operating in a volatile environment. In that context, our focus remains firmly on the things we can control and influence. Over the last several quarters, we've taken deliberate steps to strengthen the business, improving our cost structure, optimizing mix and reinforcing pricing discipline while maintaining flexibility in how we run our operations. These actions are already positively impacting volumes and pricing even as external conditions remain dynamic. Global supply chains have been affected by the conflict in the Middle East, resulting in shortages across certain regions. As a result, customers are turning to dependable suppliers contributing to the growth in our order book. At the same time, overall supply remains tighter, though uneven across regions and products, which reinforces the need to continually assess how the supply picture develops. Trade defense remains an important part of the equation. Antidumping measures are in place across several key markets. And as I noted earlier, trade defense agencies in the U.K. and Australia have also opened investigations on Chinese dumping, including the possibility of provisional duties. We are also taking definitive actions on pricing. As I mentioned earlier, we are implementing price increases in all regions in addition to select surcharges in markets impacted by cost escalation from the conflict in the Middle East. Against that backdrop, we are managing inventory while maintaining flexibility. While we are not bringing all idle mining assets back online, we are evaluating selective ramp-ups where it makes sense, particularly for products where inventory levels are low, such as zircon. Our disciplined and adaptable approach positions Tronox to manage through the current environment and capture meaningful step-up in earnings momentum. Turning to the next slide, I'll provide a brief update on the rare earth initiatives we have. During the quarter, we continue to make significant advancements in our rare earth strategy. Our primary objective remains to move further downstream into the production of separated rare earth oxides, all while maintaining a disciplined approach to capital management. Meaningful progress has been achieved in advancing towards our definitive feasibility study, and we are actively evaluating various development pathways. These pathways are being considered with a clear focus on prioritizing returns and limiting any incremental leverage on our balance sheet. At the same time, we're engaging broadly with stakeholders, including potential customers, strategic partners and funding sources to identify the most viable and responsible way forward for the project. These ongoing discussions are instrumental in shaping our approach and ensuring that we pursue opportunities that align with both our strategic vision and our values. Earlier in the week, the Australian government awarded us federal major project status, which was posted on the Australian government site this morning, and this was a significant acknowledgment of the viability of our project. Our approach remains steadfast in its dedication to generating long-term shareholder value. We are carefully balancing strategic opportunities with prudent financial management. We believe that the rare earths represents a compelling growth platform for Tronox, leveraging our existing mining footprint and our expertise in hydrometallurgical and chemical operations to create new avenues for sustainable growth. So that concludes our prepared remarks. We'll now move to the Q&A portion of the call. So I'll hand the call back over to the operator to facilitate. Operator? Operator: [Operator Instructions] Our first question comes from David Begleiter from Deutsche Bank. David Begleiter: John, on your Q2 EBITDA guidance, even taking into account the cost headwinds you laid out there, how is the low end of that guidance range play out for you? What would you need to see to get there sitting here today? John Romano: Well, maybe I'll speak more towards how I get to the high end of the range as opposed to the low end of the range. A lot of that's going to depend on volume. So we've got that -- I made the reference that our order books -- maybe I'll just back up. When we entered the year, if you think about supply-demand globally, there was a deficit with all the capacity that had been pulled out. So when I say that deficit, there was less supply than there was demand. So we were already expecting, as I mentioned in the last call, that we were starting to see volume improvements. We had a 9% increase in volume in the fourth quarter, 5% increase -- improvement in the second quarter -- I mean in the first quarter, and I've just given you an idea of what our volume increase looks like for the third quarter -- I mean, the second quarter. That number that I referenced, high single digit, could be in the teens if we have the inventory to actually fill those orders. We preposition inventory globally to make sure we can meet our customers' demand, and we've done a very good job. Our commercial team has done an excellent job of doing that. There has been -- with the conflict in the Middle East, a little bit of delays in shipping. That's not the bigger issue. The bigger issue is that we depleted a lot of our inventory, and we've got more orders on our order book than we can fill. So to the extent we can fill those orders, we'll be closer to the top end of that range. There's other elements that will kind of fill into that range that we provided on EBITDA. I mentioned we had 2 major outages, one on the pigment side and one on the mining side of the business. Both of those -- one of those is a statutorily required maintenance project that is done every 10 years. To the extent we come out of that outage on track or earlier, that could have a positive impact on the EBITDA and the same thing with the SR kiln, which is on the mining side. So we have a reline of our SR kiln. That happens about every 4 years. Again, those were planned. Those weren't unplanned outages. The SR kiln is about halfway through the process. We're making good progress. And we have a very good plan for our outage at our pigment plant to work through that as well. So lots of puts and takes on where we are on that guide. Hopefully, that answers your question. John Srivisal: Obviously, as you know, this is a very volatile market. And so raw material costs have escalated significantly and are very volatile in the quarter. So while generally our guide range is informed more heavily by our commercial side of it, as John mentioned, we do see some volatility on the raw material side. And as you know, we are implementing surcharges as well. So we expect over the fullness of time to recover that and be margin neutral around it, but there is some delay, particularly in Q2. John Romano: And specifically, that delay. So again, when we think about when the conflict started, we got more cost improvement or increases and we had inventory that we had to work through with our customers. So not all of our inventory was impacted by that conflict immediately. But when we made reference on the prepared comments that the surcharges that we're implementing, which are largely driven by sulfur, so the biggest surcharge that we're actually implementing is for our Bahia facility that went into effect May 1. So that's kind of the delay. We had all of April where we didn't actually get the benefit of that. And then in May and June, we will get the benefit of that surcharge. David Begleiter: No, very helpful. And John, just on European capacity situation with Lomon buying Greatham and announcing a restart of production. Why do you think these former Venator assets are largely still running or up and running in this weakened demand environment? John Romano: Yes. Great question. Thanks. So Scarlino and Palva, I think those assets will come back up. It will take time to do that. It's hard to say if we were starting a brand-new or starting a plant that had been down for a period of time. Those are 2 separate buyers. I do believe one of them was a previous sulfuric acid producer. So there was kind of a strategic reason why they brought that plant back up. Both of those plants were a nameplate capacity of 80,000 tons. So 80,000 tons, that's 160,000. On the announced closure, I guess, with Lomon buying the facility at Greatham, I believe that's going to take longer. The reality is that plant has been down since September. They made an announcement that they had hired back 132 people. We've got a plant not far from there that's equivalent size, 132 people is not going to run the full breadth of that production. So there's lots of assumptions on what Loman may do. As I mentioned in the prepared comments, the U.K. has now officially launched an antidumping initiative for the U.K. and we have good confidence that we're going to get good results and possibly get provisional duties in place maybe sometime in the third quarter. The reality is that's not only on finished pigment, that's on products for TiO2 that are as low as 80%. So rumors out there that they may bring in finished pigment or unfinished pigment and finish it at the plant. If antidumping is effective, that would prohibit them from doing that as well. So hard to say. That is a chloride facility. Chloride facilities that have been down for extended period of time are harder to bring back up. And that is very unique technology. It's plasma arc chloride technology on the oxidation side, which Huntsman created that technology. It took about 8 years to develop it, and it's the only technology of its kind. So not to say they won't, but it's not without its challenges. Operator: Our next question comes from John McNulty from BMO Capital Markets. John McNulty: So just because of past, I guess, changes in the mine, operations getting shut down like at Botlek as an example, there's a lot of kind of volatility on the cost of product, cost of inventory kind of working through your P&L. I guess, can you help us with some kind of a benchmark on how to think about how those costs improve as we go through the year, whether it's on like a cost per ton basis? Or I guess, can you help us to kind of get a little peek behind the curtain in terms of how to think about how the cost side flows through because I think you were pretty clear on the price and how you're thinking about volumes. But admittedly, the cost side seems to be a big part of the equation that's a little bit opaque right now. John Romano: Yes. So maybe I'll start and John, and then I'll let you add to it. So for a lot of reasons in the fourth quarter of last year, we were slowing down production. We weren't running assets as hard. We made reference to Stallingborough going down for extended maintenance. That had an impact on our cost. And in the first quarter, we sold more of that high-cost inventory than we expected, which had an impact on our earnings. We do believe that, as I mentioned on the call, that as we get into Q2, we'll start to sell more of the inventory that we made in Q1, which was, in fact, lower cost than what we made in the second quarter. So look, there's lots of reasons why our costs have gone up. You've got escalations most recently around the war. We don't think those are going to last forever. But if the war ends tomorrow, there will be collateral damage from that for a period afterwards. So I'm not going to speculate on when the war ends. But we do believe that we are making good progress on cost. The cost improvement program is moving in the right direction. So 2026 forecast for costs for lots of reasons. One, we're going to be running our assets at much higher rates. And we've done a lot of work to mitigate some of the costs. And in areas where we're getting escalations on cost, we're also putting in surcharges to cover it. So it's a little bit, I'd say, mix. But John, if you want to add. John Srivisal: Yes, I think John mentioned that the impact of shutting down and idling some of those facilities for planned maintenance and otherwise was a $10 million to $15 million net of higher cost inventory being sold in the Q2. So you can imagine that the Q2, if you just isolate those operating impacts, it is going to be probably in the $20 million to $25 million. So we obviously expect as you roll through the second half of the year to have a pretty meaningful earnings uplift in the second half of the year, each Q3 and Q4. So we don't have any significant unplanned outages in the second half of the year. So you would expect that type of adjustment back in Q3 and Q4. John McNulty: Got it. Okay. No, that's helpful to kind of fill in some of the color there. And I guess the second question is just on cash flow. So you had $135 million use of funds in 1Q, and you think you get the bulk of that back in 2Q. So you've got -- EBITDA is up whatever, $10 million, give or take. I guess, help us to bridge the rest of that. What are the kind of the bigger puts and takes there? Presumably, it's going to be in the working capital area, but can you help us to kind of unpack that a little bit? John Srivisal: Yes. So for Q2, we do have some structural things in Q2 and Q4 that are different because primarily related to our interest upon interest payments of $50 million. So Q1 -- Q2 and Q4 are $50 million, just lower based on that. But yes, the rest of that really relates to our inventory conversion and then cash. We obviously set out on this strategy to operate more for cash proven itself out, $75 million reduction of inventory in Q1, and we do expect a significant amount in Q2 and then a little bit less throughout the year, but still generating a huge cash inflow for the full year. And inventory is the biggest driver of getting to our full year comments that we will have meaningful positive free cash flow. Operator: Our next question comes from Duffy Fisher from Goldman Sachs. Duffy Fisher: First question just on zircon. Zircon for 3 years in a row in Q1 has been down on price/mix. And collectively, that's down 56% on your published numbers over that period. But yet you sold 57% more volume at that level. So if your commentary that things feel like they're tightening, why wouldn't you hold back supply and try to push for more price? It feels like you're selling a lot of volume to your customers at kind of rock bottom prices that allow them to build some inventory that may make prices harder later in the year. But just the strategy there, why not take a value over volume strategy in zircon similar to TiO2? John Romano: Yes. Thanks for the question. And what I would say is we had opportunities to sell more in the first quarter than we actually acted on. So there is a balance. We've got customer requirements. We've got pricing that we've announced and have already implemented. So there, in Q2, as I mentioned, we've got a price increase that was announced and implemented. I signaled that on the prior call that we were announcing increases. So if we could always get it perfect where we could hold the inventory until the highest price, that would be a perfect situation. So we're trying to balance that. The reality is we have got customer requirements. We are seeing some lift in the market. I mentioned that there were some outages, and we don't expect those outages to abate anytime soon. So you've got about 131,000 tons of zircon production that are roughly offline right now. That's why we believe there will be price upward movement beyond the second quarter. So it wasn't perfectly balanced in a perfect world, I could have waited and sold all of it when the price was higher, but we don't live in a perfect world. We're trying to manage our customer requirements and commitments at the same time, pushing price. Duffy Fisher: Fair. And then to jump to TiO2, you talked about the Chinese potentially getting impaired in some markets or boxed out with ADD and things like that. Their sulfur price is up, but yet the export number from March was extremely high. So one, do you think that month was an aberration and you'll see the export numbers come down meaningfully? Or I guess, how do you triangulate those numbers where their exports are growing in what should be a more difficult market for them to export into? John Romano: Great question. And we'll know that probably May 28 when the numbers come out. But I do believe the war started 1:15 in the morning on February 28. So a lot of those shipments were already on water. So again, India stay on duties, you saw a bump up in India. You saw a bump up in Europe and all those things are right. I would expect, based on what we're seeing in the market today that those numbers will move down not only in April, but they're going to move down in May as well. So I mean let's just talk a little bit about sulfur. Sulfur prices, and we've got some anecdotal questions even before the call around, are there -- the price increases that China announcing, is that covering cost and giving them additional margin? And the answer is with what they've announced and implemented, it's barely covering the additional cost of sulfur. So we have a plant in Brazil that consume sulfuric acid. So we know well what you need to do to cover the cost of the sulfur increase. And sulfur prices, as I mentioned, there's been a structural shift in sulfur over the last 2 years with pricing going up since the end of 2024 by 160%. And there's just not as much sulfur. There's more demand for it. 78% of sulfur goes into fertilizer. So where are you going to push the sulfur? You're going to feed people? Are you going to make products like TiO2. So it's not only price, it's availability. Second and third-tier producers are curtailing production, not because of price because they can't get it. They can't get the sulfur to produce the TiO2. And we're seeing that inflection in our order book. So right now, I mentioned previously, there are certain regions of the world where we're not able to fill orders. If we're able to fill those orders, we'll be able to be closer to the top end of that range. So things are very dynamic. We talked about on an inflection point when the market is going to turn, you'll see a bump up in demand. I'll go back to the point I made earlier or the point that was referenced earlier. So let's just assume Scarlino, Cueva and Greatham come back online. You've still got 800,000 to 900,000 tons of capacity that's left the system. And when the market inflects, which it has, and as I mentioned earlier in the call, we walked into 2026 with a supply deficit to demand. There's a very quick movement. Pricing is moving up at a rate that was much higher than what we expected, and we're very well advanced into negotiations for pricing into the third quarter and have a high level of confidence we're going to make progress on that as well. Operator: Our next question comes from Jeff Zekauskas from JPMorgan. Jeffrey Zekauskas: In thinking through the Chinese export data, for the first 3 months of the year, sulfate exports were flat to down. The growth in exports was in chloride in that their chloride exports went from, I don't know, 100,000 tons to about 135,000, 138,000 tons. So where is that chloride going? Or what are the markets where Chinese exporters seem to be more aggressive in chloride-based tons? John Romano: Thanks, Jeff. It's a great question. And I think right now it's going where most companies that are buying sulfate TiO2 are wanting to flip to chloride. So at this particular stage, companies like Lomon Billions are selling everything that they're making. So chloride production, I'd say, is a bit more reliable. At the end of the day, chloride production on the Chinese side is only 20% of what is produced in China. 80% of it is sulfate, and that's heavily impacted by what I've been referencing, and that's the sulfur move. So there was a clip up in the last month on exports. I do believe when we see the exports coming in the next couple of months, it's going to reverse the other direction. Jeffrey Zekauskas: Okay. When you talked about a mid-single-digit price increase for the second quarter in TiO2, what part of that is surcharge? And what part of that is price? And all things being equal, do you expect your prices to cover your costs in the second quarter, cost inflation or not to cover the costs? John Romano: Yes. Great question. So when we think about surcharges versus price increases, we're getting price increases in every region. And the large percentage of our surcharges are in Brazil to cover sulfur. So the sulfur -- that's where we're seeing the majority of the increase on sulfur. That's where the majority of the surcharges are. And from a proportional standpoint, less than 1/3 of what we're doing is surcharges and everything else is price increases. And as we start thinking about moving into the third quarter, we haven't announced any additional surcharges yet. And the price momentum that we're announcing for the third quarter is all price increases, not related to surcharge, not to say that we won't have surcharges if the raw material prices continue to fluctuate, and we'll do that to prevent margin erosion. Just quickly on India. There has been a stay on the duties, and we're still confident that that's going to come back. But we saw a significant lift in exports out of Asia into India when that stay happened. And now based on what we're seeing from our customer order book, our engagement with customers in India is that, that's going to flip the other direction. Interestingly enough, even with the stay on those duties, our volumes in India did not go down where we expected them to be. And I think a lot of that has to do with our position in the market, our relationship with the market. We had another question that came up later in the quarter from another investor about what -- we talk a lot about this structural shift in supply/demand, what gives you confidence that your volumes are going to stick around if duties don't stick -- if duties were not to come back, which we do believe they'll come back in India. And a lot of that is because we're not just moving volumes to spot buyers. We're moving our volumes to customers that we have strategic relationships and doing that through contractual discussions. And this has a lot to do with customers not wanting to have some of that variability and pulling some of the variability of buying back and forth from China. So not to say that there won't be any risk there, but our commercial team is doing a good job of making sure they're securing volumes not on a spot basis, but on a long-term basis. Operator: Our next question comes from Hassan Ahmed from Alembic Global. Hassan Ahmed: John, just curious about, you guys obviously made a fair number of comments around the rise in sulfuric acid prices, what that's done to the cost curves and the like. So just kind of curious that if we go to the pre-conflict time, right, I mean, there was a large chunk of capacity on the cost curve that was sort of in the red, right? And as you guys rightly pointed out, some of the price hikes that we've seen in China, in particular, are barely just covering the incremental cost. So I'd like to imagine that on a cost curve basis, still that chunk of capacity is in the red, right? So what are you guys seeing in terms of the rationalization side of things? Again, in prior calls, you guys would throw a certain number out in terms of how much capacity rationalization you think is going to happen. So just help me sort of put that together in light of where we are on the cost curves, where we are with obviously now sulfur being sort of tricky to attain and also with some of the goings on with Venator's assets. John Romano: Thanks, Hassan. So it's always hard to estimate when Chinese companies are actually going to take TiO2 production offline permanently. But Tier 2 and Tier 3 have already pulled back on production, and a lot of that has to do with just availability of sulfur, not necessarily the price. I would agree with you that the price increases that have been announced by the Chinese are barely covering the cost of the sulfur prices that have gone up. When you think about sulfuric acid as price for sulfur goes up or acid goes up $100, it's like a 3:1 add on TiO2. So you all know how much has been announced. It's barely covering the cost. I would expect they'll continue to move that cost of that price up. That being said, we have seen some smaller plants idle capacity in the last 6 months. We idled up -- we permanently closed our plant. So I think it's going to happen. You've still got subsidies that are happening in China. At the end of the day, it's hard for me to actually give you a good answer on when all this capacity is going to come offline and if it will. But I do think that this is going to create more stress. And not only on sulfur, but TiO2 prices are moving up. Raw material prices are moving up. And the high tide floats all boats. So what prices are starting to move up now, ilmenite. We've seen that as recently in the last 3 weeks, ilmenite prices are starting to go up. So there are a lot of headwinds, and it's typically what happens, TiO2 pricing will kind of lead into it, and then you'll start to see feedstock move up as well. It's another reason why our vertical integration in an inflationary environment will be beneficial for Tronox. Hassan Ahmed: Understood. And then again, you made some comments around Q2 volumes and how they could actually be higher depending on regional inventory availability. So in which regions are you guys seeing the leanest inventory levels? And are you guys prioritizing volume growth or price protection in those regions? John Romano: Yes. So I would say in Asia Pacific right now, predominantly in India because we're seeing a significant inflow of orders there, along with a lot of price improvement. Less inventory there. We're having obviously, in Brazil, we've got inventory limitations. In Europe to a certain extent. North America, you're running into an uplift in demand, which is seasonally driven. So I would say that we've got a shortage of inventory across the entire portfolio of assets, probably a little bit more focused on Asia. And when we start thinking about how we're going to prioritize that, we don't have a lot of spot volume. And I mentioned earlier, as we start to get into these discussions with the structural shift in TiO2 and customers coming to us to offset some of what Chinese produced -- or we used to be supplied by the Chinese. We're looking at strategic customers that want to align with us for the long term. So it's not like we're moving out of regions that are strategic. We're maintaining strategic volumes in every region. But every region on pricing is moving up. So to the extent there is volume available, that may shift to a region that's generating higher margin. So problem at this particular stage, it's repositioning that inventory is taking a little bit more time than it would have historically due to the conflict in the Middle East, which is also playing favorably for us. I mentioned our operation in Saudi Arabia, which is kind of right in the hot bed of all of those -- the conflict in the Middle East. And that plant has operated unbelievably well. It's running at higher rates than it's run in, I'd say, the last 1.5 years. Costs are in a very good place. And with the Strait of Hormuz being closed, there's a lot of volume that Chinese suppliers typically were selling in the Middle East, and they're not able to do that anymore. So our volumes, not only in the Middle East, but out of the Middle Eastern plant moving into Europe is being supported by that plant. So lots of great work going on there in a very difficult environment. Operator: Our next question comes from Josh Spector from UBS. Joshua Spector: I actually wanted to ask a similar question. It's just really when you're talking about that extra demand that may not be filled, I'd just be curious what region is that coming from? And not thinking about where you're prioritizing your tons, understanding you're doing that for profitability, but where are you kind of maybe upside surprised on where volumes coming in? And is that more orders from existing customers or new customers? John Romano: Thanks, Josh. So yes, we're getting a lot of inquiries from new customers, most of which we're not filling because, again, I make that reference, we don't have a lot of spot volume. So we're looking at strategic customers. So is there some shift around where we may be going where customers, quite frankly, don't want the price increase, then yes, we may shift volume around. But again, Asia is very impacted by the conflict in the Middle East because a lot of what they're getting is coming from the Middle East. So I would say that's the area where we're seeing, I think, maybe the most inbound on orders, and it's where we're seeing the highest increase in prices as well. But it's not just Asia. We're seeing increased demand in lots of different markets. I mentioned them earlier. But I'd say, from Q1 to Q2, that volume increase is probably more focused on Asia and where we're limiting volume because we're just getting a lot of inquiries into India, that may be the area where we're having the hardest filling orders. Not that we're not filling existing orders, but customers wanting more than we can provide. Joshua Spector: That's helpful. And if I could follow up on pricing. I'm just wondering with some of the contract structures you have now, do you have any lagged pricing implementation so that you've already had conversations with customers, perhaps you know pricing is going up in 3Q or 4Q because of that lag. And I mean, is that any different than what we may have seen prior cycles? I think some of the reactions this earnings season have been, investors expected kind of some faster pricing implementation. And I wonder if this dynamic is impacting this in any way. John Romano: Great question, and you're right. So we still have margin stability agreements largely in the Americas. So when we think about the price increases that we've announced. We do have agreements that there's a bit of a lag on when those actually will be implemented, which is impacting our price increase in the second quarter and will play favorably to what we do in the third quarter. So that's exactly right. It hasn't changed significantly. I would say we have less margin stability agreements than maybe we did in APAC. Majority of them are in the Americas, and they're -- I can't -- you stated it exactly correct. Operator: Our next question comes from Frank Mitsch from Fermium Research. Frank Mitsch: As I think about last year, it was obviously a difficult year for Tronox. I look back and it was the lowest earnings level since 2016. And it does seem that things are set up a bit better in 2026. However, using the midpoint of your 2Q guide, you're starting at the first half down $68 million year-over-year, again from a difficult overall year. I mean, how realistic is it to expect that '26 would be up over 2025? John Srivisal: Yes. Thanks, Frank. Great question. Again, I'll make reference to the planned outages we have in the absence of -- and again, I say those are planned, those were planned for a long period of time, specifically the statutorily required ones. So if you pull out that $10 million to $15 million, that midrange of $75 million gets to $90 million. When we think about what happens in the third quarter moving into the fourth quarter, very confident that we'll start to get into triple-digit numbers. And again, pricing is going to play into that. Our cost improvement program is going to play into that. John made reference that we've made progress on our costs, so we'll start selling lower-cost tons in the second half of the year. Our mining projects are going to start gaining traction. And again, I won't keep stressing price, but the fact that prices are moving up, price moved up in the first quarter, it's moving up in the second quarter. We're well advanced in negotiations into the third quarter. And every time pricing goes up, call our capacity 800,000 tons with the 2 outages. $80 million every time it goes up $100, then we've got a lot of run room above $100 a ton for pricing to move. And that doesn't include zircon. Zircon 220,000 tons a year of sales. We've got a lot of run room on zircon as well. So it's not all on the back of price, but price has been something that's kind of been missing in the discussions we've had on calls for the last 3 or 4 years, and it's happening now. Frank Mitsch: And by the way, I don't mind you at all putting a stress on price. Speaking of stress, however, Mr. Srivisal, if I think about your cash level, where you ended the first quarter, it's relatively low compared to your historic. So how do you -- what sort of cash levels do you feel comfortable maintaining in terms of running the company? John Srivisal: Yes. I mean I think we look at it from a liquidity perspective. We do have a lot of different facilities around the world and cash accounts everywhere that we can move around pretty significantly. But we've said we can operate in the $75 million to $100 million of cash over the long term, but we can move it pretty easily over the quarter. But we are in the $406 million in Q1. That's pretty much what I've mentioned is more than what we feel comfortable operating in. We have operated in that in the past Q1, past couple of years. So we feel confident about our ability to manage our cash flow and cash balances. And as John mentioned, we do expect a pretty significant Q2 and rest of the year cash flow. Q1 is always a big use. And so we will be generating a lot of cash, as I mentioned earlier, primarily through bringing down our inventory. We took a concerted effort late last year to operate for cash. We've proven that we can turn it into cash with $75 million from inventory in Q1. And so we feel like we're in a very good position as we move forward in the year. Operator: Our next question comes from Roger Spitz from Bank of America. Roger Spitz: Your 2026 working capital guide of well in excess of $100 million inflow. My question is, is that on a reported basis? For instance, you increased your off-balance sheet AR securitization by $45 million. Presumably, you're going to fill that up and get $45 million of inflow, but that's just financing your receivables. Is that net of that? Or is that $45 million helping on your way to getting to greater than $100 million? John Srivisal: So we haven't greater than $100 million. So there's a wide range of it. When we look at it, we do include the AR securitization in our working capital number. But obviously, if it's $100 million versus $200 million, it could be in around of that number. Roger Spitz: Got it. And then in terms of sulfate prices -- sulfur prices going up so much, you can't -- I understand for decent paint, you can't just swap chloride versus -- process versus sulfide process because of the different paint colors. But do you think your customers will push more on their formulations that are based on chloride formulations because of the price increase on sulfate? Or how much can that shift? Or in certain regions, people like, this is the color we like at how much you make your sulfate and we'll paint less because it's more expensive. John Romano: Yes, that's a great question. And look, they're already doing that, right? So one of the reasons that people buy from Chinese -- or companies buy from Chinese producers because the majority of the sulfate production comes from China because there's been a significant price gap. So when you think about the announced price increases that have happened on the sulfate side of the equation, that gap has narrowed. So it does push them to look at more chloride capacity. Chloride capacity is constrained as well, constrained from the standpoint that there is not enough supply to meet the demand. So we're talking about a structural shift in supply base, which started at the beginning of the year where we had less supply than we had demand. This has only exacerbated the situation. So yes, customers -- again, the majority of our capacity is chloride. We do have less than 10% of it sulfate out of Brazil. And we have customers wanting to move to more chloride. The problem is we don't have more chloride to ship them. And I don't think we're on an island. So not to say that there won't be a shift, but 2 things are happening. One, prices are going up to your point, the gap that's narrowed, which gave them the incentive to buy from the Chinese producers is disappearing. It's not disappearing that much because we're moving our price up as well. But that sulfur price has moved up a lot. Those price increases that they've announced are to try to cover that cost. And I think there's going to continue to be an imbalance. But I think the short answer to your question is, yes, customers are trying to do that, but there's not enough supply to do that because there's not enough supply to fill that demand. John Srivisal: And sorry, Roger, going back to your first question, I just wanted to clarify that even though we -- when we report, we include AR securitization in our free cash flow and working capital numbers. Our increase in our guide for working capital was not driven by our AR securitization activities. It's primarily inventory. Operator: Our next question comes from John Roberts from Mizuho. John Ezekiel Roberts: On the mid-single-digit Q-over-Q improvement in TiO2 prices for the June quarter, how much of that is surcharge versus base prices going up? And is that mid-single digits a blend of low single digits in the U.S. and mid- to high single digits outside the U.S. John Romano: Yes. Thanks for the question. I'm not going to give a lot of breakdown on regional pricing. It's going up everywhere. What I -- I think I'll reiterate what I said a few minutes ago, and that is pricing is the majority of that mid-single-digit increase. There is an element of surcharges, the majority of which are sulfur-based out of Brazil. So less than 1/3 of what we're implementing is surcharges. The majority of it is pure price increases globally. And to the point that Josh made earlier, there is some margin stability agreements that will temper how much we get in the second quarter, which will come in the third quarter. So when we start thinking about Q3 pricing, Q3 pricing will likely be moving up at a step rate that's higher than what we're doing in Q2. John Ezekiel Roberts: And then why is zircon volume moderating a little bit here in the June quarter? John Romano: Because our inventories are lower than what they should be and repositioning inventory, remember, everything we produce, zircon is a bit different, right? We're on the TiO2 side, we've got plants that are located kind of where our customers are. Our zircon inventories are a bit different. They're in South Africa and Australia, and we have to ship that material. So some of the inventory that we had in the inventory warehouses has been depleted in the first quarter. Some of the consignment inventory was higher than we expected. So it's only a function of having less inventory to fill the orders. It's not an order book thing. So... John Srivisal: It's still a very strong quarter if you take a look at the tonnage. And it is more than what our average production quarterly for the year is. So it is a very strong quarter still. John Romano: Yes, moderate. I said slightly moderate. We're not talking about a significant step down. It's just going to be a bit lower than the fourth quarter -- the first quarter, and pricing will be up. Operator: Our next question comes from Vincent Andrews from Morgan Stanley. Justin Pellegrino: This is Justin Pellegrino on for Vincent. I have 2 quick questions on sulfur. First being, have you had any difficulty procuring sulfur in Brazil? And then second, in the event of a conflict resolution, how quickly do you think the Chinese production ramps back up? And do you think there would be any sort of a risk premium remaining in the pricing for sulfate? John Romano: Thank you. So I do believe there'll be a risk premium that's going to go up. I mean, at the end of the day, the Chinese weren't making money to begin with. It's not to say that there won't be an adjustment on sulfur pricing as sulfur goes down. I can't really tell you when the war is going to end. But what I can say is that there's going to be a longer-term impact on sulfur. What this war has done is just really shot -- I talked about a structural shift in supply of sulfur and demand for sulfur. Sulfur was up 160% from the end of 2024 to the end of 2026. It's gone up almost -- that's almost 300% now. So it's having a meaningful impact on anybody that's making sulfate TiO2 if you're not pressing the price. You asked the question about our plant in Brazil. We are not having trouble getting sulfuric acid. It's all of the negotiation of the price. So when we start thinking about every time that price moves up, we have to make sure customers understand where it's moving so that we can move that price accordingly. So for us, it's not an availability issue. It's getting it. In China, basically there are no more exports of sulfuric acid going out to China any longer. There's limitations on where that sulfur can be sent. And we are seeing limitations of sulfur, not just pricing in China. How long that's going to impact -- 8% of the sulfur is produced in Qatar. Qatar has been down since the war started. When is that going to start back up? When is heavier crude going to become available, so when they refine it more sulfur is available? These are all the structural changes that over time have taken sulfur production down and demand has continued to move up. So my personal opinion is the war impact depends on when the war ends. There's an awareness around sulfur that I think is going to be highlighted moving forward, which will tend to drive sulfur prices and TiO2 prices higher than they would have been historically even before the war. Operator: And our last question comes from Pete Osterland from Truist. Peter Osterland: First, just across your TiO2 production footprint, are there any mismatches regionally between where you have pricing power and where the cost inflation is being most strongly felt? And how has that impacted your strategy on operating rates in the current environment? John Romano: Thanks for the question. So look, at this particular stage, we're ramping, we've ramped up all of our assets. The only plant that we're continuing to ramp up, which has been running very well, as I mentioned, was our facility in Saudi Arabia, and that's adding one more line to the 5 that we're currently running. That's a sixth-line operation. We'll be bringing the sixth line on. As I mentioned, from a pricing perspective, surcharges predominantly have been around sulfur, and that's in Brazil. So we're getting pricing in every region. It was a little bit lower in some areas, as I mentioned earlier, based off one of the other questions around some of the margin stability agreements. And so we'll start to get that inflection more in the Americas region, specifically North America as we move into the third quarter, which will only add to the additional pricing that we'll see in Q3 over Q2. Peter Osterland: Okay. Great. And then just as a follow-up, just given how diversified you are, I mean, are there any regions where you're seeing elevated risk of demand destruction that could impact your volumes as you implement pricing surcharges if we stay in an inflationary environment? John Romano: Yes, it's a great question. I think that's the part that's really hard to understand. I think a lot of that's going to depend on the war. I don't think TiO2 price going up is going to create demand destruction. It's been down well longer than it should have been, which has been an advantage to everybody that's buying it. So pricing going up on TiO2, I do not believe is going to have an impact on demand destruction. But could the war and extended engagement in the Middle East create some kind of demand destruction because there's inflation in all the other raw materials out there, that's possible, and we're continuing to monitor that. That's why we've got to be agile in how we look at our production and operating units moving forward. But that's a question that will continue to be evaluated depending upon how long the war lasts. Operator: We have no further questions. This will conclude today's conference call. Thank you for your participation. You may now disconnect.
Operator: Thank you for standing by. Good day, and welcome to the First Quarter 2026 Cheniere Energy, Inc. Earnings Call and Webcast. Today's conference is being recorded. At this time, I would like to turn the conference over to Randy Bhatia, Vice President of Investor Relations and Communications. Please go ahead. Randy Bhatia: Thank you, operator. Good morning, everyone, and welcome to Cheniere Energy, Inc.’s First Quarter 2026 Earnings Conference Call. The slide presentation and access for the webcast for today's call are available at cheniere.com. Before we begin, I would like to remind all listeners that our remarks, including answers to your questions, may contain forward-looking statements and actual results could differ materially from what is described in these statements. Slide 2 of our presentation contains a summary of those forward-looking statements and associated risks. In addition, a reconciliation of non-GAAP measures to the most comparable GAAP measure can be found in the presentation appendix. The call agenda is shown on slide 3. After prepared remarks from Jack, Anatol, and Zach, we will open the call for Q&A. I will now turn the call over to Jack A. Fusco, Cheniere Energy, Inc.’s President and CEO. Jack A. Fusco: Thank you, Randy, and good morning, everyone. Thank you for joining us today as we review our results from the first quarter of 2026 and our improved outlook for the full year. Certainly, a lot has changed since our last earnings call, which took place just before the start of the war in Iran. What has unfolded in the wake of that operation is another major shock in the global energy system—the second such shock in just over four years. The closure of the Strait of Hormuz and the weaponization of energy, including the damage to a portion of QatarEnergy’s LNG facility at Ras Laffan, are tragic consequences, the effects of which are being felt all over the world. The sudden cessation of reliable supply of Middle Eastern oil and natural gas, and the many other products that normally transit the Strait every day on their way to dependent markets around the globe, shines a bright light on the criticality of supply security and a diversified portfolio. What we sell at Cheniere Energy, Inc. is access to a secure, reliable, and affordable product that provides the energy to power homes, businesses, and economies. Prior to the war, the LNG market already demanded more production than the market could supply, as evidenced by the elevated spot market margin we had in the first two months of the year. The disruption of Middle Eastern volumes only exacerbates that supply shortage, increasing prices and restricting availability of supply to the wealthiest buyers at the expense of fast-growing energy-hungry emerging markets. At Cheniere Energy, Inc., we look forward to the resolution of this conflict that will enable the renormalization of commerce to one of the world's most important trade gateways so that prosperity through energy affordability and availability can benefit all. Please turn to slide 5, where I will highlight our key results and accomplishments for the first quarter of 2026 and introduce our upwardly revised guidance for the year. Our performance in the first quarter has gotten off to an excellent start. We generated consolidated adjusted EBITDA of over $2.3 billion and distributable cash flow of approximately $1.7 billion. On the production side, we picked up where we left off at the end of 2025 and produced and exported a record amount of LNG in the first quarter. The 187 cargoes we exported through March topped the previous record set in the fourth quarter of last year. I am extremely proud of our operations team, whose tireless efforts to engineer and deploy solutions to address the feed gas composition-related challenges we experienced last year continue to bear fruit and drove enhanced operational reliability during the quarter. Today, we are increasing our full-year 2026 financial guidance to $7.25 to $7.75 billion of consolidated adjusted EBITDA and $4.75 to $5.25 billion of DCF. This significantly improved outlook—the previous high end of the EBITDA guidance is the new low end—is driven primarily by an improvement in our production forecast of approximately 1 million tonnes, higher marketing margins, as well as higher contributions from optimization activities achieved year to date, both upstream and downstream of our facilities. Zach will cover guidance in more detail in a few minutes, but we look forward to delivering financial results within these upwardly revised ranges for the year. During the first quarter, we continued to execute on our comprehensive capital allocation plan. We repurchased approximately 2.7 million shares for approximately $535 million, funded approximately $1 billion of growth capex with equity and debt, paid down over $250 million in debt, and declared a dividend of $0.555 per share. Moving to our growth projects, we continue to make excellent and safe progress on our growth and expansion during the first quarter. Our CCL Stage 3 project now stands at approximately 97% complete. Substantial completion was achieved on Train 5 in March, and Trains 6 and 7 remain on track for substantial completion in the summer and fall, respectively, with each now tracking a few weeks ahead of schedule that had informed our initial 2026 production forecast in October. First LNG at Train 6 is expected within a few days. On our midscale Trains 8 and 9 and debottlenecking project, we have safely progressed to approximately 37% complete and, while it is still early, are tracking ahead of schedule on a number of execution fronts. Piling is nearly complete with approximately 8 thousand piles having been driven. The first structural steel has been erected, and the next major construction milestone is the first above-ground piping, which is scheduled to be installed this month. With regard to our future growth, our line of sight on the Phase 1 expansions at both Sabine Pass and Corpus Christi continues to improve. As we disclosed on our last earnings call, we are budgeting for limited notices to proceed this year on the first phase of the Sabine Pass expansion, Train 7. We are working closely with Bechtel to finalize the EPC contract and would expect to begin issuing LNTPs shortly thereafter, which should be seen by the market as a clear signal that we are on track to reach FID. At Corpus Christi, we are making excellent progress in our development of the CCL expansion project. We were pleased to receive our scheduling notice from FERC last week, supporting our expectation of FERC approval on that project in the first half of this year. We are extremely excited about these Phase 1 projects, which we believe represent the most compelling risk-adjusted infrastructure investment opportunities on the Gulf Coast—or maybe all of North America—and are expected to accretively grow the Cheniere Energy, Inc. production platform by approximately 10% each. Turn now to slide 6 where I will discuss my key strategic priorities for 2026. My priorities for 2026 are simple: execution, growth, and capital allocation. First, on execution, my priority is to maintain our track record of delivering top-tier safety metrics while furthering our operational excellence program and being a trusted and reliable supplier to our customers. In dealing with some operational challenges last year, the team has responded with determination and resolve, and its efforts are paying significant dividends. The team has increased utilization across both sites by identifying root causes and innovating solutions to address the issues impacting reliability, not just the symptoms. In addition, the team has increased production through identifying and executing on debottlenecking opportunities while seamlessly executing on our planned maintenance activities. And we are focused on managing our platform in a market with elevated volatility. Despite the volatility, our coordinated teams across the globe have done an excellent job managing our positions and assets, ensuring we deliver on our obligations to our customers while optimizing the portfolio through volatile domestic gas markets like we saw during Winter Storm Fern, as well as very volatile international gas and shipping markets that have prevailed since early March. Next, on growth, with Trains 1 through 5 of Stage 3 substantially complete, our immediate priority is a safe completion of Trains 6 and 7. As I just mentioned, these trains have accelerated since last year, benefiting from lessons learned on the first trains as our partnership with Bechtel has not only resulted in early operations of the trains, but also shorter timelines on both commissioning and ramp-up to full production. I expect those learnings to continue in order to benefit midscale Trains 8 and 9 as those trains move deeper into construction later this year. On our SPL expansion and CCL expansion, we are aggressively executing project development workstreams across regulatory, financing, commercial, and EPC contracting as FIDs on those projects come into focus. Last week, we received our scheduling notice from FERC on the CCL expansion project—a critical step in the FERC process—and it is aligned with our expected timeline of FERC approval in 2026–2027. And finally, on capital allocation, we had a major update on the last call with the achievement of the original 2020 vision plan, the new $9 billion authorization the Board approved during the quarter for share buyback, and our new share count and run-rate DCF targets. We are in an enviable capital allocation position, enabled by our incredible long-term contract portfolio that provides decades of cash flow visibility, our brownfield growth opportunities, investment-grade balance sheet, and opportunistic repurchase plan. In February, we celebrated the tenth anniversary of first cargo, and next week will mark my tenth anniversary at Cheniere Energy, Inc. I am extremely proud of the many incredible milestones we have accomplished together in that time. While these anniversaries offer the opportunity to look back, I prefer to look forward. And what we have in front of us are incredible opportunities: an opportunity to grow Cheniere Energy, Inc. in the near term and secure the next phase of growth beyond that; an opportunity to grow our platform by another 20%, benefiting Cheniere Energy, Inc.’s stakeholders while providing the world with more of the secure and reliable energy it needs to improve lives, grow businesses, and help emerging markets emerge. I am incredibly excited about these opportunities, and we are laser-focused on turning them into achievements in the coming years. With that, I will now hand it over to Anatol to discuss the LNG market. Thank you again for your continued support of Cheniere Energy, Inc. Anatol Feygin: Thanks, Jack, and good morning, everyone. Please turn to slide 8. The past quarter has been defined by geopolitical disruption, most notably the escalation in the Middle East and the resulting closure of the Strait of Hormuz, which has put significant strain on global energy markets, including LNG. While the situation remains fluid, our commercial focus is twofold: first, supporting our customers through near-term volatility, and second, understanding what these disruptions mean for longer-term LNG market structure and contracts. We continue to hope for a safe and timely resolution, including the return of Qatari and Emirati LNG volumes to global markets. Coming into the year, the industry was expecting roughly 40 million tonnes of LNG supply growth. This expected supply growth continues to be offset by the halt of Middle East LNG flows through the Strait, which removes approximately 7 million tonnes of supply each month. Additionally, U.S. exports were temporarily reduced during Winter Storm Fern to help balance the domestic gas market, and in late March, Australia’s approximately 9 mtpa Wheatstone facility and other gas processing plants experienced a multi-week outage following Cyclone Norelle. In aggregate, these disruptions displaced nearly 8 million tonnes of supply in the first quarter alone. With tanker and LNG vessel traffic through the Strait remaining constrained with limited visibility on timing of normalization, approximately 7 million tonnes of LNG supply per month—or approximately 100 cargoes—continues to be disrupted. The immediate effect of the crisis was a sharp repricing across regional gas markets, and given most Qatari volume is sold into Asia, we saw the JKM–TTF spread flip in a way not seen since 2023, creating a strong pull for LNG into Asia. Destination-flexible U.S. cargoes responded as expected, with flows re-optimizing toward Asia to capture higher netbacks. This is exactly the flexibility the market relies on in periods of imbalances or distress, underscoring a key advantage of U.S. LNG in the global gas market. While today our customers are squarely focused on replacing near-term lost volumes, the flexibility and security of U.S. LNG through long-term contracts is being highlighted in our commercial conversations and negotiations today. On the demand side, impacts have been more gradual. Middle East cargoes that were already on the water continued to arrive through March, which delayed the full physical effect of the supply disruption. Asia’s LNG imports were 5% higher year over year for January and February but started decreasing in March, dropping by 1.5 million tonnes, or 7% year over year, with import declines in price-sensitive markets expected to continue in April. Now several months into the disruption, we are seeing clear differentiation across markets in Asia to cope with the supply shock. China has again demonstrated system flexibility, halting spot purchases and redirecting cargoes to markets of higher need. Price-sensitive Qatari-dependent markets such as Pakistan, India, and Bangladesh have taken measures to reduce demand and seek alternate fuel sources, while higher-affordability markets including Taiwan, Singapore, and Thailand have stepped in to procure replacement cargoes, and we have been actively supporting our customers navigating this volatility. In Europe, the situation is increasingly tight as storage levels exiting the winter are near five-year lows, with a deficit of 13.2 bcm—about 10 million tonnes, or approximately 150 cargoes of LNG equivalent—versus the five-year average. While the region is relatively less exposed to disrupted Middle East LNG flows compared to Asia, the absence of Russian pipeline flows and the impending ban on Russian gas and LNG add further pressure. To reach adequate storage levels ahead of next winter, Europe will require almost 10 million tonnes more LNG than last year to reach minimum storage levels of 80% and approximately 15 million tonnes more year over year to reach historical levels of 90%. This highlights Europe’s dependence on LNG and intensifies the competition for marginal LNG supplies with other basins, especially as we look ahead to winter. Europe’s imports grew 12% to approximately 40 million tonnes in the first quarter, despite a month-on-month drop in March, which remained flat year over year as more cargoes started heading east. Across global markets, pricing dynamics evolved in two distinct phases in the first quarter. At the start of the year, benchmark gas prices were moderating, reflecting expectations of that forecast 40 million tonnes of incremental supply to enter the market. First-quarter JKM averaged $10.40/MMBtu and TTF $11.60/MMBtu, down by roughly 30% and 20% year over year, respectively. Following the disruption in the Middle East, we have seen a clear repricing, with prompt pricing and forward curves moving higher by $3 to $4/MMBtu. However, despite the disruption of comparable magnitude, these prices still reflect much lower levels than in 2022 following the onset of the Russia–Ukraine war, which we believe stems from the market’s expectation that the disruption will prove temporary and potentially quick to resolve. The Henry Hub curve, by contrast, has remained relatively flat, reinforcing its position as a stable pricing anchor. Let us turn to the next page to expand on what this means longer term. Uncertainty around the disruption in the Middle East remains high, and we continue to hope for a swift resolution with limited lasting structural impact. However, even under that assumption, the supply outlook over the next few years has shifted. The industry has effectively lost two liquefaction trains in Qatar, representing approximately 12.8 mtpa of capacity, which could be offline for up to five years. We are also likely to see delays to major expansion projects in the region in both North Field in Qatar and Ruwais in the Emirates. As shown in the chart on the left, even if flows normalize into the summer, most, if not all, of the previously expected growth in 2026 will be absorbed. Directionally, 2026 is much tighter than previously forecasted, and now 2027 has become more structurally constrained, especially considering the record-low storage position and supply dynamics across Europe heading into the 2026 winter I just discussed, likely creating a similar scenario ahead of winter 2027—before eventually net supply growth resumes as new projects in the U.S. and smaller ones elsewhere commence operations and ramp up production the rest of this decade. We expect the market to return to a more well-supplied position as new supplies start fully offsetting volume losses and Qatari projects get back on track after that. So timing matters. But in most scenarios, the near-term buffer has been greatly reduced, while the broader trajectory after the next year or two remains relatively unchanged. The LNG market is still expected to grow to approximately 600 million tonnes by around 2030. As new supply comes online, we would expect that growth to help moderate prices. This would be particularly welcomed by price-sensitive markets that have been constrained in recent years by sustained higher prices. Importantly, demand growth continues to be driven by a diverse set of markets from established importers in Asia to emerging consumers in South and Southeast Asia who need to supplement rapidly depleting domestic fields, to continued demand support in Europe as the complete ban on Russian molecules has and continues to create a structural demand anchor for the LNG market. At Cheniere Energy, Inc., our focus remains consistent: providing reliable, flexible, long-term LNG supply to a broad and growing set of global markets and doing so through a mix of direct relationships that expand access while maintaining the credit profile in our customer portfolio required to support long-term investment. It is these strategic relationships that underpin not only our current business and infrastructure investments, but also our expansions. With over 35 long-term creditworthy counterparties, we remain resolute in our commitment to them and our differentiated track record of performance, which is recognized and appreciated by our customers, particularly in volatile market conditions like these. That differentiation on reliability is a significant commercial asset, and we are leveraging this as we engage with customers today, with a focus on commercializing the balance of CCL Train 4 now that SPL Train 7 is sufficiently commercialized. So while the disruption we are seeing today is significant and it is difficult to fully assess in real time, over the long term events like these tend to become relatively small inflections in a much broader, longer-term growth trajectory. From that perspective, the underlying need for reliable, long-term LNG supply and the agreements that enable it is only being reinforced. With that, I will turn the call over to Zach to review our financial results and guidance. Zach Davis: Thanks, Anatol, and good morning, everyone. I am pleased to be here today to discuss our financial results and improved outlook for the full year. Turn to slide 11. For the first quarter of 2026, we generated consolidated adjusted EBITDA of over $2.3 billion and distributable cash flow of approximately $1.7 billion. Compared to the first quarter of 2025, our 2026 results reflect higher volumes of LNG delivered thanks to the substantial completion of Trains 1 through 4 last year of Stage 3, higher contributions from optimization upstream and downstream of our facilities, and the one-time alternative fuel tax credit during the quarter. We recognized in income 6.46 TBtu of LNG produced from our facilities in the first quarter. While meaningfully higher than 2025, 2026 volumes were impacted by in-transit timing dynamics that favored the fourth quarter of 2025 and February 2026. Looking to the balance of 2026, it is likely the first quarter will be our lowest quarter of volume recognized this year. As asset production ramps, the remainder of the year is expected to benefit from the rest of Stage 3 coming online, including midscale Train 5 at the end of January and Train 6 expected to produce first LNG imminently. In addition, there are no major turnarounds planned this summer, and lower ambient temperature should benefit the fourth quarter, making the last quarter of the year likely our highest quarter of LNG produced and recognized in income. Additionally, for the first quarter, we generated a net loss of approximately $3.5 billion, which is primarily the result of the unrealized non-cash derivative impact predominantly related to our long-term IPM agreements and the mismatch of accounting methodology for the purchase of natural gas and the corresponding sale of LNG. The derivative accounting treatment, coupled with the long-term duration and international price basis of our IPM agreements, results in fluctuations in fair market value from period to period as LNG curves move, which you may remember similarly impacted our GAAP net income results in 2021 and 2022. The surge in international gas prices and increased volatility during the quarter drove the unrealized non-cash losses and our overall net loss for the quarter. Adjusting for these non-cash unrealized derivative losses and the associated impacts to income tax and noncontrolling interests, we generated positive adjusted net income of approximately $1 billion for the quarter. This adjusted net income figure is aligned with our EBITDA and DCF and more representative of our financial performance in the quarter. To be clear, as we deliver on our IPM agreements that are accounted for as derivatives or economic hedges that mitigate future cash flow volatility, we expect these non-cash unrealized mark-to-market losses to unwind over time and generate mark-to-market gains as we realize the intended and corresponding fixed liquefaction fees from these contracts that pass through the LNG market price exposure to our IPM counterparties. While IPM agreements may contribute to variability in our reported GAAP net income, those agreements most importantly provide stable long-term cash flows, similar to our SPAs, that help support our contracted infrastructure platform and cash flow visibility for decades to come. As Jack and Anatol noted, our business model is built to thrive regardless of market environment, and the same goes for our capital allocation plan. During the quarter, we deployed approximately $1.2 billion towards our capital allocation pillars of accretive growth funded with equity and cash flow, shareholder returns in the form of buybacks and dividends, and balance sheet management. In the first quarter, we repurchased approximately 2.7 million shares for over $500 million, highlighting the opportunistic nature of the program considering the movement of our share price over the quarter. Given the volatility in the shares year to date, our disciplined value-based repurchase plan is working as designed, and we continue to opportunistically deploy the remaining over $9 billion under our current authorization according to the framework which guides repurchase activity, working towards our current target of approximately 175 million shares outstanding around the end of the decade. For the first quarter, we declared a dividend of $0.555 per common share, representing a payout of over $116 million for common shareholders. We remain committed to growing our dividend by approximately 10% annually through the end of this decade. Shareholder returns achieved through the combination of our dividend and opportunistic share repurchase plan are a key value proposition for our investors, providing them with a stable and growing dividend and increased ownership in Sabine Pass and Corpus Christi over time, while maintaining the financial flexibility essential to our long-term capital allocation plan. Moving to the balance sheet, we repaid over $250 million of our indebtedness with cash on hand during the quarter, fully redeeming the remaining SPL 2026 notes and amortizing a portion of the SPL 2037 notes. Additionally, in March, we issued $1 billion of 2030 notes and $750 million of 2056 notes at CEI, making our inaugural 30-year issuance and extending our maturity stack into the second half of this century alongside a growing list of our long-term LNG contracts. With a portion of the proceeds, we prepaid the $550 million drawn on our Corpus Christi term loan while also canceling an additional $600 million of unused commitments. We continue to maintain substantial liquidity with approximately $1.8 billion in consolidated cash and billions of dollars of undrawn revolver and term loan capacity throughout the Cheniere Energy, Inc. complex. Also in the quarter, we continued to receive recognition from the credit rating agencies, as Moody’s upgraded its ratings of our unsecured notes at CEI and CCH to Baa2 and Baa1, respectively, each with a stable outlook. We are now high-BBB at both projects and mid-BBB or better at the unsecured corporate levels by all three credit rating agencies. During the quarter, we funded approximately $1 billion of growth capital across our business as we continue to progress the construction of Stage 3 and midscale 8 and 9, development of the SPL and CCL expansion projects, as well as our Gregory Power Plant to support incremental power needs at Corpus over time as the midscale trains are completed. Of the $1 billion of growth capex in the quarter, approximately $300 million was equity-funded and approximately $700 million was efficiently debt-funded as planned via our delayed-draw Corpus Christi term loan as well as from a portion of the proceeds from the recent CEI bond raise. We do expect to increase our spending on Train 7 at Sabine Pass later this year as we have budgeted for potential limited notices to proceed to Bechtel ahead of our expected FID early next year, which is why we are retaining cash at CQP by flexing the variable component of the CQP distribution this quarter. Looking ahead, we remain well positioned to fund our disciplined growth objectives comfortably within our cash flow forecast while retaining our strong investment-grade credit metrics and our significant financial flexibility for shareholder returns through cycles. Turn now to slide 12, where I will discuss our upwardly revised 2026 financial guidance and outlook for the year. Today, we are increasing the midpoint of our guidance ranges for full-year 2026 consolidated adjusted EBITDA and distributable cash flow by $500 million and $400 million, respectively, bringing expected consolidated adjusted EBITDA to $7.25 to $7.75 billion and distributable cash flow to $4.75 to $5.25 billion. We are maintaining our CQP distribution guidance for the year of $3.10 to $3.40 per common unit. These increases are attributed to a few key drivers, including an increased production forecast for the year, an improved margin outlook, and contributions from optimization activities already locked in year to date, both upstream and downstream of our facilities. As Jack mentioned, thanks to increased utilization of our existing trains as a result of continued debottlenecking and resiliency efforts related to feed gas composition variability, as well as accelerated timelines on the remaining trains at Stage 3, we are increasing our 2026 production forecast by approximately 1 million tonnes—to approximately 52 to 54 million tonnes for the year—unlocking incremental volumes available for CMI this year. With this increase and continued forward selling by our team over the quarter, we still forecast less than 1 million tonnes—or less than 50 TBtu—of unsold open volumes remaining in 2026. Therefore, we currently forecast that a $1 change in market margins would impact EBITDA by, again, less than $50 million for the full year. Despite having very little open exposure for the balance of the year, we are maintaining the $500 million guidance range, as results could still be impacted by a number of factors, particularly given the sustained volatility in the global energy markets, but also variability in our production forecast, the ramp-up and specific timing of substantial completion of Trains 6 and 7 at Stage 3, the timing of certain cargoes around the year-end, contributions from further optimization activities during the balance of the year, and the impact Henry Hub volatility can have on lifting margin. As we progress through the year and lock in some of these variables, we will look to tighten these ranges as we have done in years past. Our first-quarter results, coupled with our revised guidance ranges, once again underscore Cheniere Energy, Inc.’s ability to leverage our platform, respond to market signals, and unlock optimization opportunities throughout our business while still maintaining our highly contracted business model built upon a foundation of long-duration fixed-fee cash flows from creditworthy counterparties—our conviction in which has only been reinforced as we look forward to funding additional accretive brownfield growth at both Sabine and Corpus, while concurrently growing shareholder returns in the form of buybacks and dividends that can be relied on year after year. These dependable cash flows are essential to the over $50 billion natural gas infrastructure platform we have developed over the last decade plus, as well as our disciplined, all-of-the-above capital allocation framework, and the durable through-cycle value of this approach has only been enhanced in the wake of the current market environment. Looking ahead, we remain focused on maintaining safe and reliable operations to ensure we can continue reliably delivering flexible, secure LNG as well as meaningful long-term value to our stakeholders around the world for decades to come. That concludes our prepared remarks. Thank you for your time and your interest in Cheniere Energy, Inc. Operator, we are ready to open the line for questions. Operator: Thank you. If you are dialed in via the telephone and would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment. Please limit yourself to one question and one follow-up before rejoining the queue. Again, you may press star 1 to ask a question. We will take our first from Jeremy Bryan Tonet with JPMorgan. Jeremy Bryan Tonet: Hi, good morning. Thanks for all the color today. I just wanted to expand a bit on some of the remarks. Anatol, I was just wondering, in the customer conversations at this point, given the disruptions in the Middle East, how you would describe the tone or appetite for U.S. LNG given the reliability and Cheniere Energy, Inc.’s track record there. And then at the same time, contrasting that to somewhat higher prices and how that impacts demand for LNG overall—how have those two factors flowed through conversations? Anatol Feygin: Thanks, Jeremy, good morning. We are in a very enviable position. As the plants run better and, as you see, we have some additional volume, and we only have these three dozen critical long-term counterparties, we are able to really focus on supporting these key relationships, and that is what we have been doing over the last couple of months. As you can imagine, the initial reaction by a number of these players is to ensure there is ample supply as this 7 million tonnes a month is replaced to keep the lights on in the short run. Our ability to support them is helping to broaden and deepen the relationships and is certainly a tailwind to a number of those engagements. In terms of the longer term, we think, just like COVID in 2020, when you look in the rearview mirror, that disruption is a small blip. It changed the dynamic by delaying what we were expecting by somewhere between 12 and 18 months, but the overall trajectory remained the same. We expect this issue—and hope that this issue—is similar. We are in a great position. We need to support our growth ambitions with relatively modest incremental commercial agreements, and clearly we have proven that this is a very affordable, reliable offering, and Cheniere Energy, Inc. is a great counterparty to help support those long-term ambitions by our customers. Jeremy Bryan Tonet: Got it. That makes sense. And then just want to turn to operations and execution. Could you expand a bit more on the Corpus expansion—seems to be tracking a bit ahead of expectations for timeline there—and at the same time being able to eke out a bit more capacity. What bottlenecks were you able to address, and what more could be possible? Jack A. Fusco: Thank you, Jeremy. As I said in my prepared remarks, I am extremely pleased with what we have been able to do in operations and production engineering. At Corpus, not only have the trains been coming in significantly ahead of the guaranteed schedule from Bechtel, but our ramp-up has been higher and steadier. The team has really learned how to make those smaller midscale trains, and that is producing some very good quantities for us. I would expect those learnings to continue to work their way through 6, 7, 8, and 9 at a minimum. The other thing that has been helpful is we figured out a couple of different operational modes to handle variability of feed gas at both Sabine Pass and at Corpus Christi. We have worked with some good suppliers of solvents to come up with creative ways to use solvents to mitigate the need for defrost. There are a hundred different things in our toolkit right now that we use every single day, and they all seem to be adding up to meaningful amounts of additional production. That is what you are seeing from us in this raise of guidance. Zach Davis: And then, on the growth and the expansions, just to put into perspective, right now on the whiteboard is SPL Train 7. You can tell from the CQP distribution guidance and where we ended up with Q1, we are reserving cash as we are in good shape to start LNTPs later this year and be in a position, with a permit, to FID that project early next year. In terms of the Corpus expansion, that is a bit behind just because we did not file for the permit until after we officially announced FID and NTP on Trains 8 and 9. But that is in good shape and tracking to receive a permit, let us say, mid to late next year. In the context of the previous question to Anatol, we can be very disciplined on the SPAs considering we have approximately 10 million tonnes of SPAs today that have not been used yet to underpin an FID project. That is more than enough to cover the SPL Train 7 project plus debottlenecking, and we are in good shape on even the first train of the first phase of a Corpus expansion. So we can stay quite disciplined not just on how we grow and the parameters that we hold ourselves to—which are leaps and bounds beyond anyone else in the industry, especially in North America—and then we can be disciplined on the SPAs and eventually move forward and create value for the company long term. Operator: We will take our next question from Spiro Michael Dounis with Citi. Spiro Michael Dounis: Thanks, operator. Good morning, everybody. Picking up on contracting, there seems to be some expectation that we will see a wave of contracting for U.S.-sourced LNG. Understand your point that a lot of the focus so far has been filling near-term supply, but is the market wrong in expecting a contracting wave? And based on your discussions, would you be surprised if Corpus IV Phase 1 is not underwritten with SPAs by year-end? Anatol Feygin: Thanks, Spiro. I think your overall thesis is correct. There are not that many options, and we keep demonstrating that this is a great place to source volumes. Customers lifting from us FOB at today’s NYMEX economics are lifting roughly at $6/MMBtu with the reliability and flexibility that we have demonstrated over a decade. If not now, if not us, whom and when? That said, this is a very competitive market. There are some credible projects moving towards FID and a lot of projects that have FID that have spare capacity yet to be placed. We are fortunate in that we will continue to not participate in that commoditized race. We will pick and choose with whom we want to continue to partner. You will continue to see from us the same thing you have seen for the last four or five years, which is additional volumes with existing customers. We have made a significant dent into Corpus Train 4, and whether it is by year-end or by the time we are ready to FID, we think we will be in a very good commercial position to support that. Spiro Michael Dounis: Thanks. And on LNG prices, as you think about Europe needing to refill storage and the aggressive ramp in cargoes that needs to happen, perhaps extending into 2027, are you surprised prices have not been stronger? When would that play out in the curve? Beyond ’27/’28, do you think the curve appropriately reflects lingering supply issues? Anatol Feygin: We are astounded that prices are where they are—that prices in Europe and Asia are backwardated into the winter. U.S. is up 50% into the mid-$4s in the winter, but the world gas market is strangely backwardated. Europe is in a very difficult position with, adjusted for flows, record-low storage, banning Russian gas, and the Indian subcontinent—the price-sensitive market—has already been turned off. We think we will be in an environment in the third and fourth quarters where there is very aggressive competition for volumes globally. China has done an excellent job of using its storage and domestic production to be a relief valve again. The current situation is masked by the shoulder period, and the physical disruption of deliveries from the Strait being closed really only started to be felt a month ago. We are very constructive on where prices will go into the second half of the year, and that likely reverberates into 2027, which again will highlight how attractive the long-term SPA from Cheniere Energy, Inc. is to those that can meet Zach’s stringent credit requirements. Operator: Our next question comes from Jean Ann Salisbury with Bank of America. Jean Ann Salisbury: Hi, good morning. You have suggested in the past that after Sabine Pass 7 and Corpus 4, in the blue-sky growth case, future trains beyond 75 mtpa would be more likely to be at Corpus. Can you talk about the tradeoffs between your two sites for expansion, both for the potentially next two trains—Sabine Pass 7 and Corpus 4—and then beyond that? Jack A. Fusco: Hi, Jean Ann. Corpus has been blessed with another 500 acres of basically untouched land. We bought that land from the old Sherwin Alumina site. We have been working on that property to make sure that it is environmentally ready to go. It has great access to the water. It has a power plant that sits literally right next to it, which is our Gregory Power Plant that we own and control. It is close to the Permian—it is a 40-mile straw to our pipeline system and to Agua Dulce for gas supply. It just has a lot of benefits that make it a compelling place to continue to grow. At Sabine, while we still have property, a lot of it is wetlands that we would have to mitigate appropriately, which adds cost, and there are a few other nuances. On the positive side, we have three berths already at Sabine. So it is not out of the question, but I do think additional growth after the first phases will probably happen at Corpus prior to Sabine—just my gut—and that is way down the road from where we are today. Operator: We will take our next question from Jason Gabelman with TD Cowen. Jason Gabelman: Thanks for taking my questions. First, on the 2026 EBITDA guidance, you typically are a bit more conservative early in the year ahead of summer maintenance. Given that it seems you are guiding to lower maintenance this year, is there a bit less conservatism baked into the plan at this point? And then my follow-up is on what you are seeing across the world from governments in response to higher global gas prices—it is the second period of high and very volatile prices in the past five years—have you seen any reaction, especially from Asian countries, to pivot more toward long-term planning for coal and renewable power over gas? Zach Davis: I hear a lot of analysts say we are often conservative early in the year, but we do not overpromise. Our initial guidance is consistent with how we set budgets and targets. The reason we were able to raise this time is several things: production coming through—not just with midscale trains coming online quicker and ramping up quicker thanks to teamwork with Bechtel handing over—but also all the resiliency work since last year boosting production. That adds roughly $400 million at margins in the $9 to $10 range. Then margins are up since the last call on less than a million tonnes—that adds about $100 million. Optimization: we do not bake in optimization that has not been locked in yet; we were able to add another $100 million that is already locked. Henry Hub has come down since February a bit for the rest of the year, which offset some of that and is why we raised by $500 million. We feel good about the range, but there are moving parts: a $0.50 move in Henry Hub is about a $100 million swing; if Trains 6 and 7 timing moves by half a month, that is roughly a $50 million swing; about $50 million or less for every $1 move on CMI margins; overall LNG production variability adds plus or minus $100 million for 10 TBtu; and O&M is usually plus or minus $20 million. Add it up, and that is why we stick to a $500 million range. We prefer to overperform. Anatol Feygin: On your question about pivoting away from gas, we really have not seen that yet. It is fairly early in this disruption, and the market initially thought the resolution would be quick. We are skeptical it normalizes in weeks; we see months. After the Ukraine war, you did see a couple of governments shift, but we are not seeing that now. Entities that can transact on a long-term basis are seeing delivered gas prices from us that are well within, if not below, their planning ranges. Those that are creditworthy and capable to transact long-term and are not whipped around by spot prices have no reason to reconsider. In the grand scheme, LNG is only about 3% of primary energy. It is not a solution for the world; it is an elegant way to complement reliability, intermittency, and emissions. We are optimistic this will be in the rearview mirror soon, and the world will continue to grow to the 700+ million tonne market we expect in 2040. Operator: Our next question comes from Alexander Bidwell with Research and Advisory. Alexander Bidwell: Good morning. Appreciate the time. Looking at future expansions at Corpus and SPL, we have been seeing a ramp in labor competition across various projects in the U.S. Gulf. Do you expect that to have a knock-on impact in terms of EPC costs for the future Sabine and Corpus expansions? Jack A. Fusco: I think the timing of our FIDs will work very well with Bechtel’s current schedule and their growth projections, and we have not seen an issue with any of our midscale workforce—about 5 thousand workers there. So I do not see a problem. Zach Davis: There is a nice cadence with midscale—completing Stage 3 this year, then 8 and 9, and then the ramp-up starting next year and into 2028–2029 with Sabine 7, and then after that the ramp-up with CCL 4. The cycle is in our favor and slightly off from many projects that have FIDed recently or are desperate to FID right now. Alexander Bidwell: Thank you. And as a follow-up on midscale train performance, can you give a sense of the differences in OpEx and maintenance thus far versus your traditional large-scale trains? Jack A. Fusco: It is a little too soon. They have been roughly equal, maybe a little higher on the midscale as we continue to debottleneck. It is hard to segment sustainable O&M versus debottlenecking activities we are doing to get more output. Give us a bit more time with operations under our belt and we will try to provide more transparency. Zach Davis: One note: the midscale trains require more power, so you will see that incrementally in cost of goods sold. As we scale, it will be straightforward and consistent with the other 15 million tonnes at Corpus. With more scale beyond just five trains, they will get relatively close—it will just be in different buckets to an extent, as midscale requires more power. Operator: We will take our next question from Manav Gupta with UBS. Manav Gupta: Good morning. You are one of the few midstream companies that, besides dividends, also rewards shareholders with buybacks. Given the current environment and the amount of free cash you are generating, how are you thinking about stock buybacks here? Zach Davis: Today, we feel very good about buybacks. Our buyback is meant to be opportunistic and disciplined. Our stock basically varied from sub-$200 to $300 in Q1, and we bought over $500 million at about $202—showing discipline and opportunism. We bought back over $1 billion in Q3 and Q4 last year, but that is because we bought less than $700 million in the first half and rolled over allocations. Deployment may be bumpy quarter to quarter; the allocation and cash reserved for buybacks is not. That is very steady and why we committed to a $10 billion buyback through the rest of this decade. Also look at our payout ratio—dividend plus buyback versus DCF—basically around 50–60% a year, the high end of peers. We are basically the only one doing buybacks to this extent. As DCF grows, there is more cash for buybacks. We are budgeting to FID SPL 7 early next year and a first phase of Corpus by mid to late next year as well. With that cash flow reserved and still committing to $10 billion, you should expect buybacks to continue to compound quarter after quarter. If there is even a month delay in FIDs, that means more free cash flow for buybacks in the near term. Operator: We will take our last question from Burke Charles Sansiviero with Wolfe Research. Burke Charles Sansiviero: Thanks for the time. Understood you are not baking in any optimization that has not been locked in to the updated guide. Could you provide any additional color on what potential upside optimization could look like for the balance of the year, all else equal? Zach Davis: It can come from anything across the integrated platform. We have a different edge versus anyone else in LNG having the pipeline network we do, the two facilities, and then not just CMI handling open capacity but also our DES contracts and our IPM contracts. That scale gives us a different level of ability to optimize, and we do expect more optimization through the rest of the year. In the past quarter, including Winter Storm Fern, we were able to provide some of our gas back into the U.S. gas market as it was needed. There were also spikes in shipping and LNG prices after the war broke out in late February where we were able to provide ships and LNG to customers that needed them. Those are things we could not have forecasted even the same week they occurred. Having the scale and integrated platform gives us an edge. In the past three months, we bought cheaper gas upstream of our facilities as part of optimization upstream of Sabine and Corpus. We were able to source third-party cargoes—over 30 TBtu—freeing up shipping and optimizing certain cargoes as well. More likely to come. If there is one conservative aspect of guidance, it is that we do not bake in any more of that in the current roughly $7.5 billion EBITDA guidance. Anatol Feygin: As the platform continues to expand and these trains come on, additional DES and IPM contracts come with additional shipping that is paid for by those contracts. We have the highest number of vessels we have ever had in our portfolio today, and that will continue to grow—again paid for by long-term commitments—but giving us the opportunity to take advantage of volatility. Our crystal ball is not good enough to tell you what opportunity will be here next week, much less over the second half of this year. Burke Charles Sansiviero: Understood. Have you been able to opportunistically hedge some of your open exposure into 2027 a little earlier than normal as margins improved? Zach Davis: We do use our financial capacity for the prompt year and sometimes the year after. We usually try not to financially hedge too far out considering how much volatility there could be and considering we are in a shoulder season heading into Asia cooling and then European storage filling. Financially hedging is not the priority for 2027. Since the last call, however, we have sold over 1 million tonnes of open capacity in 2027. Margins were under $4 as of the call in February and now are closer to $6 to $7. When we see that and have willing buyers, we lock it in. We have already made a dent on the open capacity next year, which strengthens cash flow visibility and, obviously, cash in the coffers for things like buybacks. Operator: That concludes our question and answer session. I would like to turn the conference back over for any additional or closing remarks. Jack A. Fusco: Hi, this is Jack. I just want to thank you all again for your support of Cheniere Energy, Inc. Operator: This concludes today’s call. Thank you again for your participation. You may now disconnect, and have a great day.
Operator: Good afternoon, and welcome to the Gevo, Inc. Quarter One 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, we will now open the call for questions. If you would like to ask a question during this time, simply press star 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. Thank you. I would now like to turn the call over to Eric Frey. Please go ahead. Eric Frey: Good afternoon, everyone, and thank you for joining us on today’s call to discuss Gevo, Inc.’s first quarter and full year 2026 results. I am Eric Frey, Vice President of Finance and Strategy at Gevo, Inc. With me today, we have Paul D. Bloom, our Chief Executive Officer; Oluwagbemileke Agiri, our Chief Financial Officer; and Unknown Speaker, Executive Vice President of Operations and Engineering. Earlier today, we issued a press release that outlines our first quarter 2026 results and some of the topics we plan to discuss. Copies of the press release are available on our website at gevo.com. Please be advised that our remarks today, including answers to your questions, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently anticipated. Those statements include projections about the timing, development, engineering, financing, and construction of our alcohol-to-jet project; the potential expansion and debottlenecking of our Gevo, Inc. North Dakota plant; the potential expansion of our carbon sequestration well; our expected future adjusted EBITDA; our agreements with Ara Energy; and other activities described in our filings with the Securities and Exchange Commission, which are incorporated by reference. We disclaim any obligation to update these forward-looking statements. In addition, we may provide certain non-GAAP financial information on this call. The relevant definitions and GAAP reconciliations may be found in our earnings release which can be found on our website at gevo.com in the Investor Relations section. Following the prepared remarks, we will open the call for questions. I would like to remind everyone that this conference call is open to the media, and we are providing a simultaneous webcast to the public. A replay of this call and other past events will be available via the company’s Investor Relations page at gevo.com. I would now like to turn the call over to the CEO of Gevo, Inc., Paul D. Bloom. Paul? Paul D. Bloom: Thanks, Eric. Good afternoon, everyone, and thanks for joining us. This quarter was about advancing execution and strengthening the foundation for scale. Our team continued to build on the momentum of last year, strengthening our core business while advancing the next phase of our growth. We made measurable progress on our ATJ 30 project and our planned debottlenecking and expansion of Gevo, Inc. North Dakota. We continued to improve the performance of our existing business and refine our financing strategy. 2026 was our fourth consecutive quarter delivering positive non-GAAP adjusted EBITDA that reflected better than expected results with improved margins on top of solid production volumes. Our carbon business continued to deliver strong returns from low carbon ethanol compliance markets. In Q1, we sold approximately 57% of our carbon attributes attached to fuel. We also generated nearly 20 thousand tons of engineered carbon dioxide removal credits, or CDRs, to be sold into the voluntary carbon market and continue to see steady demand and relatively strong credit pricing for low carbon ethanol sales in markets where we participate. Our customers for CDRs continued to grow in Q1, including purchases and retirements by Amgen, Bank of Montreal, and PayPal, while continuing to advance more sizable long-term CDR deals. Importantly, we see continued growth this year even before our debottlenecking at Gevo, Inc. North Dakota comes into effect. Last year, we reported approximately $16 million adjusted EBITDA. For 2026, we expect approximately $30 million of adjusted EBITDA as we progress towards our previously stated target of achieving $40 million of adjusted EBITDA on an annualized run-rate basis from existing operations by the end of this year. The impact of our debottlenecking and other growth plans is incremental to this target. To further support our efforts, we have launched a corporate-wide initiative we are calling the EBITDA Challenge. This is about unlocking new revenue growth, improving operational performance, and managing costs across our organization. We look forward to providing more updates as we make progress on this critical initiative. Now let me turn to our alcohol-to-jet project that we call Project NorthStar, since I know that is top of mind. As previously announced, we made the decision to withdraw from the DOE financing process following a conversation with them around certain new requirements for the loan guarantee, including enhanced oil recovery as a business objective. These requirements did not align with our duty to maximize value for our stakeholders, from both an economic and timeline perspective. Withdrawing from the DOE process allows us to fully engage with a broader group of private capital providers while adding greater certainty and flexibility to our financing efforts. I am pleased to report that we have received nonbinding indications of interest from multiple lenders, which supports our goal of securing financing for Project NorthStar by the end of 2026. As a reminder, we are pursuing a combination of non-dilutive project-level debt and strategic capital options for Project NorthStar. Beyond financing, we are making good progress on our other key milestones that include engineering and offtake agreements. On engineering, we talk about front end loading, otherwise known as FEL, for which stage two has been completed. We remain on track to complete FEL 3 this quarter, which will further refine our capital cost estimates and position us to move forward to detailed engineering. Regarding offtake, we have already secured approximately half of the financeable long-term contracts for synthetic aviation fuel and carbon attributes for the project. Currently, we are at the term sheet stage for additional contracts which, upon completion, we expect will meet our financing requirements. We see a clear path to final investment decision, or FID, and based on our progress, continue to believe that Project NorthStar can deliver approximately $150 million of adjusted EBITDA per year once fully commissioned and online. Switching gears to our expansion projects, on March 30, we announced our intent to expand the capacity of Gevo, Inc. North Dakota by up to 75 million gallons per year, bringing our total capacity to an expected 150 million gallons per year. This expansion would effectively double the carbon capture and low carbon ethanol production and all the value that comes with that, from our original acquisition of the plant last year. To help finance the expansion, we entered into a preliminary agreement with Ara Energy, a global private equity and infrastructure firm focused on industrial decarbonization, to co-invest in the project. We still have to finalize the details, but we believe partnering with experienced capital providers will allow us to move faster than our balance sheet alone would support, while maintaining a disciplined approach to capital projects, avoiding dilution, and optimizing risk-adjusted returns. We expect construction of that expansion to take approximately 18 to 24 months following final investment decision. Lastly, let me touch on the debottlenecking and other site improvements that are currently in progress at Gevo, Inc. North Dakota. As previously announced, the volumes unlocked by our debottlenecking efforts should expand adjusted EBITDA in the Gevo, Inc. North Dakota segment by an anticipated 10% to 15%. We are on track to deliver the debottlenecking and operational reliability projects by the end of 2026. Site improvements are underway, and Unknown Speaker will talk more about that and our other operational and engineering highlights. But first, I will turn it over to Oluwagbemileke Agiri to run through the financial performance for the quarter. I will come back at the end to recap. Oluwagbemileke Agiri: Thanks, Paul. During Q1 2026, we reported revenue of $43 million compared to $29 million in Q1 last year, net loss attributable to Gevo, Inc. of $22 million, or $0.09 per share, which is coincidentally the same as it was in Q1 of last year. I would emphasize that first quarter results include debt extinguishment and modification of $11 million, and non-GAAP adjusted EBITDA of $9 million compared to a loss of $15 million in Q1 last year. Adjusted EBITDA largely reflects contributions from our carbon capture, low carbon ethanol and RNG operations, and corporate expenses. While our adjusted EBITDA for full year 2025 was $16 million, we continue to see adjusted EBITDA growth in 2026 and are excited to reaffirm our target of reaching an annualized run-rate adjusted EBITDA of $40 million this year. During the 12 months of 2026, we expect $30 million of adjusted EBITDA. Our first quarter results were better than expected due to strong production and margin performance, in spite of typical seasonal softness in ethanol margins. We are optimizing value from monetizing carbon, commodity, and tax credits, in addition to our strong focus on fiscal discipline and cost management. As Paul mentioned, we launched a corporate-wide initiative that we are calling the EBITDA Challenge. This is not just a cost-cutting exercise. This is about unlocking new revenue growth, improving operational performance, and managing costs across our organization. Going forward, we continue to expect some quarter-to-quarter variability in adjusted EBITDA, but overall, we reaffirm our targets. I also note that we see some potential upsides to our targets across a number of fronts, including unlocking revenue from expected new low carbon fuel pathway approvals we have been working on for over a year. Turning to cash flow and the balance sheet, we ended the quarter with approximately $39 million of cash and cash equivalents. We reported negative operating cash flow of $21 million. This reflects timing-related impacts, including $17 million of tax credits that have been generated but have not yet been monetized, and roughly $4 million of one-time costs tied to debt refinancing and extinguishment. Adjusting for these factors, operating cash flow would have been close to neutral, in line with our expectations and consistent with our path toward achieving our 2026 cash flow objectives. Refinancing our growth, we are taking a disciplined and methodical approach. Our priority is to ensure that any capital we raise aligns with our long-term strategy, preserves flexibility, and supports sustainable value creation for our shareholders. Regarding ATJ 30, we are actively evaluating indications of interest that we have received from private capital providers. This process is focused not only on securing funding, but partnering with capital providers who understand the strategic position of our project, share a commitment to our execution timeline, and help minimize dilution. On debottlenecking and other asset enhancement projects, we expect to spend $26 million this year that we plan to fund internally, as we have said previously. And as Paul mentioned, we expect to finance our expansion project with capital partners like Ara Energy. Overall, we believe our cash and cash flow put us in a strong place to execute this year and confidently pursue our long-term objectives. And now I will hand it over to Unknown Speaker to talk about operations. Unknown Speaker? Unknown Speaker: Thanks, Oluwagbemileke. From an operations standpoint, we saw consistent performance across our asset base in the first quarter. At Gevo, Inc. RNG, we produced about 92 thousand BTUs of renewable natural gas compared to about 80 thousand during the same quarter last year, or a 15% increase. Last quarter saw improved reliability as a result of our continued focus on operational stability. At Gevo, Inc. North Dakota, the plant delivered 18 million gallons of low carbon ethanol, plus 16 thousand tons of dry distillers grains, 51 thousand tons of modified distillers grains, and 5 million pounds of corn oil co-products. This was even better than expected as a result of our continued focus on operational excellence. The team remains focused on executing the debottlenecking and asset reliability projects that are expected to unlock incremental volumes and expand margins. During a planned shutdown in April, we succeeded in making the process tie-ins we need for these improvements. We believe we will not need any additional or unplanned outages to complete and commission the debottlenecking. That is great because we can start adding long-term production capacity without sacrificing our short-term volume this year. We are currently in construction of a new fermenter, liquefaction tank, beer degassing system, and a new milling building, which are all part of our plans to increase the plant capacity to around 75 million gallons per year of low carbon ethanol starting in 2027. For comparison, the current nameplate capacity is 67 million gallons per year, which we are already exceeding. We budgeted $26 million in capital expenditures this year for the debottlenecking and site improvements, funded by Gevo, Inc. North Dakota operating cash flows, as Oluwagbemileke mentioned, and we continue to expect about that level of capital spend. On our plant expansion from 75 to 150 million gallons a year, we are repurposing much of our work, design, and team from our previous ethanol project that was originally planned for South Dakota. We believe these efforts, while working with our existing network of partners, including Fluid Quip Technologies, will accelerate the expansion. Finally, on ATJ 30, we are on schedule to complete FEL 3, which will bring us to a plus or minus 10% estimate on the capital cost of the project, including the modularization work being done by Praj along with the Gevo, Inc. engineering team in India. Our U.S. engineering team and engineering partners are focused on completing the balance of plant design and integration of the entire project. In summary, we are focused on delivering operational excellence while also positioning our assets to support the next phase of growth. Now I will turn it back to Paul. Paul D. Bloom: Thanks. As you can see, we are in a much stronger position than we were a year ago. We have a solid operating base, a clear path to improving profitability, and multiple opportunities to scale our business in a meaningful and repeatable way. In addition, the conflict in the Middle East has highlighted, among other things, the relative inelasticity of jet fuel supply and demand, underscoring the critical importance of renewable alternatives like SAF. With the expected increase in global demand for jet fuel in the future, Gevo, Inc. has seen increased interest in our SAF and franchise strategy, both in our carbon management and our anticipated ability to supplement regional supply with our modular approach to deploying alcohol-to-jet capacity. Let me finish by saying our focus is clear. First, expand our cash-generating business. Second, secure a durable capital structure. Third, deliver our first commercial-scale SAF project. And lastly, build a repeatable platform for growth. With that, I will turn it back over to the operator to take your questions. Thank you. Operator: We will now open the call for questions. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first question comes from Amit Dayal from H.C. Wainwright. Please go ahead. Amit Dayal: Thank you. Good afternoon, everyone. Thank you for taking my questions. Good to see all the progress, Paul. On the debottlenecking front, should we assume that the impact from these efforts will reflect in the financials in 2027? Paul D. Bloom: Hi, Amit. Thanks for the question. Yes, that is the plan here because, like Unknown Speaker mentioned, we have already got the tie-ins done for the expansion. We are working on that construction today. That will be done at the end of the year, so that should immediately start in 2027 in Q1 to start delivering that extra 10% to 15% that we are talking about compared to where we end the year. Amit Dayal: Understood. Thank you for that. And with the efforts with Ara, does that require any capital commitment from you, or will that also be project finance? I am just trying to think through whether that puts any burden on the balance sheet or whether you have optionality to fund that through project financing and outside sources. Oluwagbemileke Agiri: Thanks for the question. High level, we are going to arrange project-level debt to complete the capital stack. So the combination of cash that we have on hand with capital from Ara Energy completes all the capital we need to complete that expansion project. Paul D. Bloom: Yes, we were really excited about that, Amit, to say we found what we think is a really good partner in Ara Energy. We are looking forward to getting that finalized so we can get started because the clock is ticking, and we want to get that done as soon as possible. Like we mentioned, we have a timeline of 18 to 24 months to get that completed, and that effectively doubles what we have at Gevo, Inc. North Dakota. That is a pretty exciting project for us, and we just cannot go fast enough. Amit Dayal: On that front, Paul, can we assume that if everything closes in a timely manner, work on the buildout starts this year in 2026 itself? Paul D. Bloom: Absolutely. We have already started to work on this project because, Amit, we had a lot of the team working on ethanol plant design back when we had the South Dakota greenfield plant. We have done a lot already, so we are repurposing the team. Unknown Speaker mentioned we are already working with Fluid Quip, for example. So we have already started. How do we get this done? What does that engineering look like on site? We started talking about that right after we got the acquisition done of the Red Trail assets, now Gevo, Inc. North Dakota. So this has been in the works and in the planning for some time, and we are ready to hit the ground running. Amit Dayal: That is good to hear. Just last question. Did not hear too much about Verity. Just wondering how that is progressing and if you are seeing traction with potential customers on that front? Paul D. Bloom: Sure. Thanks for the question on Verity. We love Verity. Verity has become part of our core franchise business for one because if you look at a bottle of Jet A and a bottle of SAF, they look the same because the molecules are essentially identical. The only difference is how we got there: what was the source of the feedstock, how we produced it, and the carbon intensity score, and customers want that proof. So as we build out our business, we will have Verity inside everything that we are doing, whether it is low carbon ethanol or on the SAF side. On Verity specifically, we have more customers. We had a couple of partnerships that we announced over the past few months. One was with Bushel, who basically services about 50% of the grain elevators in the United States and Canada. We think that is a really good way to take Verity and combine it with another software platform and get out to the market faster. We have also been working with a company called Cboe, and Cboe really helps with data acquisition, boots on the ground. We have signed up 8 customers so far. We are really excited about this. The one thing that we need to still see for Verity—because we designed this to take the benefits from the field to the fleet, or the field to the seat on the aircraft—is ag benefits, the 45Z ag benefits specifically included into 45Z. We have been waiting for that. We think we are getting closer, but we really need to see that, and I think that is a catalyst for Verity to really take off and grow in the marketplace because we have a tool that was designed to do that. Amit Dayal: Understood. Thank you, Paul. That is all I have. I will step back in the queue. Paul D. Bloom: Great. Thanks. Operator: Your next question comes from Jeffrey Grampp from Northland Capital Markets. Please go ahead. Jeffrey Grampp: Afternoon, guys. I am curious, with respect to the project finance opportunities for both the expansion project and ATJ, given that the timelines could potentially coincide a bit, are you evaluating perhaps a single source of capital for both projects? Does it make sense to have varying capital for different projects? Just curious how you are evaluating funding since it seems like there is perhaps some overlap. Oluwagbemileke Agiri: Thanks for the question. High level, we are evaluating all executable project financing plans, and some of the current project capital providers that we are talking to have expressed appetite in both projects. At the end of the day, we have a decision to make in terms of how we prioritize the capital providers that optimize our return for each of the various projects we have in front of us. We are really excited about the opportunities and the engagement that we have so far. Stay tuned. We will be sharing more definitively in terms of what those selection criteria are and the parties that we are going to be developing those projects with, especially ATJ 30, in due course. Paul D. Bloom: Thanks, Oluwagbemileke. Just to add on to that, Jeff, one of the things that we want to make sure of is we go as fast as we can on these projects. Making sure that we have the right options, whether they are together or independent, could change timelines on some things. Like we said, we are looking at all the options and are really excited and happy about the response that we have at this point. Jeffrey Grampp: For my follow-up, somewhat related to the financing but more specific to ATJ. It sounds like you have half the offtake in place and you are working on additional offtake. Is it safe to assume that is a prerequisite to closing anything on that side? And are there any other major obstacles or negotiating points outside of the offtake beyond just normal terms and conditions? Paul D. Bloom: The offtakes are the major gating item that we are still working through here, Jeff. We are focusing on delivering those bankable contracts that everybody is comfortable with on the financing side. We are pretty far along. We just need to finish up a few things that are at the term sheet stage. We will get that completed here, hopefully in the near future. I do not want to have everything under contract either for the ATJ 30 project. Project NorthStar we believe is going to be very accretive, and we want to make sure that we have some free to sell in the market so we can be opportunistic with those sales because who knows what those carbon values and jet fuel prices are going to be in the future. We will get enough to get where we need to be for the financing and go from there. Jeffrey Grampp: Understood. If I can sneak one more in related to that last point, what is that right mix? I understand there is not a single right number, but what kind of spot exposure makes sense for you? Oluwagbemileke Agiri: Ideally, you effectively do the math to understand what amount of contracted offtakes underpin the investments from our capital providers. It is a negotiation that we are going through. Typically, when you look at capital projects like ours, you see facilities under contracted offtakes somewhere between 70% to 80%. Maybe we will be in that mix. Maybe we can expose our volumes to more spot offtake volumes. That is yet to be determined. Did I address your question? Jeffrey Grampp: Yes, that is perfect. I will turn it back. Thank you, guys. Oluwagbemileke Agiri: Thanks. Operator: Before we proceed, again, if you would like to ask a question and join the queue, simply press star 1. Your next question comes from Derrick Whitfield from Texas Capital. Please go ahead. Derrick Whitfield: Good afternoon all, and congrats on the strong quarter. Paul, I am sure a lot of this was in process with your team before, but you have hit the ground running with this release. Paul D. Bloom: Thanks. We have been busy. It is a busy group. Derrick Whitfield: On the EBITDA Challenge, could you speak to the scale and scope of the program and what it could reasonably yield on the current platform before accounting for debottlenecking and expansion? Paul D. Bloom: Sure thing. We are pretty excited about this. It is focused on getting us to the run-rate of $40 million in adjusted EBITDA per year as soon as possible. We said we are going to do it, and the main thing is: how are we going to do it and measure it? We put process and an initiative in place for all Gevo, Inc. colleagues where we are capturing the metrics of what we are putting in place. It is part of an incentive plan that all employees have to drive EBITDA, not just to that $40 million but well beyond that. Think of this as phase one. It is getting us all to think about how we work, how we do our jobs the most efficient way, and deliver value—whether unlocking revenue, managing our costs, or coming up with better operational projects. We have a whole list already, and that list will continue to grow. I think it will go well beyond the $40 million that we set as a target by the end of the year. If you look at the investor presentation, after $40 million, we will have the debottlenecking. After debottlenecking, we are looking at the terminal for third-party CO2, and then we have the expansion with Ara Energy, and then monetizing that pore space fully. That gets to over $100 million in adjusted EBITDA that we are targeting. Again, think of it as a phased approach. We will continue this challenge. The challenge never ends; it will just go in phases as we work through it. Oluwagbemileke Agiri: One of the key points is we are targeting sustainable EBITDA growth. As we look at cost management, we also look at opportunities for investment to expand margins. Those are aspects that we hope to translate into recurring EBITDA growth and drive shareholder value. Paul D. Bloom: One other thing to reinforce: we have a number of fuel pathways today where we are selling low carbon fuel with the carbon attributes attached in compliance markets as part of our carbon business. Some of those recognize the value of carbon capture and sequestration, or the CCS value; some do not. We have made sure with our sustainability team that we have optionality to sell that value with or without the fuel, and we are getting more approvals. We expect additional approvals this year that should unlock substantial value. That is an example of a revenue unlock that could be quite substantial for us going forward. Derrick Whitfield: Along the same lines, are you seeing opportunities to further improve your ethanol netbacks? Ethanol is, globally, the cheapest octane in the world at present, and the global product markets are exceptionally tight. It seems like there are ways to make more economics just on the brown molecule as well. Paul D. Bloom: Absolutely. A couple of things are going on. We will see where the farm bill gets with E15, but that could increase ethanol demand by 5% just right there if we go to year-round E15. We have also seen other markets that are pulling for export, just extra demand. We see demand growth in Japan as they think about E10 and then moving on to E20. We look at marine markets where there has been a lot of talk and potential expansion. We are going to stay focused on the markets that we service really well because those are great markets for us, and we see new low carbon fuel markets open up. Hawaii just announced a low carbon fuel standard. We have New Mexico that is starting to take shape. The Canadian market is really strong today on their credit pricing and demand, and they are a large importer of U.S. ethanol. We are well positioned to take advantage of that growth. Unknown Speaker: I would add, as we look inside the fence and drive operational excellence, we are very focused on energy consumption—how we can be more energy efficient—and also how we can drive value in our co-product valorization. One project is how we can be even better with our corn oil recovery. Paul D. Bloom: That operational excellence piece is important. The Red Trail assets and the team there have done a phenomenal job over time. We are bringing our team and combining forces now as Gevo, Inc. North Dakota to drive operational excellence. These are not just small incremental amounts. These are step-change kinds of improvements we could see. Corn oil recovery is a big one. As we look at things like D4 RINs, we will see how that continues to drive values for things like distillers corn oil as the D4 RINs in the recently announced RVO have gone up. That is also good for potentially jet fuel in the future because we believe that RVO increase, with SAF anticipated to qualify for a D4, is all moving in the right direction. Derrick Whitfield: With respect to project financing plans, how much of the total project CapEx could you reasonably cover with project financing? And should we think about the cost of financing as, let us call it, 200 to 300 basis points wide of DOE funding? Is that the right way to think about it? Oluwagbemileke Agiri: We are targeting a leverage ratio of around 60% of the total project cost for ATJ 30. That is our target, and our engagement with private capital providers is on that basis. We think that tracks what the market will bear and what we are going to transact. On pricing, what you are triangulating is close to fair. The cost of debt that the DOE brought to us will erode a little bit as we engage with private capital providers. Some of those reasons you know: the subsidized capital and the guarantee structure that DOE had does not exist with other parties, and they have to charge closer to what the market rate is. The range you gave is close to where we might end up. Derrick Whitfield: Fantastic. Great update, guys. Thanks for your time. Operator: There are no further questions at this time. I would now like to turn the call back over to Paul D. Bloom for the closing remarks. Please go ahead. Paul D. Bloom: Thanks again, everybody, for joining us for this quarter’s update. We are really happy with the team’s performance. We are headed strong, and you will see continued focus on our EBITDA growth, which is one of the critical things for us. Stay tuned for more updates on our ATJ 30 financing—Project NorthStar—as we get that done by the end of this year. Again, great quarter. Really pleased with the progress that everybody is making, and thanks for joining us. Operator: Ladies and gentlemen, thank you all for joining. That concludes today’s conference call. All participants may now disconnect. Thank you.
Operator: Thank you for standing by. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the DoubleVerify First Quarter 2026 Earnings Conference Call. [Operator Instructions] I will now turn the call over to Brinlea Johnson, Investor Relations. Please go ahead. Brinlea Johnson: Good afternoon, and welcome to DoubleVerify's First Quarter 2026 Earnings Conference Call. With us today are Mark Zagorski, CEO; and Nicola Allais, CFO. Today's press release with this call may contain forward-looking statements that are subject to inherent risks, uncertainties and changes and reflect our current expectations and information currently available to us, and our actual results could differ materially. For more information, please refer to the risk factors in our recent SEC filings, including our Form 10-Q and Form 10-K. In addition, our discussion today will include references to certain supplemental non-GAAP financial measures and should be considered in addition to and not as a substitute for our GAAP results. Reconciliations to the most comparable GAAP measures are available in today's earnings press release, which is available on our Investor Relations website at ir.doubleverify.com. Also, during the call today, we'll be referring to the slide deck posted on our website. With that, I'll turn it over to Mark. Mark Zagorski: Thanks, Brinlea, and good afternoon, everyone. We delivered strong Q1 results as we continued our solid execution on our product innovation, strategic and financial road maps. In Q1, we achieved 10% year-over-year revenue growth, led by accelerating growth of our social verification and optimization solutions, and we delivered a 31% EBITDA margin, which exceeded expectations, largely due to AI-fueled operational efficiencies. Advertiser growth was positive across all key industry verticals in the quarter as we continue to benefit from our focus on further diversification of customer engagements and ad spend across various client types. We also repurchased $100 million worth of shares year-to-date, reflecting confidence in our business and our commitment to returning capital to shareholders as a core element of our long-term value creation strategy. We expect to deliver a strong 2026 as we successfully execute on our strategic plan to verify the quality, optimize the investment and prove the impact of digital ad impressions across any platform, media or market or advertiser spend. The solid results this quarter were fueled by our core growth catalysts, social activation and measurement products, streaming TV verification and our dynamic suite of solutions that empower advertisers to better navigate the evolving ecosystem of AI advertising platforms and Gen AI content. Across all of these sectors, our incredibly durable value proposition remains tantamount. DV is the independent essential trust layer that marketers rely on to ensure their ad spend is protected from fraud in unsuitable context and most importantly, delivers the highest possible return on investment. And this essential role in the ecosystem continues to expand as new product innovations power our growth flywheel. Let me share a few recent stats that underscore the impact of these investments. Driven by continued success on Meta, social measurement grew 23% year-over-year, a significant acceleration from Q4. Social activation, our fastest-growing solution set, grew 92% year-over-year in Q1, up from 62% in the fourth quarter. Authentic Advantage on YouTube, which combines Scibids AI optimization with prebid filtering and post-bid measurement launched in Q3 last year and is also expanding rapidly. It is now on track to deliver $10 million of expected ACV in 2026. CTV measurement impression volumes also grew, up 28% in the quarter. And our ABS-enabled streaming TV prebid Do-Not-Air List entered general availability in January. With 3 top 15 customers representing hundreds of millions in CTV spend implementing these DV-only streaming TV controls. DV continues to break new ground in the drive towards greater transparency in streaming TV. AI measurement tools like Slop Stopper, which is now available on YouTube and AI agent ID are showing meaningful engagement rates. Our AI Slop Stopper measurement solution for mobile and online video and display is already applied to over 40% of measured impressions, and the prebid tool is being tested by 6 of our largest advertisers. Our midterm goal remains to increase the contribution of social, streaming TV and AI-driven solutions from under 30% of total revenue today to approximately 50%. As we drive this evolution, our mobile and online video and display business remained stable in Q1 with approximately 2/3 of impressions that we engage with delivered on mobile, in-app and mobile web environments. We remain focused on creating a revenue mix that closely aligns with the fastest-growing global digital ad sectors. TV continues to drive new revenue opportunities, distance ourselves from competition and create meaningful margin expansion through AI efficiencies and product innovation. AI solutions, social activation tools and streaming TV quality solutions are positively impacting our customers' ad performance and building a foundation for TAM and market share expansion for DoubleVerify. Shifting focus to the role that AI is playing in the ongoing expansion of our product-led growth cycle, we continue to lean into AI to operate more efficiently, launch products faster and improve margins. And as the emerging AI advertising universe evolves, it is creating new revenue opportunities that expand our TAM as we extend our essential role in this burgeoning environment. Regarding this new environment, we've identified 3 main areas where DV has the largest AI growth opportunities and which we are already seeing traction with customers. First, the Agentic Buying and selling of media, where we are building new products, connecting with and leading the development of the numerous protocols that will help advertisers lean into AI-based buying. Second, we are empowering advertisers to navigate the dynamic AI-impacted advertising landscape as AI cyber fraud and AI content slop becomes prolific. And third, we are digging into the massive potential ad market on LLM chatbots where many of our current advertisers are beginning to deploy their marketing dollars, GIFT had little in the way of transparency and independent measurement. Let me talk briefly about each one of these opportunities. First, we are focused on establishing security and trust in the agentic advertising ecosystem. Trust has always been essential in our industry, and we recently joined the Ad Context Protocol, AdCP, a coalition of ad tech companies established by Agentic Advertising organization to define standards for ad buying and selling by AI agents. According to eMarketer, about 2/3 of ad buyers plan to focus more time on Agentic ad buying this year. While in early days, we are actively engaged to make sure DV is at the forefront of establishing standards that will continue to preserve trust and transparency for its advertisers wherever they choose to deploy their advertising investments. As with all of our engagements, we remain independent and agnostic and the way we operate in the agentic advertising world will be the same with the ability to plug into any agentic protocol from the IAB framework to platform-specific systems that are important to our customers. Second, we are expanding tools to protect ad investments from AI-fueled challenges. We continue to enhance our market-leading suite of AI tools that combat the increasing challenges of navigating AI Slop and avoiding AI cyber fraud. With the launch of DV AI SlopStopper for Social, we've expanded our capability for advertisers to avoid low-quality AI-generated content on YouTube and will broaden our coverage to other walled gardens in the coming quarters. Fueled by malicious AI, cyber fraud continues to become more sophisticated, threatening to challenge the ROI and efficiency gains driven by the positive use of AI. In Q1 2026, DV's fraud web continued to harness AI to fight fraud as AI-powered fraud schemes proliferated at a record pace and became even more sophisticated. AI-powered bot schemes continue to evolve faster than ever with 140% more bot scheme variants emerging in Q1 '26 compared to Q1 '25. In parallel, app-based fraud continues to accelerate dramatically, especially across mobile and CTV, where we have classified over 1,300 apps as fraudulent since the beginning of 2026. Finally, we are focused on capitalizing on the massive potential ad market that AI chatbot marketing will represent. According to eMarketer, ad spend on LLMs is forecasted to grow by over $25 billion by 2029, with ad spend expected to cannibalize over 14% of search spend, a $400 billion market that DV has historically not been able to access. OpenAI recently shared that they expect to generate $100 billion in advertising revenue by 2030, underscoring just how the market may be moving even more rapidly than analysts are predicting. As has been the case for the open web, mobile, streaming and social environments, unbiased independent measurement will play a key role in engendering the advertiser trust needed for this new ecosystem to thrive. While AI platform ad models continue to evolve, advertiser demands remain the same, ensuring ad transactions are trusted and transparent and ads are viewable, brand suitable and delivered to legitimate traffic within authentic content environments. Our enterprise customers and agency platforms have made it clear to us that expanding beyond test budgets in AI environments will require even greater transparency and trust than is present today. We are confident that, as we have shown on social and streaming platforms, our role as an essential trust layer will extend to this new ecosystem, and we are engaged in discussions with several LLMs who are leaning into ad-supported models. As AI drives digital advertising to become more automated, agentic and opaque and as AI Slop becomes the must-avoid content category for advertisers, the need for independent verification, protection and performance measurement has never been greater. Regardless of platform, buying mode or message, DV will be an integral trusted part of the ad equation. Moving to social verification. The social sector remains our fastest-growing business segment and is a core driver of our next phase of growth. No other verification or measurement provider has more innovative solutions for advertisers seeking to protect their spend on social platforms and ensure it performs. Social activation accelerated meaningfully to over 90% year-over-year growth in the first quarter, up from around 60% growth in Q4. This acceleration was driven by continued scaling of our social prebid solutions, elevated by enhanced product capabilities on Meta as well as expanded capabilities across TikTok and YouTube. 87 advertisers have now utilized Meta activation since launch, up from 68 in the fourth quarter with 31 of these customers coming from our top 100 clients. As of the end of the first quarter, our Meta activation product was already at a $12 million annualized run rate. On YouTube, DV Authentic Advantage has seen strong customer adoption. Some of our largest CPG customers have started scaling on the solution, driven by the significant ROI improvements that it delivers. Through the combination of Scibids AI optimization with social prebid filtering and post-bid measurement, DV Authentic Advantage customers have seen their media CPMs decline by as much as 36%, while reach has expanded by 64% and brand suitability integrity remains strong. As with DV's Meta prebid solution, we are just starting to scratch the surface with the impact that Authentic Advantage can have on our customers' business and our growth profile, and we're excited about the significant opportunities ahead for both products. As mentioned previously, our social suite of tools are ramping, and we recently announced the expansion of DV AI verification to include DV's AI Slop Stopper for social. This new industry-leading offering is designed to help advertisers navigate the growing challenges posed by low-quality AI-generated content and safeguard brand reputation across social and video-centric environments, starting with YouTube. DV's AI Slop Stopper for social is another DV tool that empowers advertisers to ensure their brand investment is protected wherever they spend while driving stronger media outcomes. Additionally, in the quarter, we expanded brand suitability coverage across Snapchat's Discover feed format, enabling our advertisers to have complete coverage across Snap Discover Tiles placements. And we recently announced that we achieved Media Rating Council or MRC accreditation for TikTok video viewability, becoming the first measurement vendor to receive the accreditation. As advertising investment continues to grow across video-centric social platforms like TikTok, independent verification plays a critical role in ensuring transparency and accountability. And with accredited measurement informed by tens of trillions of historical ad transactions, advertisers can now evaluate campaign effectiveness with greater confidence and ensure their media investments deliver real value. This milestone underscores our commitment to delivering the highest standards of measurement accuracy and transparency and further demonstrates the company's alignment with the MRC accreditation process as a critical layer of accountability in digital advertising. Turning to streaming TV. We continue to deliver product innovation to address advertiser demand for independent transparency and increasing fraud in streaming environments. Our continued product innovations helped grow CTV measurement volumes by 28% year-over-year this quarter. We've already begun to see solid adoption of ABS Do-Not-Air list from 8 of our largest advertisers as well as strong interest in our authentic streaming TV solution. And in this quarter, we announced that Spectrum Reach became the first partner to join DV's certified transparent streaming program, reinforcing its commitment to secure program level transparency across streaming TV inventory. Spectrum Reach will share key show level data across their programming, including news and live sports, spanning both direct IO and programmatic buying. These insights will be available directly within DV Authentic Streaming TV reporting, giving advertisers verified post-bid visibility into the specific programs their ads ran alongside. By combining real, not implied or aggregated show-level transparency in a privacy-focused way with DV's performance analytics and optimization capabilities, advertisers can now better understand how contextual relevance drives outcomes and make smarter decisions to optimize future streaming investments. This is just the start of our drive to deliver granular unaggregated show-level transparency across all streaming environments, and we are seeing momentum from additional platforms to join our certified transparent streaming program. The results of our innovation leadership are clear. We are growing client engagements and winning deals with new solutions where there aren't any competitors. We work with over 340 advertisers now generating more than $200,000 annually. And our unique solution underscored a 77% greenfield win ratio in Q1, meaning that we're winning deals with solutions in new areas in which there are no competitive incumbents to displace. Investment in innovation continues to be DV's secret sauce to get stickier with our customers, win new deals and gain market share. And AI is enabling us to innovate more efficiently than ever as we continue to expand margins while launching and expanding the tools that cement our role as the essential trust layer for buyers and sellers of digital media. With strong execution in the first quarter, we're leaning hard into AI-powered innovation that will continue to extend our leadership position. Looking ahead to the rest of the year, we remain focused on product development acceleration, partner expansion and market share growth and continued strong margins and cash flow. With that, let me turn the call over to Nicola. Nicola Allais: Thanks, Mark, and good afternoon, everyone. For the first quarter, we achieved 10% year-over-year revenue growth and 31% EBITDA margins. Off the strong start to the year, we are reiterating guidance for the full year. For the first quarter, total revenue was $181 million, representing 10% year-over-year growth. Total advertiser revenue, which includes activation and measurement, represented 90% of total revenue and grew 9% year-over-year, driven by 12% growth in volume or MTM, partially offset by a 4% decline in fees or MTF. Activation revenue grew 6% with ABS representing 53% of activation revenue in the quarter. As of quarter end, over 75% of our top 500 clients were using ABS. Measurement revenue grew 16% year-over-year with social measurement revenue increasing 23% and representing 49% of measurement revenue and international revenue increasing 18% and representing 27% of measurement revenue. Supply side revenue represented 10% of total revenue in the quarter and grew 12% year-over-year. We're driving growth by adding new CTV and digital platform partnerships and by continuing to expand DV solutions on retail media networks. Moving to expenses. In the first quarter, we delivered 82% revenue less cost of sales. Our continued investments and use of AI capabilities are allowing us to scale at a consistently efficient rate even as we measure increasing levels of volume. We delivered $55 million of adjusted EBITDA, representing a 31% margin as compared to 27% margin in Q1 of 2025. Total expenses for product development, sales and marketing and G&A increased 2% as compared to 10% revenue growth. We are showing early signs of the benefit of using AI capabilities to grow through improved productivity across the organization and increased software capitalization related to product development. We are scaling the business more efficiently, which results in increasing EBITDA margins. Stock-based compensation was $24 million in the first quarter, flat to prior year. For the second quarter, we expect stock-based compensation of approximately $25 million to $27 million and weighted average fully diluted shares outstanding of approximately 157 million shares. For the full year, we continue to expect stock-based compensation to range between $102 million to $107 million, a decline year-over-year, reflecting the impact of our updated equity incentive plan that reduced the annual value of equity grants in 2026 by over 40% as compared to 2025. Turning to cash. Year-to-date, we have repurchased 9.8 million shares for $100 million, of which 7.3 million shares were repurchased in the first quarter for approximately $75 million and 2.5 million shares were repurchased in April for approximately $25 million. Year-to-date, the 9.8 million shares we repurchased represent approximately 6% of fiscal year-end 2025 outstanding shares. Net cash from operating activities in the first quarter was $4 million and was impacted by timing of collections and payments at the end of the quarter. For the full year, we expect free cash flow conversion of approximately 60%. We ended the first quarter with approximately $174 million in cash and no long-term debt. Now turning to guidance. For the second quarter of 2026, we expect revenue to range between $199 million and $205 million, representing a year-over-year increase of approximately 7% at the midpoint. As a reminder, we're lapping our 21% growth rate in Q2 of 2025. And we expect adjusted EBITDA to range between $63 million to $67 million, representing a 32% adjusted EBITDA margin at the midpoint. For the full year 2026, we are reiterating our prior guidance. We expect revenue to range between $810 million and $826 million, representing an 8% to 10% year-over-year increase and expect adjusted EBITDA margins of approximately 34%. As discussed on our prior call, incremental growth in 2026 will be driven by 3 product-led growth engines. First, continued adoption of our solutions across social and streaming TV; second, growth from existing enterprise clients scaling our product offering; and third, continued new customer acquisition driven by DV's differentiated products. Our first quarter results demonstrate progress on each growth driver with increasing social activation revenue growth, increased adoption and scaling of new products and a consistently high win rate. Our first quarter results show solid execution. With a clear focus on durable growth and expanding profitability, we're well positioned to continue to deliver long-term shareholder value. And with that, we will open up the line for questions. Operator, please go ahead. Operator: [Operator Instructions] Your first question comes from the line of Matt Swanson with RBC Capital Markets. Matthew Swanson: Congrats on a solid start to the year. I think I'll pick up right where Nicola left off there. So I mean it was a great quarter for social measurement. But I mean, really focusing on that growth opportunity in social activation. Any time you have something with over a 90% growth rate, we should probably start there. Can you just kind of give us an update on how things are trending and kind of how the rollout has been going relative to your expectations with your customers, especially on Meta? Mark Zagorski: Yes. Thanks for the question, Matt. So obviously, we're really pleased with the scale -- scaling and speed of scaling on social activation, which is really being driven by all 3 prongs. The first, as you mentioned, Meta activation and the new Meta prebid tools we have there. The second, growth in YouTube through our Authentic Advantage solution; and third, through TikTok as well, which is -- continues to grow at a really nice pace on the pre-bid side. So our social activation business is really running on all cylinders. And one of the things I think this really underscores is the fact that our solutions are really playing an essential role in the walled gardens. I think there were some questions about whether or not, hey, is DV as powerful or as needed in the walled gardens as it is in the open web. And this -- the growth of this is proving that out. I think it also underscores the power of the prebid and kind of post-bid engine where we can launch prebid solutions where we already have measurement in place, we see a nice catalyst for growth. So it's scaling well. Meta, in particular, now is over 80 clients have engaged with it. Some of our biggest advertisers are now engaged there. We mentioned, I think, in the last call, we wanted to get to a $15 million ARR by the end of '27 -- or '26, I'm sorry, and we're already at $12 million. So like this is growing well. I think it's scaling well. And again, it's definitely being driven by Meta, but it's also that social activation 90% growth number is being supported by our innovations in TikTok and YouTube as well. Matthew Swanson: Great. And then, Nicola, just kind of thinking more on the guidance side. I know over the last couple of years, you've become less exposed to kind of the CPG and retail sectors. But if there's anything from kind of a macro standpoint that you would point out to us? And then just any update on the advertiser who went through the agency change last quarter? Nicola Allais: Yes. So I'll start by saying from a vertical perspective, we spoke a lot about retail and the impact it had on our business for the end of the year. That has normalized as we had expected. We already spoke about it on our last call. And overall, all of our key verticals showed growth in the first quarter of 2026. And we haven't seen material changes across the verticals. If anything, we've been able to diversify further into healthcare and technology, which allows us to not be as reliant on retail and CPG. So it feels more normalized, and it feels that we are continuing to diversify in a way that's going to help to create a more predictable business for us. In terms of macro, if you look at the verticals, I'll address the 2 verticals that I generally mentioned in terms of uncertainty based on what's happening in the macro for us, auto and travel are fairly small verticals. So we're not as exposed to those. And just a general comment on macro. We're obviously not assuming strong tailwinds, but we're assuming an environment that's going to remain fairly stable. Operator: Your next question comes from the line of Brian Pitz with BMO Capital Markets. Brian Pitz: Mark, since I know Slop Stopper is one of your favorite topics, maybe you could give us your latest expectation around penetration rate and maybe thoughts on the future opportunities around this product. And then maybe stepping back more broadly, as AI content continues to proliferate across the Internet, talk about what you're hearing from advertisers in terms of how they're adapting to this changing environment? Are they starting to get more comfortable? Maybe just a little bit more insight. Mark Zagorski: Thanks for the question, Brian. And yes, I love Slop Stopper just because I love saying the name on these calls so much. As we noted in the call, Slop Stopper is now being applied on the measurement side to about 40% of all of our impressions. That's a pretty -- it's probably one of our fastest scaling attach rates for any different category that we've seen. So on the measurement side, it's really being picked up pretty quickly, and that's a great thing. And it also shows to your second part of your question that advertisers are still just trying to figure out how they navigate this world of AI content. And Slop Stopper is built for a specific reason. It's to avoid low-quality, questionable AI content, right? Not all AI content is bad, but there's certainly stuff out there that advertisers want to avoid, and that's what Slop Stopper helps them do. When we think about kind of what's next for that tool, so we launched a prebid Slop Stopper solution on YouTube. We're going to expand that to additional social platforms over the next few quarters. And it's the platforms that -- the social platforms, particularly around video, that are the most kind of challenging for advertisers to try to figure out where they should and shouldn't advertise against. So we see this as, again, another catalyst for higher attach rates for our solution and another catalyst for folks to actually lean into working with DV, maybe even if they're not because it gives them another tool to use to navigate challenging content. And I think the other thing, and as I mentioned in my earlier question, there is -- there's a growing need for our solutions within the walled gardens and not because the content there is particularly better or worse than any other platform, but the content there is becoming really overrun with a good amount of AI content and the advertisers really are looking for tools to help navigate that. So the problems that advertisers saw in the open web are evolving to different types of challenges behind walled gardens. And the great thing is that we've got solutions to address all of them. Operator: Your next question comes from Maria Ripps with Canaccord. Maria Ripps: Mark, you said that you were in discussions with several LLMs regarding sort of verifiying ads on their platforms. Is this the same brand safety stack that you offer today? Or will the agentic ad environment require sort of a fundamentally different product? And how are you thinking about sort of pricing -- sort of structuring pricing models for agentic ads? Mark Zagorski: Thanks for the question, Maria, and it's a really great one. So when we think about what's going on with the ad-supported LLMs, what we've seen so far, even as recently as this week, there's been announcements that OpenAI is embracing third-party ad solutions, right, from demand solutions and creative optimization through companies like Cargo and Pacvue and Smartly. The next step for them, as we've noticed, is really to start looking at measurement and verification. And we're leaning into discussions with lots of different LLMs on that front. And when it comes to kind of what we think about what our solution can do there, it really is to play the same fundamental role that we do in social and in streaming and in display and online video, which is acting as a trust and transparency layer. And that has everything -- has to do with everything from ensuring that ads are viewable and visible by a real human to ensuring that the context where it ends up with is aligned with what that brand and who that brand is and where they want to be. So from a general thesis perspective, the application of our solutions in that environment is pretty much the same. It's building trust between the buyer and the seller. When it comes to the business model around it, we've got lots of different business models when we employ with platforms. But almost all of them are advertiser-paid and they're based on volume of engagement. So as we look at the opportunity within the LLMs, our assumption is that model will extend into there as well, which will be volume-based, advertiser paid based on the scale and level of engagement of that advertiser with the impressions on those platforms. Maria Ripps: Got it. That's very helpful. And then just following up on Slop Stopper. So as we think about the product, do you view it primarily as a retention tool sort of bundled into existing relationships? Or is this a product that can be priced and sold independently? And sort of you just launched it on YouTube, it's coming on other platforms. But sort of what's the realistic time frame for this product to move the needle on revenue either directly or indirectly? Mark Zagorski: Yes. It's another great question. So I think of Slop Stopper really as 2 -- having 2 positive impacts on our business. The first, as you noted, is the retention. It creates greater value in our engagements with our customers by giving them another category of content to have greater transparency on. So for current customers, who already are using our measurement, I think it gives us kind of a stickier, more ingrained relationship. That is always helpful as we go back to renegotiate deals and look at price increases down the road, right? So that's one. The second is it helps with attach rate, right? So it helps advertisers who maybe, for example, aren't using us on Prebid, on YouTube. But now knowing that they can avoid AI slop by using our solution, that drives up attach rates for our solutions there. So I think it has, again, a two-pronged impact the way it currently is structured. A, it helps us retain and grow our relationships with current customers, but it also drives up attach rate. If there's a third aspect as well, it is a differentiator in the market, right? We're -- it is a unique solution for DV that our competitors don't have. It allows us to win deals on a greater scale than we would if we didn't have it. So there's a direct impact to kind of the new customers that we are able to bring on as well. I think we're already seeing -- and so the last part of your question is like when does it create a financial impact in the business. I think we're already starting to see that a little bit. When you see kind of our measurement growing at 16%, which is a great rate for us there. When you see our social activation growing, which -- of which AI Slop Stopper is part of social activation growing at 92%. Those numbers are fueled by features like this, which are unique to DV, which drive attach and create new customer engagements. Operator: Your next question comes from the line of Andrew Marok with Raymond James. Andrew Marok: Maybe just one for me on the chatbot surface again. Obviously, we've seen OpenAI kind of evolve its offering from a CPM to a CPC over time. And of course, nothing is finished yet. But from the architecture of the chatbot ad offering itself, is there anything that they could do that would be more or less advantageous for you to partner with? Are there any kind of structures that you kind of hope that they might lean toward? Mark Zagorski: Thanks for the question, Andrew. You made some great points. The first is that the model is evolving, and it's evolving very quickly, right, as both advertisers experiment and as the LLMs experiment with advertising, right? So they're changing pretty quickly. The current setup of the structures actually lean very well into what we do very well, which is analyzing content and context that's text-based at scale very rapidly. So the way that the engagements are set with consumers, the predominant nature of how consumers engage with those chatbots falls kind of very nicely into what DV has done for the last 15 years, which is analyze advertising in contextual or text environments. So that current structure actually fits well to what we do. Our experience working with walled gardens and getting real-time feeds of content, whether it's from folks like TikTok or others, gives us kind of a really strong legacy to build upon, to be able to analyze the ads in those environments. So I guess that's a long way of saying we're pretty flexible. We've built for many different types of systems from video systems to short-form video systems to text-based open web engagements. So the way that ChatGPT or any of the platforms are set up today are relatively easily engaged with our current system and our current classification system based on what we've done in the past. So we are ready. We've built for very challenging environments before, real-time environments, unique environments based on an individual engagement. And I don't think this is going to be a significant lift for us to move beyond that. Operator: Your next question comes from the line of Matthew Condon with Citizens. Unknown Analyst: This is [ Briana ] on for Matthew Condon. Just a question. You've raised the Authentic Advantage on YouTube ACV to $10 million from $8 million last quarter and then Meta activation, I think it was now $12 million versus $8 million prior. Just can you help us understand the incremental growth you're seeing within these 2 products? How much is it coming from new advertisers? Or is it more so the existing advertisers ramping spend? Mark Zagorski: So it's a combination of both. So it's current DV advertisers that we've upsold to this solution launching and the previous advertisers who we brought on board actually scaling. As we've noted, we went from high 60s number of engagements to 80-plus now. So we've got new customers scaling the solution on Meta Prebid. The same kind of scaling is happening on Authentic Advantage. So it is a combination of both. What we love about it is once advertisers get engaged, they really do stay sticky and scale with us over time. And we've got a handful of our largest advertisers kind of growing at very solid rates across both Meta and Authentic Advantage. I mean when you get a 90% growth rate on something like social activation, it's going to be fueled not just by new customers, but by current customers really starting to scale their business, and that's what we're seeing here. Unknown Analyst: Got it. That's helpful. And then just on the social side, activation grew 92%. Just on activation revenue, it slowed to 6% from the 4Q number. Just can you help unpack what's going on within that line item? Nicola Allais: Yes. So activation for the quarter was up 6%, which equates to the growth that we had in the fourth quarter of last year. Mark spoke of the social activation growth, which is a high percentage on a smaller base. The rest of the business, as we said in our remarks, has remained fairly steady in the first quarter, and the majority of that business would be driven by mobile and online video and display business. Now we are obviously focused on being able to verify and continuing to grow where the advertisers are spending. And so tied to that growth that you see on social activation is the social measurement growth of 23%. Those are the vectors that we're focused on so that we're able to continue to verify wherever the advertiser is spending. Operator: Your next question comes from the line of Mark Murphy with JPMorgan. Mark Murphy: I'll add my congrats. Interested in behaviorally, what are you seeing out of the group of 6 or 7 of the large retail and CPG companies that had started to drag on your growth rates. I think that was about 1.5 years ago. And with the understanding, obviously, you would have lapped that slowdown. Is there any signaling from those companies relating to their own internals or how they're coping with commodity prices or consumer spending trends? I'm just wondering if you see any kind of different behavior there? And I have a quick follow-up. Nicola Allais: Mark, we're not seeing any different behavior than the overall vertical, right, for both CPG and retail. And as I said earlier, Retail, in particular, we've sort of seen the spend patterns normalize after the end of last year, which is a positive for us. And then in general, across the verticals, basically all of our key verticals showed growth in the first quarter. So the performance we had was spread. We are diversifying away from CPG and retail because we have large clients that are scaling, especially in healthcare and technology. And so as much as we can diversify as a result of us signing larger brands in different verticals, that obviously helps the business. But to go back to the initial part of your question, what we saw in Q1 is more of a normalized pattern of spend for CPG and retail. Mark Murphy: Okay. That's encouraging. So my other question is coming back to the prospect of working with the LLM providers, whether it's OpenAI or Perplexity or someone else. I'm curious when you think might be the earliest opportunity for some of those ads to maybe run in scale where they could conceivably be measured and verified in a way that would start to contribute noticeably. And then -- and also, is the push to do this coming more from the LLM providers themselves? Or do you think it's coming more from the brand advertisers? Mark Zagorski: Yes. Mark, it's a great question. Things are moving very rapidly on the LLMs with regard to advertising. We've mentioned in the last call and this call that our advertisers are more than excited to test them out, but to scale budgets, and they've been very clear with us and their agent has been clear with us to scale budgets, they've let the platforms know that they're going to need third-party measurement, they're going to need more transparency and more verification. So the drive to kind of integrate into the platforms is really coming from our partners and the brands who want the same level of transparency, the same level of currency-type measurement on the LLMs that they get everywhere else. I mean, on Meta, on YouTube, on TikTok, on the open web, on streaming, they get that kind of agnostic verification and they're demanding it on the LLM. So things are evolving rapidly there. We saw this week that ChatGPT and OpenAI opened their ad platform to numerous third parties to buy -- to allow for buying and creative optimization on those platforms. So it's clear that they're definitely embracing the marketplace. They're embracing third parties to come in and help build that business. And when you throw a number out there like $100 billion by 2030 in ad revenue, they're going to need partners to do that. So we're very positive and bullish on the opportunity. It certainly hasn't materialized yet, and we've been very clear on that, but we do believe that if we can use history as a guide with what's happened with social with us and streaming and mobile, et cetera, that we think this will be a great opportunity for DV down the road. Operator: Your next question comes from the line of Tim Nollen with SSR. Timothy Nollen: Could I switch topics to CTV? Actually, you've had an announcement or 2 during the quarter. And I'm just curious, what are you bringing to TV measurement to CTV that is new and different versus what has existed thus far? And I'm using the term measurement loosely, there's a lot of new ways to measure TV. I'm just curious what is the opportunity for DV in a much more complicated TV market these days than it used to be. And just relatedly, you mentioned MTMs for CTV were up 28%, I think, in the quarter. Could you just put that in a bit of context for us? I assume that's accelerating on the new products and kind of where is that trending for the rest of the year? Mark Zagorski: Yes, Tim, thanks for the question. We've said that of our -- we've got 3 pillars we're focused on for growth: social, AI, which we spend a lot of time on, but streaming is incredibly important to us as well. Impression growth last quarter was up 28%. And it was driven by higher attach rates for some of our new solutions. So the launch of verified streaming TV, which gives advertisers the ability to actually measure and ensure that their ads are being delivered on a high-quality full episode player, not on an outstream or embedded video someplace that it is a truly streaming TV environment. That is gaining traction and driving attach rates up on the post-bid measurement part of our business. We've also seen with our tools like the automated do not air list which allow advertisers to create dynamic exclusion lists of programming that they don't want to be around. Our attach rate has almost tripled for that across our prebid solutions on specific DSPs. So we've seen attach rates grow, which drives prebid. We've seen -- and when prebid attach grows, post-bid attach measurement grows as well. And I think it's because that advertisers have been demanding more transparency on CTV, right? Believe it or not, they probably get less granular verification data on CTV than they get on social or even on like short-form video and YouTube. So I think our solutions are starting to touch a nerve with advertisers. It's driving up attach rates. And it's increasing, obviously, the number of impressions that we're measuring across streaming TV as well. This is all good for us. Attach rates mean more money on how people are using our solutions more. Nicola Allais: Yes. And Tim, on your question for the volume of impressions. So yes, it grew 28% in the first quarter, and we do expect that to continue to outpace the overall revenue growth of the company just because it is the area that is growing. So we do expect that to continue. Timothy Nollen: Okay. And just a quick follow-up. When you're talking about -- I use the term CTV again kind of loosely, but -- and you mentioned streaming, Mark, are you specifying this from video that you've been measuring on -- in other areas like in social? Mark Zagorski: Yes. CTV, we designate as something that actually ends up on a large player in a living room. Streaming TV includes CTV, but includes high-quality branded entertainment that may end up, for example, on a mobile device or a tablet, but it's Hulu. It's not a TikTok video. It's Paramount. It's not a reel. That's different. So streaming TV, think of it includes all high-quality TV. CTV includes stuff that ends up in your living room on a big screen. Operator: Your next question comes from the line of Youssef Squali with Truist. Robert Zeller: This is Rob on for Youssef. On the gross margin expansion due to AI, I'm just curious if we could unpack that. And then is this the new norm for 2026? Or are you still targeting the 80%? And then I'm just curious on the drivers behind the sequential trend in large advertising customers and ARPU for that as well. Nicola Allais: Yes. So on the gross margin, we achieved 82% in the quarter. And the way we're able to do that is that we are using AI tools to essentially allow us to verify and classify content a lot more efficiently. And our expectation is that even though the volume of impressions that we measure will continue to grow, we'll be able to maintain a healthy gross margin. Whether it's 80% or 82%, it's going to depend a little bit on the volume that comes from the new batch of verification that we will have to do, including on the AI platforms. So it's hard to say. But one thing is certain is that we will be able to continue to remain efficient as the volumes grow. And so 80% is a safe benchmark, and it's a very healthy benchmark. And then on the other question, which was trending on large advertisers, what we're seeing -- and we called this out in the last call, which is the average dollars per client for the top 100 is continuing to grow year-over-year. We look at that on an annual basis, but it is certain that our large advertisers are being upsold to the new solutions and are part of the growth rates that we mentioned on social activation. So the ARPU is growing as we're able to offer them new products, especially on social and soon on CTV. Operator: Your final question comes from the line of Justin Patterson with KeyBanc Capital Markets. Jacob Armstrong: This is Jacob on for Justin. I guess kind of hitting on that last point about how you're using AI internally on classification. Can you talk about maybe some of the areas that DoubleVerify is using AI internally in terms of ramping engineer productivity and maybe how you're keeping that -- keeping a scaling token costs in mind while kind of ramping adoption internally these tools? Mark Zagorski: Yes. Thanks for the question, Jacob. We look at obviously, 2 large buckets of how we are leveraging AI. First is in kind of internal execution where we focus on efficiency and effectiveness and better client engagement. And the second major bucket is kind of the AI product development, which we've talked about a lot on this call. When it comes to kind of internal AI execution, we are focused really on agentic development and using agents to create code. So far, we've seen 40% faster software development. We're triaging IT tickets at rates we've never seen before. And it's allowed us to, as we've said before, maintain a headcount that will continue to show efficiencies over the coming year. So, a, just in general, engineering operations, we've been able to balance the cost of tokens with kind of the impact on it. And we look at everything from an ROI perspective when we lean in on using AI. You also mentioned core classification. And we've been using that to help our core systems kind of do what they do much faster. It's increased our productivity by 4x in classification. We're driving labeling, what we do when we label content by about 2,000x faster. And we've been very clear that we've got a decent number of contractors that have been helping us with the labeling and feeding our models. That number of contractors will be reduced by over 100 by the end of the year. So we're seeing efficiencies by using AI and an engineering team across core classification. And eventually, we're going to see this with client interaction as well as we start moving towards more natural language interfaces that enable better client interactions with less client service engagement and overhead. So it's a big impact on our operations. That's why we're seeing not only increasing margins, but faster go-to-market with product and more efficient client engagements. Operator: I will now turn the call back over to management for closing remarks. Mark Zagorski: Thank you all for joining us this evening. As we look ahead, we remain confident in the performance of our business and our priorities are clear: deepen adoption of the core products with core customers, accelerate the growth of our solutions for social, streaming TV and AI and drive industry-leading margins by leveraging the power of AI. We appreciate your continued support and look forward to connecting with many of you at upcoming conferences. Operator: Ladies and gentlemen, that concludes today's conference call. Thank you all for joining. You may now disconnect.
Operator: Good day and welcome to the Myomo, Inc. First Quarter 2026 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Bruce Voss of Alliance Advisors. Please go ahead. Bruce Voss: Thank you and good afternoon, everybody. This is Bruce Voss with Alliance Advisors IR. Welcome to the Myomo, Inc. First Quarter 2026 Financial Results Conference Call. With me on today's call are Myomo, Inc.'s Chief Executive Officer, Paul R. Gudonis, and Chief Financial Officer, David A. Henry. Before we begin, I would like to caution listeners that statements made during this call by management other than historical facts are forward-looking statements. The words anticipate, believe, estimate, expect, intend, guidance, outlook, confidence, target, project and other similar expressions are typically used to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and may involve and are subject to risks, uncertainties and other factors that may affect Myomo, Inc.'s business, financial condition and operating results. These risks, uncertainties and other factors are discussed in Myomo, Inc.'s filings with the Securities and Exchange Commission. Actual outcomes and results may differ materially from what is expressed in or implied by these forward-looking statements. Furthermore, except as required by law, Myomo, Inc. undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call today, 05/07/2026. Now it is my pleasure to turn the call over to Myomo, Inc.'s CEO, Paul. Paul, please go ahead. Paul R. Gudonis: Thanks, Bruce. Well, good afternoon, and thank you all for joining us today. We remain very excited about the opportunity in front of us to improve lives and grow our company. Chronic upper-limb paralysis is an underserved medical condition and each year stroke leaves hundreds of thousands of Americans with long-lasting arm impairments. When you add in spinal cord injury, traumatic brain injury and brachial plexus injuries, the addressable U.S. population reaches into the millions, and globally millions more. For most of these patients, the standard of care has been a passive brace, ongoing physical therapy with diminishing returns, or resignation to permanent loss of function. Our MyoPro is the only commercially available powered arm orthosis in the U.S. that uses non-invasive EMD sensors to detect the patient's own muscle signals and amplify them into functional movement, thereby permitting paralyzed individuals to feed themselves, carry objects, return to work, and reclaim independence at home. It is not an incremental improvement on existing care. It is really an entirely different category of device and Myomo, Inc. owns it. Let me start with a quick real-life story. Our staff just helped Mike, who lost the use of his right arm due to a brachial plexus injury from a motorcycle accident when he was just 17 years old, and now some 50 years later, he is using both arms again with the help of a MyoPro, carrying objects safely around his home and doing household tasks such as mowing his lawn. Our MyoPro has improved the quality of life for Mike and for his wife, reducing the burden of care from his impairment, and that is what this is all about. Several positive factors are converging right now to drive Myomo, Inc.'s success: reimbursement, distribution, and technology. Reimbursement by CMS and a new Medicare Part B benefit category with HCPCS codes for the MyoPro have opened access to the Medicare population of tens of millions and removed the single largest historical barrier to adoption. New clinical studies and in-network contracts with a growing number of commercial payers have significantly increased market access for patients covered by these plans. We are transitioning our go-to-market strategy with a distribution system based on recurring patient sources from rehab hospitals and O&P providers to reduce our customer acquisition costs and to build the foundation for accelerated growth going forward. And our investments in technology are increasing the value to patients and clinicians while reducing our operating costs as we scale the business to sustain profitability. Earlier this year, we established four success pillars for 2026: recurring revenue, market access, operating leverage, and innovation, with strong progress against each. First quarter revenue and profitability exceeded our targets. To measure our progress against these four success pillars, let us review each of them. Number one, the shift to recurring patient sources. We launched the MyoConnect program in mid-2025 to encourage therapists and physicians at rehab hospitals, stroke clinics, and other healthcare facilities to refer prospective MyoPro patients to us or to a local O&P partner. These channels not only provide recurring referrals but they also carry lower acquisition costs and higher conversion rates versus direct-to-patient marketing. With Medicare coverage in place and the new MyoPro 2X introduced last year, it was the right time to bring the benefits of the MyoPro to the incidence population of patients who are currently in outpatient therapy, expanding our target market beyond individuals with chronic arm paralysis and the large prevalence population. We reoriented our field clinical team, added sales specialists, and conducted numerous in-service educational sessions at these rehab locations. I am pleased to report that more than 150 rehab facilities are now referring candidates to us. The O&P channel is another source of recurring referrals, and our O&P revenue grew 79% year-over-year as we trained and certified additional CPOs and jointly implemented outreach programs. Earlier this week we announced that we have been working with Autoboc U.S. Clinical Operations to certify them as MyoPro Centers of Excellence, and we recently conducted training for over 20 clinical specialists from around the country, part of their national rollout. Autoboc is the world's largest provider of O&P products and clinical services, and we are very pleased to be working so closely with them. In Germany, we have more than 100 O&P practices working with us to provide the MyoPro to their patients. The insurance environment in Germany is highly favorable and our international revenues reached a Q1 record of approximately $2 million. We continue to expand our sales and clinical staff in Germany and later this month we will be attending the OT World Conference in Leipzig to engage with additional O&P clinics. This conference is the largest O&P event in Europe. As a result of these efforts, we are tracking extremely well against our targets at consistently increasing revenue from recurring patient sources. Pillar number two, the second success pillar, is to increase market access for patients by signing additional payer contracts. As discussed in March, we signed a national arrangement with Elevance, which manages a number of Anthem Blue Cross Blue Shield plans in 27 states including large ones like Texas, Ohio, Virginia, and California. We have been entering into these payer contracts to secure Myomo, Inc. as an in-network provider with case-by-case coverage determinations and an agreed-upon price for the MyoPro. As a result, we are now seeing a significantly higher authorization rate from these Medicare Advantage and commercial plans. Over the next several months, I expect we will sign additional state contracts under the Elevance national arrangements. Since we secured Medicare coverage in April 2024, and added various commercial and Medicare Advantage contracts, we have gone from just 9 million covered lives to 158 million lives currently. Pillar number three is to demonstrate operating leverage and the path to profitability. We demonstrated early operating leverage in the first quarter with revenue up 3% while OpEx was down 1% year-over-year. We also expanded gross margin by 100 basis points, and the combination of these accomplishments resulted in a 20% improvement in adjusted EBITDA. Pillar four is to continue to invest in product development and clinical research. In March, we launched a new mobile app which allows clinicians, patients, and caregivers to use their smartphones to adjust the device settings, display their muscle movements and EMD signals, and collect usage data that can be used by therapists and physicians. The app also eliminates the need to ship a laptop with our proprietary software to each user, reducing our MyoPro material costs by about 10%. You will see this benefit flowing through to gross margin beginning in the second quarter. Another R&D investment is a randomized control trial being conducted by the University of Utah Rehabilitation Hospital. After a successful pilot last year, the university's IRB approved the study, which will compare the outcomes of users with the MyoPro against those who receive the current standard of care of occupational therapy. We have enrolled 18 of the 50 subjects to date and, when completed, and assuming similar results to our pilot last year, this clinical evidence is expected to support increased reimbursement of the MyoPro. Finally, development of the MyoPro 3 next-generation platform is progressing and focused on enhanced functionality and increased processing power to support future software-driven innovations. The progress on each of our four success pillars is tracking with our targets, and we are excited to keep on delivering. On the marketing front, we added a new marketing executive and engaged a new digital ad agency in Q1. As a result, we have refined our marketing strategy with a new approach to digital channels and data-driven targeting. We are also expanding the use of social media to engage directly with healthcare providers and to introduce the MyoPro in geographies with payer contracts. These initiatives are already improving lead quality, which is resulting in more pipeline adds per lead generated and reducing patient acquisition costs. We expect further efficiency gains as these programs scale throughout 2026. With that overview, I will turn the call over to our CFO, David A. Henry, to walk through the financial results in more detail. David A. Henry: Thank you, Paul, and good afternoon, everyone. As Paul just discussed, we have been busy executing against the success pillars we introduced earlier this year, and I am pleased to report on the progress we have made. Our revenue for the first quarter of 2026 was $10.1 million, up 3% versus the prior-year period. The increase was driven by a higher average selling price, or ASP, partially offset by a slightly lower number of revenue units. ASP in the first quarter was $58,800, up 9% versus the prior year due to higher Medicare Part B and Medicare Advantage reimbursement amounts reflecting beginning-of-year fee updates, as well as a positive channel mix, including higher international and Medicare Advantage revenues. We delivered 172 MyoPro revenue units during the quarter. Looking at payer mix, Medicare Part B patients in our direct billing channel represented 51% of revenue in the first quarter, which was down 12% in dollar terms compared with the prior year. Medicare Advantage patients in our direct billing channel represented 19% of first quarter revenue and, in dollar terms, were up 11% compared with the prior-year quarter. As many healthcare providers are seeing, the macro environment for Medicare Advantage plans continues to be challenging. To mitigate the impact, we are focusing on in-network patients obtained through our contracting efforts; early results are showing higher authorization rates compared with non-contracted payers. The direct billing channel represented 71% of revenue in the first quarter compared with 79% in the prior-year quarter. Direct billing revenue declined as we continued transitioning our business toward recurring patient sources. Revenue from recurring patient sources represented 49% of first quarter revenue, up from 25% in the prior year. As you can see, we have made significant progress in shifting toward recurring patient sources at a lower patient acquisition cost compared with advertising-driven direct patient revenues, which carry a much higher cost to acquire. Breaking down the recurring patient sources, approximately 20% of first quarter revenue was generated by direct billing referrals, another 20% was generated by the international channel, 8% from the U.S. O&P channel, and the rest was from VA payers. International revenue was up 53% year-over-year and the U.S. O&P channel was up 79% year-over-year. As of 03/31/2026, the pipeline stood at 1,680 patients, an increase of 10% sequentially and 13% year-over-year. During the first quarter, we added 723 patients to the pipeline, which is up 7% sequentially and 3% year-over-year. 11% of first quarter pipeline adds were generated from direct billing referrals, demonstrating the traction so far with the MyoConnect program. 62% of first quarter revenue units were from intra-quarter fulfillments, which is up from 45% of revenue units a year ago and demonstrates our increased velocity in fulfilling orders. 16% of first quarter orders came from direct billing referrals. We exited the quarter with a backlog of 226 patients. Gross margin for the first quarter of 2026 was 68.2%, up from 67.2% a year ago, driven by a higher ASP and material cost reductions, partially offset by higher labor and travel costs needed to fit patients on-site. Operating expenses for the first quarter of 2026 were $10.1 million, down 1% over the prior-year quarter. The decrease was driven primarily by lower R&D and G&A expenses, partially offset by higher sales, clinical, and marketing expenses. Operating loss for the first quarter of 2026 was $3.2 million, which narrowed from an operating loss of $3.5 million in the prior-year quarter. Adjusted EBITDA for the first quarter of 2026 was a negative $2.3 million compared with a negative $2.8 million in the prior-year quarter. The improvement was driven by the lower operating loss I just mentioned and higher add-backs for depreciation expense and stock-based compensation. First quarter non-operating income includes a mark-to-market gain from the change in fair value of derivative liabilities, partially offset by cash and non-cash interest expense through the Avenue Capital term loan. Net loss for the first quarter of 2026 was $3.0 million, or $0.07 per share. This compares with a net loss of $3.5 million, or $0.08 per share, in the prior-year quarter. Turning now to our balance sheet and cash flow. As of 03/31/2026, cash, cash equivalents and short-term investments were $15.7 million. Reflective of the improvement in adjusted EBITDA, our use of cash was $2.7 million in the first quarter compared with $3.2 million used in the first quarter of 2025. Let me conclude my remarks with our forward-looking guidance. As you just heard, we are making tremendous progress on our 2026 objectives. In the first quarter, we achieved higher year-over-year revenue, improved gross margin, and lower operating expenses, resulting in improved adjusted EBITDA. Our transition of the business toward recurring patient sources is running ahead of plan. In addition, the marketing changes we initiated are beginning to take effect. As a result, we expect second quarter revenue to be in the range of $10.3 million to $10.8 million, which is up 7% to 12% year-over-year and up 2% to 7% sequentially. We expect gross margin in the second quarter to be higher year-over-year but lower sequentially due primarily to channel mix. We expect operating expenses to increase slightly versus the first quarter, reflecting a modest increase in advertising spending. For the full year, we are reiterating our revenue guidance in the range of $43 million to $46 million, and we reaffirm our full-year operating leverage expectation to limit the growth of operating expenses in 2026 to about one-half the growth of revenue. With that financial overview, I will turn the call back to Paul. Paul R. Gudonis: Thanks, Dave. To summarize, we are keenly focused on implementing our four success pillars to grow MyoPro volume and revenues while improving key financial metrics including gross margin, adjusted EBITDA, and cash usage. Our technology is making a dramatic difference in the lives of patients who are suffering with chronic arm paralysis. And now Dave and I are ready to take your questions. Operator? Operator: Thank you. We will now begin the question-and-answer session. If you are using a speakerphone, please pick up your handset before pressing any keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Paul R. Gudonis: While we are waiting for the first question, I would like to mention that in May, we will be participating in the Sidoti Virtual Investor Conference and AGP's Annual Healthcare Company Showcase. And on June 23–24, we will be presenting at the iAccess Alpha Select Virtual Conference and holding one-on-one meetings with investors. Operator, let us take the first question whenever you are ready. Operator: Our first question comes from Chase Richard Knickerbocker of Craig-Hallum. Please go ahead. Chase Richard Knickerbocker: Good afternoon. Thanks for taking the questions. Maybe just first on the ASP increase, could you go into a little bit more detail as far as what drove that as far as the mix specifically that you were referring to and the drivers within that mix, higher or lower within ASP? And then how sustainable is that? How should we be thinking about ASP sequentially through the year? Thanks. David A. Henry: Yeah, sure. So the ASP was $58,800. The increase was due in part to the fee increase that happens at the beginning of every year with CMS. That also affected the Medicare Advantage payers as well. So both Medicare and Medicare Advantage—those were about 70% of revenues in the first quarter—and those were all subject to that fee increase. Also, in international revenues we get some foreign currency benefit from that. So international is our second largest channel in terms of both revenues and ASP, and they were 20% of revenue. So those are the reasons why. And then in terms of sustainability, I do expect that the ASP will come down a bit through the channel mix in the second quarter, and I think it is still prudent to assume maybe around, you know, $55,000 ASP on a more longer-term basis. Chase Richard Knickerbocker: Understood. Maybe just on the advertising side, can you break down what the percentage benefit was in the quarter from MyoConnect? Was the majority of that decrease in cost per pipeline add driven by MyoConnect, or were there some improvements that you are seeing on the digital marketing side? David A. Henry: Just in terms of the metrics, you know, 11% of the pipeline adds in the quarter were MyoConnect, and those come at a low cost per pipeline add because we are not advertising to get those. So that is a big part of it, plus just some of the efficiencies we are seeing. As Paul mentioned, we are seeing a lower cost or more pipeline adds per lead that we are generating through some of these efforts that we are making. Paul R. Gudonis: Yeah. We are finding that the quality of the leads, which was an issue a year ago, Chase, has really turned around. Now we are getting more of the leads that are generating; we are engaging with those patients, and they are medically qualified, they are moving into the pipeline. We redid our TV advertising as well with a new 120 seconds slot, and that has paid off really well—a good cost per call—and the patients who see that, or their caregivers, are really engaged. Those couple factors have reduced our cost per pipeline add. Chase Richard Knickerbocker: And you had mentioned ramping some of the marketing spend as we go through the year here into Q2. Is that driven by seeing some improvement on that side of things? Or maybe talk me through the drivers behind that reinvestment? David A. Henry: Yeah, I would say that is the case. And it is also something that we do typically every year. Second and third quarters are typically our highest spending for advertising, then it comes back down again in the fourth quarter just because of the inefficiencies that happen in the fourth quarter. Paul R. Gudonis: But also due to the revenue cycle, which could be four to six months or longer depending on the patient's insurance. Advertising now builds a good pipeline and backlog for Q3 and Q4 revenue. Chase Richard Knickerbocker: And then just last for me. Guidance assumes a step up in growth in the second half. Guidance was reiterated; the mix on a quarter basis was a little bit different than what we expected. Can you walk us through what the top end of your guidance assumes and the bottom end, as far as the moving pieces and the assumptions in there? Thank you. David A. Henry: I think the top end of the guidance would reflect more from the direct billing channel, particularly as it relates to more on the referrals side of things. MyoConnect, I think, is probably the biggest swing factor in terms of our guidance. Good news and good traction with that—which so far we are seeing—would lead us to trend toward the higher end of our guidance. If for some reason some of those results were to begin to flatten out or go down, that would drive us toward the lower end of our guided range. Chase Richard Knickerbocker: Understood. Thank you. Operator: Our next question comes from Edward Wu of Ascendiant Capital. Please go ahead. Edward Wu: Yes. Congratulations on the quarter. My question is on international. Once again, you had another very strong quarter, very good growth, record revenue. How much potential can the German market have, and is there ability to accelerate the growth near term? Paul R. Gudonis: Well, you look at the German market, over 80 million population compared to, let us say, 330 million here in the U.S., so it is about 25% to 30% of the total size of the U.S. market. So you can see that there is definitely upside potential there. Also, as we have seen, because of the statutory health insurance and social court rulings over there, we are getting good traction with the insurance companies there. So that is why we are continuing to add resources, which is the way to grow that German business. I will be there later this month in Leipzig, Germany for the OT World Conference to recruit more O&P providers. We will also start looking at some other international markets. Edward Wu: That sounds good. You mentioned other international. I know you previously have said that the German market was kind of unique. Other European markets, or would it be possibly markets in other areas? And any updates on the Chinese market? Paul R. Gudonis: Well, probably the other European markets where we can get the reimbursement relatively quickly. So we will be talking to some O&P providers in these other countries to see what they feel about the reimbursement environment. And we always look at where investing another euro is the best place to put it; so far the best return has been in Germany. Also, staying in Europe would help us leverage infrastructure we have over there. In China, we continue conversations with China Lead Ventures, which was one of the major investors in the joint venture. We have had regular conversations to introduce new potential partners, medical device manufacturers and investment partners into the JV, but nothing has been finalized over there as far as the next step with the JV. Edward Wu: And I wish you guys good luck. Thank you. Paul R. Gudonis: Thank you, Ed. Operator: Our next question comes from Jeremy Pearlman of Maxim Group. Please go ahead. Jeremy Pearlman: Thank you for taking my question. Firstly, I want to talk about MyoConnect. You have mentioned that you have roughly 150 rehab facilities that are referring patients currently. How extensive do you think that runway is? How many more rehab clinics are in the pipeline to convert to this MyoConnect? Paul R. Gudonis: Well, we have had tremendous results in just the first nine months, Jeremy, since we started that in mid-2025, and I expect we are going to add new clinics every month. I would love to get to the point where we have several hundred by the end of this year. There are about 1,500 stroke clinics in the United States plus many other major hospitals that treat stroke patients. Then on top of that, we are finding a lot of success with these smaller private rehab clinics. There are therapists out there who have their own clinic, and they are referring MyoPro patients to us. Our goal is to grow the number of rehab facilities to a couple of hundred by the end of the year. We also see what I call same-store sales growth where, after referring that first patient, they will refer a couple of others, and that should grow not only this year but well into next year. And that is why I see we are laying the foundation for accelerated growth next year. Imagine hundreds of these clinics, then growing the number of patients they refer next year, plus new clinics that come online next year as MyoConnect partners, and you have more and more OT providers coming on. We just announced Autobot; they have over 50 locations in the U.S. We just trained 20-some of their clinicians around the country who are going to be spreading the word within their territories. We have other major national accounts lined up for similar type of training going on. Jeremy Pearlman: Okay, that is great. And then just to follow up, you mentioned that you hope this is laying the foundation for accelerated growth. Once they refer the first patient, they will refer more. Is it too early to tell? Have you seen that play out with the rehab clinics that are already in the program—that once they refer the first patient, does that give you confidence that 2027 we could see a big uptick? Paul R. Gudonis: We are starting to see those green shoots. Remember that most of these have just come online, maybe made their first referral in December or January. The patient has to go through the insurance process, has the fit with the device, then goes to that clinic for therapy services, then they see the outcome. It may be six months from the time they make their first referral until they make the second, but I am confident that with the way our device performs for these patients, we will get these ongoing referrals. Jeremy Pearlman: Okay, understood. And then also, related to MyoConnect, do a higher percentage of the patients that are referred through this program convert eventually to the backlog into a paying customer? Or is it similar to your legacy advertising direct-to-consumer marketing where a certain percentage drops off and then whatever percentage goes through the funnel? Paul R. Gudonis: That is a very good observation because patients are better in two respects. One, we have trained the clinicians that are referring to pre-qualify these patients for us. So they are sending us better quality patients, meaning they are more likely to benefit from MyoPro in terms of their medical qualifications. That is a plus; they are higher quality patients than what comes in from the general advertising. And number two, because these clinicians know that Medicare will cover this, they are sending us a higher percentage of Medicare than in the general population. So it is almost like a double win from these referrals from the MyoConnect program. Jeremy Pearlman: Okay. That is great. I understand. And then just last question. I know you mentioned at last year’s Investor Day a section about adjudicating denied claims. Any follow-up—how has the success rate of that been? Is that steady? Has it been improving? Maybe anything you could talk about there? David A. Henry: Yes, we are continuing to do these ALJ hearings, still running about that same success rate. However, as we mentioned, where we have contracts with these various plans we have a much higher authorization rate right up front, and so you do not even need to go to the hearings. Jeremy Pearlman: Okay. That is great. Thank you for taking my questions. I will hop back in the queue. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Paul for any closing remarks. Paul R. Gudonis: Well, thanks, operator, and thank you all for joining us today and for your questions. We look forward to seeing and hearing from you in the coming months. Thanks again, and have a good evening. Operator: This concludes today's conference call. You may now disconnect your lines. Thank you for participating and have a pleasant day.
Operator: Please stand by. Your program is about to begin. Welcome to the Stabilis Solutions, Inc. first quarter 2026 earnings conference call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions following the presentation. If at any point your question has been answered, you may remove yourself from the queue so that others can hear their questions clearly. We ask that you pick up your handset for best sound quality. Lastly, if you require operator assistance, we would now like to turn our call over to Andrew Lewis Puhala, Chief Financial Officer. Mr. Puhala, please go ahead. Andrew Lewis Puhala: Good morning, and welcome to the Stabilis Solutions, Inc. first quarter 2026 results conference call. I am Andrew Lewis Puhala, Senior Vice President and CFO of Stabilis Solutions, Inc., and joining me today is our Executive Chairman, and Interim President and CEO, J. Casey Crenshaw. We issued a press release after the market closed yesterday detailing our first quarter operational and financial results. This release is publicly available in the Investor Relations section of our corporate website at stabilissolutions.com. Before we begin, I would like to remind everyone that today’s call will contain forward-looking statements within the meaning of the Private Securities Reform Act of 1995 and other securities laws. These forward-looking statements are based on the company’s expectations and beliefs as of today, 05/07/2026. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. The company undertakes no obligation to provide updates or revisions to the forward-looking statements made in today’s call. Additional information concerning factors that could cause those differences is contained in our filings with the SEC and in the press release announcing our results. Investors are cautioned not to place undue reliance on any forward-looking statements. Further, please note that we may refer to certain non-GAAP financial information on today’s call. You can find reconciliations of the non-GAAP financial measures to the most comparable GAAP measures in our earnings press release. Today’s call is being recorded and will be available for replay. With that, I will hand the call over to J. Casey Crenshaw for his remarks. J. Casey Crenshaw: Thank you, Andy, and good morning to everyone joining us today. Our first quarter results reflect the expected transition following the completion of two large multiyear contracts at the end of 2025 that were in our marine and behind-the-meter power generation markets. As anticipated, that created a near-term revenue and earnings headwind in the quarter. At the same time, we continue to see strong demand in the quarter for aerospace and emerging power generation opportunities for additional data center work. While our financial results were soft during the transition period, our commercial activity remains very encouraging. Demand for small-scale LNG and integrated last-mile delivery solutions continued to grow, and our commercial teams are actively engaged with both existing and prospective customers across multiple end markets. Importantly, the contracts already awarded to us combined with our active pipeline of opportunities provide us with increasing visibility into improved performance as we move through the balance of 2026. Based on expected contract startups later this year and advanced commercial discussions underway, we expect results to improve meaningfully in the second half of 2026, even before the expected 2027 startup of the large data center contract we announced earlier this year. As a reminder, the data center award is an estimated $200 million minimum two-year contract to support behind-the-meter power generation for a U.S. data center. While delivery is expected to begin in 2027 and continue through 2029, we view this award as a strong validation of Stabilis Solutions, Inc.’s platform and a meaningful step forward in our participation in the rapidly growing distributed power market. The accelerating demand for behind-the-meter power, bridge power, commissioning support, and durable energy infrastructure is creating a clear need for flexible, reliable LNG solutions. This is where Stabilis Solutions, Inc. is especially well-positioned. Our value proposition is not simply LNG supply; it is the ability to deliver a complete solution, including sourcing, logistics, storage, regasification, and last-mile reliability in environments where customers need dependable energy infrastructure quickly. A key advantage of our model is that we are not limited solely by the capacity of our own liquefaction facilities. Our multi-source LNG supply model allows us to serve customers across regions of the United States by combining our own production assets with third-party supply arrangements, logistics capabilities, and mobile infrastructure. This scalability is critical as we pursue larger opportunities in data center, aerospace, marine markets, and industrial applications. Within the aerospace market, demand remained strong. Activity among commercial space customers continues to grow, and we are seeing increased engagement with current customers as launch activity and LNG requirements expand. We continue to believe aerospace represents a long-term growth opportunity for Stabilis Solutions, Inc., supported by our ability to provide high-purity LNG, reliable delivery, and fit-for-purpose solutions for customers with demanding technical requirements. Turning to our Galveston LNG project, as we announced last month, we elected to terminate an offtake agreement for our proposed Galveston LNG facility. During negotiations with prospective financing partners, we were asked to amend the offtake agreement to facilitate the financing. The customer did not agree to the requested modification and we elected to terminate the agreement. While this development has delayed the project timeline, I want to be clear that we remain committed to pursuing the Galveston LNG project. We are in active discussions with other potential customers to sell the available capacity. We also continue to express support for the project. Galveston LNG remains an important component of our long-term value creation strategy, particularly as we look to serve durable multiyear demand in the Port of Galveston and the broader Gulf Coast marine market. At the same time, it is important to emphasize that the Galveston project is only one part of our growth strategy. We continue to see significant organic growth opportunities across our existing platform, including distributed power for data centers, fuel for aerospace, and LNG for industrial applications. As we look ahead, we believe that 2026 is a temporary low for the business as we move through this transition period and prepare for the ramp-up of new contracts and opportunities beginning in 2026. The demand environment remains strong, our customer engagement is active, and our awarded contracts provide a foundation for recovery in 2026 and substantial growth in 2027. We remain focused on converting current and future demand into sustainable, profitable growth while maintaining financial discipline and creating long-term value for our shareholders. We believe Stabilis Solutions, Inc. is well-positioned across multiple high-growth end markets, and we look forward to updating you on our progress in the quarters ahead. With that, I will turn the call over to Andy for a detailed review of our financial performance. Andrew Lewis Puhala: Thank you, Casey. I will begin with a discussion of our first quarter performance, followed by an update on our balance sheet, cash flow, liquidity, and capital spending. First quarter revenue was $10.4 million, a decrease of approximately 40% compared to 2025. The year-over-year decline was driven primarily by a 41% decrease in LNG gallons sold and lower rental and service revenue, partially offset by a slight increase in the underlying commodity price. At an end-market level, there were no revenues from marine customers during the quarter, and revenues from behind-the-meter power generation were not material due to the completion of the large multiyear contracts late last year. This was partially offset by continued growth in our aerospace and other legacy markets, where revenues increased [inaudible], respectively, compared to 2025. Adjusted EBITDA was negative $700 thousand in the first quarter compared to a positive $2.1 million in the prior-year period. The decrease was primarily attributable to the completion of the two large multiyear contracts. I would also note that our adjusted EBITDA for the first quarter excludes approximately $1.5 million of vessel charter costs incurred during the period. These costs relate to the lease of a non-Jones Act vessel that we entered into in 2025 in anticipation of supporting logistics requirements of our previously completed marine bunkering contract. We are currently working to fully subcharter this vessel. In the interim, we are leasing it back to the lessor at a reduced cost. Until a subcharter agreement is finalized, which we expect during the second quarter, our cost of revenue will continue to reflect these lease expenses, which we expect to exclude from adjusted EBITDA as an extraordinary item. Turning to cash flow and liquidity, cash flow from operations was $12.4 million for the quarter. This included $15 million of advance payments from a customer associated with our behind-the-meter data center contract scheduled to begin in 2027. These payments are restricted to support equipment and other preparations for that project. At quarter end, total liquidity was $17.2 million, consisting of total cash of $13.7 million, of which $10.6 million is restricted, and $3.5 million of availability under our credit agreements. Capital expenditures totaled $5.3 million during the quarter. These expenditures were primarily related to equipment purchases associated with our upcoming large data center project. Looking ahead, we expect to invest an additional $10 million to $12 million in capital for equipment and securing guaranteed supply for this project. We expect these investments to be funded through the advance payments received during the first quarter as well as additional advance payments we expect to receive over the course of the year. That concludes our prepared remarks. We will now open the call for questions. Operator: We will take our first question from an Analyst with Johnson Rice. Analyst: Good morning. The first question I had, I wanted to talk a little bit about the contracts that you are finalizing here that could start up in 2Q, but it sounds like they will definitely impact the second half of this year from behind-the-meter power. Could you talk about the size of those, for the two contracts that were canceled in the fourth quarter last year? And also, with behind-the-meter power, is this going to be a bridge-type arrangement until pipeline is hooked up to these facilities, and then is there the opportunity for backup-related contracts later on? J. Casey Crenshaw: Good morning, and thank you for joining today. Let me try to take on what are really two questions. First, on the type of contract for distributed power, we really talk about that being either commissioning power, bridge power, or more permanent backup related to behind-the-meter applications and distributed power. This is more of a commissioning project, which is normally a six- to twelve-month effort that we anticipate starting up at the end of the second quarter of this year and running through the end of the year. We do anticipate, with the work we have commitments around, being able to replace the contracts that ended at the end of last year during the back half of the year. Without giving too much in the way of forward-looking statements, we anticipate being able to replace that on the P&L, and that is before we get into the contracted demand starting in Q1 of next year, which is meaningful in size as well. Analyst: Great. Thank you. And then just on the Galveston LNG project, it sounds like you are active with discussions with offtakers to replace the canceled contract. Is there the possibility that the previous offtaker would return to sign up for offtake, and also are you satisfied with the provisions of the other offtake agreement contracts you have that they will not need to be modified for project financing purposes? J. Casey Crenshaw: Yes, that is a great question. I will take the last one first. The current offtake agreement we have works well with the project construction timeline and does not create risk on when construction would finish and when startup would happen, so that contract is in good position. Going back to the first question, we highly anticipate this customer that we were required to cancel that contract with coming back and doing business with us in Galveston once we get further down the road or complete the plant. Whether or not they will be part of the offtake that helps create the financing, or they become a spot market client post construction, we do not know yet, but we are actively working with that client. Timelines and the Iran war and different things happening caused delays and issues around dates and how that would affect financing, which created the need to exit that contract. Thank you. Operator: Our next question comes from William Dezellem with Tieton Capital. J. Casey Crenshaw: Good morning, Bill. William Dezellem: Good morning. I would like to talk a little bit more about the new data center contract. If we understood correctly, you said that was a commissioning contract that will begin in Q2 and basically last through Q4. Did we hear that correctly? And if so, was this a contract that you went direct to the data center, or did you have an intermediary that is taking care of all the power and they have hired you? J. Casey Crenshaw: Yes. This particular project you are asking about is more of a construction commissioning project. On all of these projects, we work with both the end user and the provider, and we are normally engaged with both. There are numerous projects like this that I would call construction commissioning, and those are normally, the way we view it, six- to twelve-month contracts depending on whether you are just going to commission Phase One or which systems you are going to work on commissioning. That is what this project is anticipated to be. It is different than the one that is starting up next year, which is more of a bridge power solution, longer in duration. All of these have minimum periods of time with potential extensions related to what is happening on their time schedule, etc. William Dezellem: Is the magnitude of the original commissioning contract’s monthly revenue similar to what you will have for the monthly revenue from the bridge, and it is simply a shorter period of time? Or is there a difference in the size of these two data centers that makes this very different? J. Casey Crenshaw: I would say, when you think about the bridge, it is defined by how many megawatts we are providing, and it is consistently provided in a consistent flow. The commissioning project that is starting this quarter and going into the back half of this year is smaller in total megawatt terms and is lower in gallons related to that, but still meaningful in size. What we wanted to present is the expectation of the recovery: kind of the trough in the first and second quarters and then how the recovery of the business goes into 2026. That is what we are trying to highlight for our shareholders and stakeholders. William Dezellem: That is appreciated, Casey. You mentioned there are many other contracts like this. We all hear of data centers ramping; there is lots of commissioning taking place. Talk to us about the pipeline of opportunities in the data center arena, because over the last few months you have announced two. J. Casey Crenshaw: Yes, Bill. We are certainly excited about it, and we are optimistic. If you look back about eighteen months, the expectation was that all the power was going to come in on time or early, pipelines would be put in on time or early; and then what has happened are natural delays—construction delays and other factors—creeping into this giant infrastructure buildout that you all know about. As that rolls downhill, first you have the power generation and backup power solutions, and now we are getting to how you provide the natural gas needed to do either commissioning, startup, or bridges. We are really excited about this commissioning activity because this is where we go in and support the data center commissioning their project—testing all their cooling and other systems—while they are waiting on either the final gas pipeline or the connection to the grid. In a perfect world it is connection to the grid with cheap power that never stops; secondly, behind-the-meter with pipeline. Stabilis Solutions, Inc. can participate in providing either commissioning, backup, or bridge, and that is what we are working around. We are seeing more commissioning activity in the first quarter of this year. That is where the activity is with our customers, with some people talking about the longer-term bridge. But the longer-term bridge is not the perfect solution for the client, so there is less activity there relative to six- to twelve-month commissioning activity. We have a number of those we are working on. William Dezellem: Essentially, we have come to this point because of delays. One way to think about these commissioning opportunities is that they may be ready to go live after testing, say in the fourth quarter, but if the grid or the pipeline is not ready, then your commissioning contract converts to a bridge contract. Is that likely? J. Casey Crenshaw: That is a good way to think about it. Another way to think about it is that their commissioning may be in modular formats; they may get power connected to one of the modular concepts and then move into the next phase of commissioning the next center nearby, because it is normally in groups or hubs. We do not expect it to be just a short-term situation. Secondly, you are going to have outages and other backup needs to continue with the reliability that they are committing to, and that will provide additional work for LNG long beyond the construction and bridge phases. Think of them as modular—80 megawatts, 50 megawatts, 100 megawatts—building modular, stacked up around each other, and we are providing unit work for units in the system. William Dezellem: One question relative to the subchartering of the vessel. What is the timeline you expect that to happen? J. Casey Crenshaw: Good question. We initially chartered that to support our client in Galveston. We ended up, for a number of reasons, with them going to a different solution. We anticipated a very quick subcharter capability with that vessel, but the Iran war disrupted rechartering activity and put a delay on it. We anticipate it happening in the second quarter for an effective date in the third quarter. We do not expect the subcharter to be at a big profit, so we expect it to be net neutral. Operator: We will go next to an Unknown Speaker, a private investor. Unknown Speaker: Good morning, guys. J. Casey Crenshaw: Good morning. How are you doing? Unknown Speaker: Pretty good. Just a couple of questions, if I may. First, with oil and LNG getting backed up, there is a lot of talk about some of these countries coming into the Gulf of America and picking up their oil and LNG. Are you currently in a position to capitalize on that development? J. Casey Crenshaw: Yes. We appreciate the question. We have never seen a macro for our Galveston LNG bunkering—reliable, consistent supply there for marine bunkering activity—being better than it is today. Though the conflict has caused some disruption in the timing of our subcharter of the vessel and potential short delays for construction, the macro around it is amazingly strong. It validates why we need more LNG, fit-for-purpose bunkering capacity on the water in the Gulf Coast. Our customers know that, and our commercial team is working hard on it. The duration of contract, credit quality, and how that matches with project financing are the things we are working on right now. Validation of the need for the project with a Jones Act vessel in the Houston Ship Channel is not in question. The conflict and the price of LNG also further our fit-for-purpose supply for aerospace and the value of what these aerospace customers are doing with telecommunications and other technologies. This further reinforces the need for U.S. presence to be successful in aerospace. Lastly, it reiterates that the price of U.S. natural gas and LNG for behind-the-meter power for AI data center activity is advantaged versus globally priced data centers. We have an advantage now, and given oil and LNG prices globally on a TTF or JKM basis, it further makes U.S. data centers more competitive when they are either on-grid power, pipeline, or LNG. It reiterates the thesis of all three of our growth legs. We are not reporting a great quarter—we do not want to gloss over that—but we are excited about the back half of the year and next year, and about marine, aerospace, and behind-the-meter power. We are working very hard on our Galveston LNG bunkering project, and we are equally excited about aerospace and behind-the-meter power. Unknown Speaker: That segues into my second question. Andy, I think you are still in charge of IR. With all that is happening now—and the data center stuff was all over Fox Business this morning—it is such a hot item. Is this a time to get on the radar a little bit with your story? Any plans for it? You are really becoming an AI company—without overhyping it—any plans to get the story out? J. Casey Crenshaw: We are starting this morning by talking about what is contracted and what we are doing on commissioning and bridge—different versions of the behind-the-meter power story. We have three growth stories: marine, which is really exciting; aerospace; and behind-the-meter. It is important, as you bring up, that these are three exciting growth platforms where we are delivering advantaged U.S. LNG into the market. We are communicating what we are doing, and we are hopeful that over time, as we see the growth we are anticipating for next year, and we see the Galveston project come online—moving it to FID, then through construction—we believe people will be able to do the math around what that means and understand the value like we see it. We cannot force people to believe in it to the same level that we do; we can only communicate what we are up to. I will now turn it over to Andy for additional comments on investor relations. Andrew Lewis Puhala: Thanks for the question. Philosophically, our number one priority is to demonstrate this in the results of the business—grow the top line, grow profitability—and then the stock price takes care of itself. That is number one. Number two, we do intend to get out there and do more in terms of telling the story as we get more exciting things to talk about. We think it is important both to deliver the results and to make sure we are communicating them. From a corporate governance perspective, we continue to file and keep the company positioned appropriately around that. Operator: We will take our next question from an Analyst with ID Capital. Analyst: I would like to follow up on the data center commissioning. Is this the same data center as the one where you are doing the bridge? J. Casey Crenshaw: No. It is a completely different project, different region, and different customer. Analyst: Will this commissioning use George West capacity or third parties? J. Casey Crenshaw: We can always do both. It is the benefit of having your own supply for backup and reliability to make sure you can deliver. This project is not an offtake as the primary source. Neither of these are. A lot of our own offtake is being drawn into both industrial projects and aerospace. That is how we think about the mix right now. Andrew Lewis Puhala: The great thing about both of these data center projects is that they are not using George West molecules, so it does not absorb all our capacity. It allows us to grow the top line and continue to grow the business without having to wait on expansion of internal production capacity. It is great for that reason as well. Analyst: Will the same third-party power provider be the one that contracted you for the bridge power with the other data center? J. Casey Crenshaw: We work with numerous power providers and numerous data center end users. Due to confidentiality and competitive information, we would prefer not to share that level of detail. Analyst: You mentioned aerospace activity and strength there. What is your current estimate on when George West volumes will be completely used again? J. Casey Crenshaw: We will have some room at George West. We are anticipating getting closer to a consistent offtake—we are not expecting 100% utilization—but moving toward reasonable utilization in the third and fourth quarters of this year. We were significantly off as those two projects ended; they were heavy offtakers of both of our production facilities. We are seeing a steady increase in pull-through and usage and expect that to happen in the third and fourth quarters—not fully utilized, but at levels consistent with what we have seen in the past. Analyst: When we look at the revenue and earnings profile of current operations, and that is prior to the addition of the new contract for next year, will that contract use George West molecules? J. Casey Crenshaw: Right now, it does not need to. It will be additional. Analyst: Thank you both again for taking the extra questions. J. Casey Crenshaw: We are delighted to do it. Thanks for joining the call. Operator: This concludes the Q&A portion of today’s call. I would now like to turn the floor over to Andrew Lewis Puhala for closing remarks. Andrew Lewis Puhala: Thank you, everyone, for joining the call today. We appreciate the interest in the company and the continued support, and we look forward to updating you on our developments as we have them and talking to you again next quarter. Thank you all very much. Operator: Thank you. This concludes today’s Stabilis Solutions, Inc. first quarter 2026 earnings conference call. Please disconnect your line at this time, and have a wonderful day.
Operator: Greetings, and welcome to the LTC Properties, Inc. First Quarter 2026 Earnings Call. At this time, all participants are in a listen-only mode. Joining us on today's call are Pamela J. Shelley-Kessler, Co-President and Co-Chief Executive Officer; Clint B. Malin, Co-President and Co-Chief Executive Officer; Caroline L. Chikhale, Executive Vice President, Chief Financial Officer and Treasurer; J. Gibson Satterwhite, Executive Vice President of Asset Management; and David Boitano, Executive Vice President and Chief Investment Officer. Before management begins its presentation, please note that today's comments, including the question and answer session, may include forward-looking statements subject to risks and uncertainties that may cause actual results and events to differ materially. These risks and uncertainties are detailed in the LTC Properties, Inc. filings with the Securities and Exchange Commission from time to time, including the company's most recent 10-K dated 12/31/2025. LTC Properties, Inc. undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances after the date of this presentation. Please note this event is being recorded. I would now like to turn the conference over to LTC Properties, Inc. management. Please go ahead. Pamela J. Shelley-Kessler: Good morning, and thank you for joining us. LTC Properties, Inc. is successfully executing our SHOP strategy. Our capabilities, reputation, and culture are resonating with sellers and operators, and these relationships are driving investment opportunities and record external growth. Clint B. Malin: Allowing us to scale incredibly quickly. We have strong conviction that our strategy is the right one to create a higher growth profile company with better risk-adjusted returns to drive shareholder value. With SHOP currently projected to represent 45% of our total investments and 40% of annualized NOI by year-end, the shift in our portfolio mix is dramatically enhancing LTC Properties, Inc.'s long-term ability to grow FFO and FAD per share above our historical rate. We are on track with our $600 million SHOP acquisition midpoint guidance, and with the expected closing of second quarter transactions, we will be more than halfway to that target. Additionally, to further increase our SHOP mix, we would consider transactions that capitalize on attractive skilled nursing pricing by recycling capital into higher-growth SHOP assets. Our operator partnerships, our relationship-centric culture, and our significant investment in the SHOP platform are driving our transformation and positioning LTC Properties, Inc. as a competitive force. I will now turn it over to Gibson for more insight on the portfolio. J. Gibson Satterwhite: Thank you, Clint. Our focus is on optimizing risk-adjusted returns for our shareholders by investing in our SHOP portfolio and opportunistically recycling capital, positioning LTC Properties, Inc. for higher intrinsic growth. As Clint noted, SHOP is expected to account for 40% of our annualized NOI by year-end, with the potential to expand even further. This target incorporates reinvestment of approximately $265 million in planned dispositions and loan repayments from skilled nursing assets this year. Of that amount, $77 million has closed, and $190 million is expected to close in the third quarter. Our guidance projects a July 1 payoff of the Prestige loan, in line with our notice of intent earlier this year. SHOP performance continues to reinforce conviction in our strategy. First-quarter SHOP NOI was in line with our expectations. For our core SHOP portfolio, which consists of 27 communities at or near stabilization, including those acquired through the first quarter of this year, we are reiterating prior guidance of 14% pro forma growth at the midpoint. You can find more information on this portfolio in our supplemental. To frame the impact of our transformation, the pro forma growth rate for our overall portfolio increases to 5% to 7% at our 40% SHOP NOI target, from the low 2% range embedded in triple-net leases. That change is driven by increasing exposure to SHOP assets with growth prospects in the low to mid-teens over the foreseeable future. We can further increase our intrinsic growth rate should we choose to take advantage of opportunities to recycle more capital into SHOP, given the strong pricing for skilled nursing assets. Our 2026 guidance includes platform investments, adding the people and data capabilities needed to scale and support double-digit SHOP growth. We expect the core infrastructure to be largely in place by year-end, enabling us to continue to scale rapidly and best support our operators. Now I will turn the call over to Dave to discuss investments. David Boitano: Thank you, Gibson. LTC Properties, Inc. has spent 18 months building a platform designed to execute with speed and certainty. We are well on track to achieving our $600 million midpoint investment target and believe, given the volume of opportunities we are evaluating, that a comparable level of annual investment is sustainable in 2027 and beyond. So far this year, we have closed around $120 million in investments, with nearly $250 million on course to close in Q2. Additionally, we have signed LOIs for off-market third-quarter acquisitions totaling $90 million. Our pipeline continues to be robust, with well over $5 billion of opportunities under consideration and visibility for continued investment growth. Our relationship-centric approach is working. By the end of the second quarter, we will have 11 SHOP operators, including nine that are new to LTC Properties, Inc. in the past year, reflecting our success in retaining and growing with existing operators at the communities we have acquired. This strong pool of operating partners has been the source of several follow-on investments and provides great momentum as we continue to build our portfolio. Key to LTC Properties, Inc.'s growth is our legacy of deep industry relationships, which, in combination with our transactional agility, gives us an edge in gaining access and insights to growth opportunities. Several investments have come through partner referrals, underscoring the synergy of our culture and our commitment to relationships. A number also have been off-market, demonstrating again the benefit of our relationship focus. Our rapid SHOP growth has not happened by chance. It is strategic and deliberate, reflecting an investment philosophy focused on assets 10 years of age or younger with operators who have deep local and regional knowledge. We emphasize asset quality, size, mix, and market dynamics that favor our long-term competitive position. These criteria guide us toward the right balance of opportunities and durable returns. Today, we are seeing a high volume of potential transactions. Here again, our operator alignment is central to identifying the right assets and markets to support solid long-term performance. Experienced senior housing investors know that community performance depends on strong operating partners. LTC Properties, Inc. is deeply grateful for our operator colleagues and the excellence and commitment they bring every day to the seniors they serve. I will now pass the call to Cece for a review of our financial results. Caroline L. Chikhale: Thank you, Dave. Including year-to-date ATM sales of $95 million, our current liquidity is $585 million, and with $190 million of proceeds expected from asset sales and loan payoffs, we remain confident in our ability to finance future SHOP acquisitions. Our pro forma liquidity totaled $775 million, providing a long investment runway. At the end of the first quarter, our pro forma debt to annualized adjusted EBITDA for real estate was 4.4x, and our annualized adjusted fixed charge coverage ratio was 4.6x. We remain well within our stated leverage target of 4x to 5x, but believe that we can reduce that further over time as a result of our organic SHOP growth. Compared with last year's first quarter, core FFO per share improved by $0.04 to $0.69, and core FAD per share improved by $0.02 to $0.72, representing 63% growth, respectively. Increases were due to SHOP acquisitions and conversions to SHOP from triple net, increases in interest income from loan originations and additional loan funding, and higher rent from market-based rent resets. The increases were partially offset by an increase in interest and G&A expenses, primarily to support our growing SHOP portfolio, as well as a decrease in rent due to asset sales. We are reiterating our 2026 guidance for core FFO per share projected in the range of $2.75 to $2.79 and core FAD per share in the $2.82 to $2.86 range. As a reminder, our 2026 guidance includes $400 million to $800 million of SHOP acquisitions, with SHOP NOI in the range of $65 million to $77 million, and FAD CapEx of approximately $5 million. It also includes $265 million of proceeds from asset sales and loan payoffs. Other assumptions underpinning our guidance are detailed in yesterday's earnings press release and supplemental, which are posted on our website. Now I will turn the call over to Pam for closing comments. Pamela J. Shelley-Kessler: Thanks, Cece. LTC Properties, Inc.'s transformation continues. What began last year through the combination of acquisition and conversions of seniors housing communities ramps up this year with an additional $600 million of SHOP acquisitions projected at the midpoint of guidance, more than half of which will be completed by the end of the second quarter. We are deliberately curating a SHOP portfolio designed to compete effectively today and in the future when new supply eventually comes online. Although new construction starts remain near historical lows nationally, we are accelerating LTC Properties, Inc.'s organic growth profile and reducing our exposure to lower-growth triple-net lease investments while expanding our roster of strong operators to support our mutual growth. In 2027 and beyond, our strategy will focus on tactical growth in SHOP, adding additional high-quality assets and driving outsized NOI growth. As a premier seniors housing capital partner, LTC Properties, Inc. is well positioned to drive substantial growth through SHOP. Our smaller size creates agility, allowing us to drive accretive change faster than our larger peers and move the needle through single-asset and small-portfolio acquisitions. Our SHOP focus over the past 18 months has enabled a successful transformation and created a clear execution advantage. From our cooperative conversions of $175 million of triple-net leased communities into SHOP a year ago, we will have grown our SHOP portfolio to nearly $1 billion by the end of the second quarter and significantly increased our ability to drive future earnings growth. The consistency of our execution and performance is driving results and reinforces the conviction in our SHOP strategy. Our goals remain clear: support our operators who care for our nation's seniors and deliver superior long-term shareholder returns. With that, we are ready to take your questions. Operator: Thank you. We will now be conducting a question and answer session. We will pause for a moment to poll for questions. Our first question today will come from Austin Todd Wurschmidt with KeyBanc Capital Markets. Austin Todd Wurschmidt: Hey, good morning, everybody. Could you provide some additional details around pro forma NOI growth for the 27 SHOP assets in the first quarter? And then maybe give us a sense of how occupancy trended sequentially and year over year within that NOI figure? Thank you. J. Gibson Satterwhite: Hey, Austin. This is Gibson. First, to give you some context around the disclosure: when we gave the pro forma 2025 for the 27 core SHOP portfolio, it was to help give an indication of the growth characteristics in that portfolio to the market and to our shareholders. But we decided against giving that on a very detailed quarterly basis going forward. What we will do is roll that core SHOP performance forward on a quarterly basis so you can track that with the metrics that we have realized during our ownership. For color behind what is going on in Q1 in that core portfolio, it came in line with our expectations for EBITDAR. Rates were a little higher. When we set guidance, we anticipated a little seasonal softness in Q1, which we realized. Directionally, occupancy turned around mid-quarter. If we look at it year over year, the occupancy troughed at a higher level, meaning the occupancy at the trough in Q1 of this year was higher than occupancy at the trough in Q1 last year. We are seeing some green shoots in terms of occupancy increasing since it troughed in February. Looking at the sales pipeline, our leads and tour volume going into the spring and summer selling season, we feel really confident, given what we know right now, in reiterating our guidance. Austin Todd Wurschmidt: A lot of helpful detail, and appreciate the context. With respect to investments, you had $157 million I think you said last quarter that you had expected to close by April. I am just wondering what drove the delay, and did a subset of that or all of those move within the $250 million? Or were there changes in the investment pool? Any details you can provide on that, as well as expected pricing for those assets? Thank you. Clint B. Malin: Sure. Austin, this is Clint. The delay is primarily related to a single off-market follow-on transaction. The seller was focused on a tax-efficient transaction, and to accommodate that we are working with them on structuring a downREIT. The seller needs some additional time to address some tax questions on their side. In working on this off-market transaction, that aspect is what led to a little bit of delay. We are very excited about this deal and about growing with this existing operator. This deal will add two newer and two larger communities to our portfolio, with a continuum of care spanning IL, AL, and memory care. In the meantime, while that was slightly delayed, as Dave mentioned in his prepared remarks, we have added another $200 million expected to close in Q2 and Q3. Dave can talk about rates. David Boitano: Yeah. So cap rates, going-in yields, have been right around 7%. We have been able to maintain that well. We are very pleased with that. It ebbs and flows a little bit from deal to deal, but generally speaking, that is where we have been coming in, Austin. Clint B. Malin: And, Austin, I would like to add some color. As we have increased the pipeline, we are seeing a lot of opportunities. Right now, at the $460 million mark—which includes what we have closed to date and what Dave spoke about regarding investments by quarter—that will get us by 3Q to 75% of our $600 million midpoint guidance. We feel very confident about where our investments are right now. We have eight transactions in total for 12 communities. The average age of that $460 million—again, including what we already closed in Q1—is 10 years, which has been very consistent with what we have talked about. Sixty-five percent of these deals in the pipeline are sourced off-market. With the Q3 closings that Dave spoke about under LOI, that is going to add two more operators—four new operators this year—and get Q3 up to 13 operators. We have two follow-on transactions. Sixty percent of the communities of this $460 million span a continuum of IL, AL, and memory care. The average size of the community is 100 units. Seventy percent of these deals are in primary markets. We feel very confident in our ability to source transactions, and, as Pam mentioned in her comments, we are buying assets that are going to be able to compete effectively against newer assets when those eventually come online. Austin Todd Wurschmidt: A lot of helpful detail, Clint. Just to clarify one thing before I yield the floor. You said you added another $200 million. Is that specific to the operator that is focused on the tax-efficient transaction? Because the $157 million is now $250 million closing in Q2, and then there is $90 million of signed LOIs set to close in Q3. So closer to $300 million. Can you reconcile the adding $200 million versus what I am getting to on the $300 million? Thanks. Pamela J. Shelley-Kessler: Austin, it is Pam. It was $90 million that is under LOI, expected to close probably in the third quarter. Austin Todd Wurschmidt: That is the difference. Alright. Thank you. Clint B. Malin: Thank you. Operator: Our next question will come from Juan Sanabria with BMO Capital Markets. Juan Sanabria: Hi, good morning. Hope you can hear me okay. I wanted to ask about the earnings guidance for the year. There is an implied deceleration from the first-quarter run rate, so I am curious on the drivers there. Is there any triple-net softening in some of the rents versus the conversion to SHOP, any temporary cash flow degradation, or any one-timers in the first quarter that will not repeat? Caroline L. Chikhale: Juan, it is Cece. In the first quarter, there was a little pickup because of timing differences. For the most part, we think we are going to be in line. There is going to be a ramp-up for SHOP NOI, as Gibson has talked about in the past, and we still think it is in line. There is some uncertainty out there in the market with interest rates. We are not sure which direction it will go with the new Fed chair, but we will give you an update next quarter. Juan Sanabria: Great. And second, you mentioned potential monetization of some skilled nursing assets. Curious on the potential scope and where you see market pricing for in-place rents. Clint B. Malin: Thanks, Juan. We are supportive of the skilled nursing industry, and we do not see any immediate near-term headwinds. What we have recycled to date going back to 2025 has been for specific reasons. Prestige, as Gibson mentioned on our last call, was about reducing concentration to an operator and state, and reducing our loan book. Other sales were related to lease maturities and some purchase options. Those were at attractive 8% caps, which we felt very good about. Going forward, we would look to capitalize on the attractive pricing we are seeing in the market. Anything we do would be opportunistic—recycling from lower-growth triple-net leases into higher-growth SHOP assets—and we would look to limit, if anything, and avoid dilution. Our coverage on an EBITDAR basis is almost 2.0x, which is historically extremely strong. We are very comfortable with our skilled nursing portfolio and reduced concentration. Any actions would be opportunistic. Juan Sanabria: Great. So, just to summarize, given the high rent coverage, the yields could be closer to what you are buying SHOP at—around the 7s—given the rent coverage? Clint B. Malin: Thank you. Operator: Next, we will move on to Richard Anderson with Cantor Fitzgerald. Richard Anderson: Thanks. Good morning. I am looking at Slide 12 and the guidance you provided for SHOP. I appreciate you are in growth mode, so it is hard to get a real sense of any same-store organic growth picture. If you were to do a hypothetical stress test of your portfolio, would it be high single-digit NOI growth, putting aside additional acquisitions—the type of growth we should expect when the time comes that you are able to disclose a same-store perspective? J. Gibson Satterwhite: Hey, Rich, it is Gibson. Good question, and I think you have asked similar questions on previous calls. In my prepared remarks, I gave the math of how the higher growth rate in SHOP moves the needle for our overall portfolio, and cited that if you assume low to mid-teens SHOP NOI growth, that was the driver behind that math. What has changed from our prior calls is that now we have some experience with the portfolio. We are really confident in what we are assembling and what the deal team is buying. If you think about the math embedded in that same-store portfolio, we think you can get double-digit—around 10%—NOI growth even without occupancy increases, with a 170 to 200 basis point spread between RevPOR and expense growth. Our guidance includes 140 basis points of occupancy increase and 14% growth at the midpoint; if you strip out occupancy to be conservative, we are still comfortable with around 10% NOI growth assuming about a 5% RevPOR increase. We have seen recent history sustain that. Step back and look at overall supply-demand dynamics—baby boomers turning 80, lack of new supply—and we feel more confident in a higher growth profile going forward. Richard Anderson: You mentioned platform investments being made that you expect to be largely completed and scalable by the end of this year. You and others are growing SHOP through external sources, but then you have to operate it, and you are married to it. How do you stress test the future of your SHOP portfolio? Things can get complicated in this business. What types of people are you bringing in, and what are you doing to manage through tougher environments? Pamela J. Shelley-Kessler: Rich, no one thinks it is a layup. We fully understand and appreciate the intensity with which you build the SHOP portfolio and operations. As we have discussed, we seek out the best managers that are the best in their markets, with strong track records. We supplement that with the data and analytics that Gibson has talked about to help arrive at better decision-making. Our value-add to operators is helping them with aggregating data. That is an expensive task, and that is what we have undertaken. We have hired people to help with data analytics, and we have hired strong asset managers with historical track records managing SHOP portfolios. If you are going to do SHOP, you have to go all in. We have fundamentally changed the way this company thinks and operates, and the way we acquire properties. We are not managers; we are hiring the best managers and helping them create the best outcomes for our portfolio. Clint B. Malin: One thing we have done on top of that is be very strategic with the portfolio we are acquiring—newer assets. We have retained the managers on the majority of all but one community we have closed to date. We have done this by design to curate a stabilized portfolio with the ability to drive continued improvement that Gibson spoke about. We are building larger, newer assets that can compete. We have the combination of the people and the assets to be successful. We have been in the business a long time, and we know this takes a lot of work. J. Gibson Satterwhite: Rich, I will add: the structure is relatively new to LTC Properties, Inc. in terms of our implementation, but we have been hard at work over the last 18 to 20 months, very deliberate about forming a plan, working through the issues with the initial conversions, and executing on that plan. Zooming out, we have had exposure to private-pay senior housing, and we have all been in the business for a long time. We are acutely aware of the challenges operators face. It is a tough business. We feel we have aligned with good operators and hired experienced people on the team, and we want to be there to support them. Richard Anderson: My last question: when you think about structurally how you are compensating your managers, what is the mindset? Percentage of revenues, NOI, incentive-based? Is there a specific model, or is it case by case? Clint B. Malin: It is a general model we are following. We look at base fees calculated on revenues as well as the bottom line—we think that helps align interests in the current 12-month period. We set budgets together, and if budgets are exceeded, we look to reward our operating partners with incentive fees. We are also aligning interests long term with synthetic promotes over time, so that when operators make decisions today between growing occupancy or rate, it is with a mindset of how it can benefit the communities long term and allow them to achieve financial awards through a synthetic promote structure a couple of years down the road. So, current 12 months, the ability to beat the budget, and a long-term horizon on overall performance—we think that is a good alignment of interests for both parties. Richard Anderson: Great. Thanks, Clint. Thanks, everyone. Clint B. Malin: Thank you. Operator: Next, we will move to Michael Albert Carroll with RBC. Michael Albert Carroll: Yes, thanks. Looking at your SHOP operator list, it looks like you have a number of operators within your portfolio. Are there a handful that you have closer relationships with that you want to continue to expand? For some with maybe one or two assets, is the plan for that to grow? How hard is it to have one operator managing one asset—does it make sense to have fewer operators managing bigger portfolios? Clint B. Malin: This is Clint. We started this investment platform mid-year last year through the initial conversions. We would look to grow with all of the operators with whom we have built relationships, and we will be adding three more relationships following this. This is a testament to the effort we put in back in 2024 when we first announced we were going in this direction. We took the time to go out and market what we were doing and let operators know, and this is the result of that intentional effort. Yes, we would look to grow with each one of these operators. Michael Albert Carroll: Is it harder if there are more operators within the SHOP portfolio? Is there a limit—are you fine with what you have now since you are adding three more? Is there a number you want to cap to make sure you can track each relationship? Pamela J. Shelley-Kessler: We have not set any limit. It really comes down to the investment opportunities. As Clint mentioned in his remarks and follow-up Q&A, the majority of our investment opportunities are coming from our operators off-market. To the extent that this is the source of deal flow for us, we would not limit that. We are targeting the best operators in the geographic regions in which we have properties and where we are looking to grow. We would not limit it, though there is a law of diminishing returns. We would not have something like 50 operators, but where we are now and adding operators in the next year or two is very manageable by our asset management team. J. Gibson Satterwhite: We have built into our staffing plan additional resources. The core platform Rich was just asking about—we feel all the major pieces will be in place to allow us to scale, and we have a staffing plan aligned with our growth strategy. Michael Albert Carroll: Switching gears back to the SNF sales. Have you started marketing some of these portfolios, or is it something you would consider if something came up? Clint B. Malin: We are not marketing at this point, but we have received a lot of inbound phone calls. We are engaging, but it has to be opportunistic pricing that works for us to recycle into higher-growth SHOP assets. Michael Albert Carroll: Is there a specific size we should think about for potential sales? Could it be $100-plus million, or is it too early? Clint B. Malin: It would be situational depending on what comes up. It could be larger or smaller. Michael Albert Carroll: Okay, great. Thanks. Appreciate it. Clint B. Malin: Thank you. Operator: Our next question will come from Omotayo Tejumade Okusanya with Deutsche Bank. Omotayo Tejumade Okusanya: Yes, good morning, everyone. I also wanted to focus on Slide 12, the SHOP performance. When you look at the quarterly results disclosed on the page, RevPOR in Q2 2025, when we just had the SHOP conversion portfolio, was almost $10,000. In March, it was around $9,500. It has gradually dropped to about $7,850 by Q1 2026 with all the additional acquisitions. Can you talk about the post-conversion acquisitions—the characteristics of that portfolio that may be driving down RevPOR from the original 13 conversions? Are you targeting different market segments, or how should we think about what is being bought relative to the initial 13? Pamela J. Shelley-Kessler: Thanks, Tayo. It is a very simple explanation. Go back to the original 13 properties in February: 12 of those were memory care. Memory care has a much higher RevPOR. As you see us adding more traditional seniors housing properties into our SHOP portfolio—a mix of IL, AL, and memory care—you see that gradually go down. There is nothing to read into that other than the mix of the portfolio changing as we diversify away from standalone memory care. Operator: There are no further questions at this time. I would like to turn the floor back to Clint B. Malin for any closing remarks. Clint B. Malin: Thank you. Thanks to everyone on today's call for your ongoing support. We look forward to updating you on our progress next quarter, as well as seeing some of you at upcoming investor conferences. Operator: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time.
Operator: Good day, and welcome to the Trex Company, Inc. First Quarter 2026 Earnings Conference Call. Participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Note, this event is being recorded. I would now like to turn the conference over to our host. Please go ahead. Unknown Speaker: Thank you for joining us today, and good morning, everyone. With us on the call are Adam Zambanini, President and Chief Executive Officer, and Prithvi Gandhi, Senior Vice President and Chief Financial Officer. Trex Company, Inc. issued a press release earlier this morning containing financial results for the first quarter of 2026. This release is available on the company's website. This conference call is also being webcast and will be available on the Investor Relations page of the company's website for 30 days. Before we begin, let me remind everyone that statements on this call regarding the company's expected future performance and conditions constitute forward-looking statements within the meaning of federal securities laws. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. For a discussion of such risks and uncertainties, please see our most recent Form 10-Ks and Form 10-Q, as well as our 1933 and other 1934 Act filings with the SEC. Unknown Speaker: Additionally, non-GAAP financial measures will be referenced in this call. A reconciliation of these measures to the comparable GAAP financial measures can be found in our earnings press release at trex.com. The company expressly disclaims any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. With that introduction, I will turn the call over to Adam. Adam Zambanini: Thank you, and good morning, everyone. Turning to the quarter, I want to acknowledge my first earnings call as CEO of Trex Company, Inc. Having been with the company for over 20 years, most recently as COO, I approach this role focused on continuity, execution, and accelerating the strategy already in place. Our five-year plan is clear. Our priorities are set, and our focus remains on disciplined growth, operational excellence, and delivering long-term value for shareholders. As part of that work, our leadership team has sharpened Trex Company, Inc.’s vision, mission, and values to ensure that we remain aligned as we scale. This is an evolution, not a reset, and it reflects both where Trex Company, Inc. is today and where we are going. Trex Company, Inc.’s vision is to shape the future of outdoor living through purposeful innovation that enriches people's lives. To support our ambitious growth and galvanize the organization, we recently codified five long-term strategic priorities. These priorities are designed to sharpen our focus and better leverage our strengths across marketing, innovation, and execution. Given their importance to our future growth, profitability, and long-term shareholder value creation, I would like to touch on each priority in detail. Our five long-term strategic priorities are as follows. First, to create an unbreakable bond with our end users—homeowners and pro contractors. Our goal is to deepen the Trex Company, Inc. brand preference and loyalty through superior marketing, product experience, and service. Trex Company, Inc. remains the undisputed brand leader in the wood-alternative market; we are committed to further strengthening that position through continued investment. We have already increased our investment in branding and marketing, highlighted by the launch of the next phase of our consumer- and pro-focused campaign centered around the “performance engineered for your life outdoors” brand platform. This multichannel media campaign will sharpen the focus on wood-to-composite conversion while also emphasizing many of our key differentiators, including technical innovations like our heat-mitigating technology as well as our marine and fire-rated solutions. I am excited about the momentum this campaign has produced and expect Trex Company, Inc. to become increasingly visible with both homeowners and pro contractors moving forward. Meanwhile, we are investing in technology to improve proactive lead generation among our programs to better support our valued pro contractors. This last quarter, we experienced a significant double-digit increase in lead generation, pointing to the early success of this investment. We are confident that these actions will help drive Trex Company, Inc.’s future growth. Next is our continued focus on high-performance innovation. As I mentioned on last quarter's call, driving high-performance innovation remains a central pillar of my leadership mandate. Shortly after joining the company, I led the development and launch of the game-changing technology that redefined the standards in the decking category, Trex Transcend decking. It was the first cap composite decking product that set a new standard of performance and aesthetics while serving as a catalyst to drive market share expansion over the following decade. At its heart, Trex Company, Inc. is the world leader in material science. We intend to sharpen our focus and leverage our tremendous development capabilities to invent and deliver a continuous stream of next-generation outdoor living solutions designed with what we believe is separator technology that makes the hardest innovation in the building products category imaginable. Our goal is to move beyond simply competing with our industry by introducing products with highly differentiated performance that effectively place us in a category of one. Building on the legacy of Transcend, our current pipeline focuses on category-defining performance. We are currently on track for a potential game-changing regional launch in 2027, followed by a more impactful national launch in 2028 through 2030. We are excited about our best-in-class products and our innovation pipeline and look forward to sharing more in the future. Our third priority is to optimize the channels for growth. Distribution remains a key component of the Trex Company, Inc. business model, ensuring that our products are readily available for pro contractors and homeowners. As a reminder, Trex Company, Inc. already has the most comprehensive distribution network with national coverage by two-step distributors and one of the very few brands in the world with a meaningful presence at both national home centers. The distribution channel has seen changes over the last five years with significant consolidation among both distributors and dealers in the two-step channel. We have seen rapid expansion of the home center retailers into the pro channel segment as they move beyond a purely on-shelf DIY focus. We expect the distribution landscape to continue evolving. Our goal remains clear: to maintain strong channel relationships at both the two-step channel and the home center retailers so that our products reach both homeowners and pro contractors across geographies. Our recent additional shelf-space wins at the home center, along with expanded territories with two key distributors, are proof of Trex Company, Inc.’s strong distribution network and demand for our comprehensive portfolio of products. And our recently redefined incentive and marketing programs have been well received by our two-step partners as we convert business away from the competition, further strengthening these valued relationships. Our fourth priority is more of a specific target—namely, lowering the cost of railing. Railing represents a material and rapidly growing part of our revenue mix, and with a large target of doubling our railing business in five years, its importance will only increase. Due to greater manufacturing complexity and a broader range of raw material components, the railing portfolio currently operates at a lower margin than decking, presenting opportunities for operational and cost optimization. We are applying the same continuous improvement initiatives and vertical integration strategies that successfully elevated our decking margins to our rapidly growing railing portfolio. And of course, as the product line continues to grow, we expect natural margin expansion due to economies of scale and greater utilization. Over time, we believe railing margins can approach those of the core decking products, contributing to an overall lift in the corporate margin. Our fifth and final priority, growth enablement, underpins all the others. This priority defines our approach in investing in our culture, technology, and talent to enable long-term profitable growth. We are strengthening our organization by building capabilities in digital and commercial excellence and fostering an innovation-driven culture that empowers teams to move with speed and discipline. We have already enhanced our leadership team, particularly in finance, adding significant capabilities in data analytics and forecasting, creating a new internal pricing group to implement a more nuanced portfolio-level pricing strategy that balances share and margin while improving responsiveness. Over the remainder of the year, I plan to add key senior roles, including a newly created Chief Commercial Officer who will integrate sales, marketing, and IT—which will enable technology, data and analytics, and customer insights—by providing sales and marketing the tools for commercial visibility that create revenue generation. Finally, we are aligning innovation and advanced manufacturing under a newly appointed Chief Operations Officer, Zach Lauer, to enable better coordination on commercializing initiatives in parallel. Our digital transformation is directly linking consumer inspiration to contractor execution, providing the TrexPro network with highly qualified leads and accelerating the wood-to-composite conversion cycle while optimizing our pricing analytics. As you can see, we are not waiting for repair and remodel demand to recover. Instead, we are taking proactive, disciplined action to accelerate growth, strengthen margins, and position Trex Company, Inc. for sustained outperformance. We are confident that these strategic priorities provide a clear roadmap for Trex Company, Inc.’s long-term success. Our team is laser focused on execution, and I look forward to updating you on the tangible progress we are making in these priorities. Turning to the quarter, we started the year with solid results, especially in light of adverse weather conditions and a continued uncertain economic environment leading many consumers to defer large-scale discretionary repair and remodeling projects. However, we are actively taking advantage of the current market environment to aggressively invest, ensuring that we capture a disproportionate share when demand normalizes. The trends underpinning our industry's long-term growth runway—the ongoing conversion from wood to composite materials, demand for low-maintenance outdoor living, and significant long-term repair and remodel tailwinds—have not changed. With that context, I will turn it over to Prithvi, who will walk you through the quarter in greater detail. Prithvi Gandhi: Thank you, Adam, and good morning, everyone. Unless otherwise noted, all comparisons are on a year-over-year basis. As Adam mentioned, we had a solid start to the year with net sales of $343 million, an increase of 1%. First-quarter volume is driven by both consumer sales and channel stocking to support the second- and third-quarter peak buying season. With our level-load production strategy implemented in 2025, we elected to reduce channel inventories for the early part of 2026 and rely on our own inventory to support peak channel requirements later in the year, resulting in lower first-quarter volume. From a channel perspective, we saw strong home-center-driven DIY demand early in the quarter, which shifted over the course of the quarter towards greater strength in higher-end pro-contractor-driven products. Gross profit was $139 million with gross margin of 40.5%, about 100 basis points better than we expected. A favorable mix of higher-margin premium decking products and lower sales of railing and margin improvements from continued operational excellence helped to offset an increase in depreciation expenses related to decking lines coming into production readiness at our Arkansas facility. Importantly, we did not experience any noticeable cost pressures related to the increase in oil prices related to the conflict in the Middle East. I would like to spend a few minutes diving a bit deeper into our raw material exposure, as it is the majority of our COGS—especially recycled LDPE. While recycled LDPE is a petrochemical, its pricing dynamic is quite distinct from virgin polyethylene, which is tied directly to the price of oil. Historically, recycled LDPE prices tend to lag virgin polyethylene by several quarters and generally exhibit less volatility. This reflects the substitution dynamic—users of virgin polyethylene typically need to see sustained higher prices before adjusting their production to incorporate even modest levels of recycled content, which in turn increases demand and prices for recycled LDPE. And supply of this material is not an issue, as we are entirely domestically sourced. As a leader in the use of recycled content, this is a significant competitive advantage, particularly during periods of raw material inflation when competitors relying on virgin inputs are more exposed to volatility. And while we are seeing increases in certain other input costs, such as diesel fuel and aluminum, we have a range of mitigating levers available, including cost-out initiatives, operational efficiencies, and product-specific pricing actions. Importantly, the same inflationary pressures also affect our competitors. Moving on to selling, general, and administrative expenses, which were $56 million in Q1, representing 16.2% of net sales. Excluding digital transformation costs of $1 million and Arkansas facility startup expenses of $200 thousand, SG&A was $54 million. SG&A came in below our expectations despite continued investments in branding and marketing programs to drive future growth. Lower self-insured medical costs and the timing of expenses more than offset higher investments in the quarter. Because we are in the final stages of the Arkansas facility build-out and did not finish as expected in Q1, interest expenses were capitalized on the balance sheet, resulting in no P&L impact. Our full-year guidance for interest expense now reflects completion beginning in Q2. Putting it all together, adjusted EBITDA of $103 million grew 2% in the quarter due to positive pricing and mix, cost control, and the timing of expenses. Free cash flow was negative $143 million as we built inventory and accounts receivable ahead of our peak selling season. This was an almost 40% improvement versus the prior year. As our capital investment needs declined significantly now that we are finishing the Arkansas facility, our balance sheet remains strong with our net debt leverage of 1x EBITDA at the low end of our target range of 1x to 2x. We are confident in our long-term free cash flow generation and continue to have balance sheet capacity to pursue our capital allocation agenda, which prioritizes an unwavering commitment to first drive growth, then return cash to shareholders through share repurchases, and lastly, to pursue disciplined M&A. In the quarter, the company took advantage of an opportunity in the stock price by executing continued aggressive share repurchases. For the first time in the company's history, we implemented an accelerated share repurchase, or ASR, to quickly buy back a large amount of stock. This $100 million ASR was part of our larger $150 million share repurchase announcement. We will be completing the full $150 million repurchase during the second quarter, and I am pleased to announce that the board has authorized a 10 million share increase to the company's existing share repurchase program, reflecting their confidence in the long-term intrinsic value of Trex Company, Inc. Turning to outlook. We are maintaining our full-year guidance based on our solid start to the year and our continued expectation for the broader repair and remodel market to be flat to down this year. We remain minimally exposed to input cost inflation. Our vertically integrated domestic recycling infrastructure and approximately 95% recycled content drive a highly stable cost profile, which helps protect margins during periods of petrochemical volatility. We continue to expect fiscal year net sales of $1.185 billion to $1.230 billion, adjusted gross margin of approximately 37.5%, and adjusted EBITDA of $340 million to $350 million. For the second quarter, we expect net sales in the range of $388 million to $403 million, and we expect to see a reversal of the gross margin benefit from product mix that we saw in Q1. Before turning the call back to Adam, I want to touch on two key metrics. The first is sell-in/sell-out. Sell-in represents Trex Company, Inc.’s sales to its distributors and home centers. Sell-out represents the sales from our distributors and home centers to dealers and end consumers. As we discussed in the past, quarterly sell-in and sell-out results can be influenced by timing, seasonality, and channel dynamics and, as a result, may not always reflect the underlying long-term trends of the business. To provide a clearer view of performance and how we manage the business, we are introducing a rolling 12-month sell-in and sell-out metric, which we will report each quarter going forward. This metric smooths short-term volatility and better captures fundamental demand trends by accounting for seasonality and other factors that are not fully reflected in quarterly movements. For Q1, growth for our trailing 12-month sell-in was 7% and growth for our trailing 12-month sell-out was 6%. The second metric is one which we believe will experience meaningful improvement not only this year, but for many years to come: free cash flow. As many of you are aware, we plan on ramping up production at our new Arkansas facility beginning next year. More importantly, the CapEx associated with the plant build-out will end this year, with the majority of our Arkansas-related spend finishing in the first half. We anticipate a total of $100 million to $120 million, down from $224 million in 2025—a more than $100 million improvement. And with construction substantially completed by the end of this year, we expect another meaningful decline in CapEx in 2027 to maintenance levels of approximately 5% to 6% of revenue, driving further improvements in free cash flow. We have built Arkansas to effectively more than double our revenue potential with just the purchase of additional lines. So this upfront investment will provide us with years of capacity expansion ability with minimal additional CapEx. This gives us a strong line of sight to continuous robust free cash flow generation regardless of the exact timing of a significant rebound in consumer demand. With our organic expansion needs met through our Arkansas campus, our capital allocation priorities will next focus on additional share repurchases and then on accretive bolt-on acquisitions. Trex Company, Inc. will return to the free cash flow generating machine that it had been before the recent necessary investment in capacity expansion, which started during COVID and will end this year. I will now turn the call back to Adam for his closing remarks. Adam Zambanini: Thank you, Prithvi. Hopefully, you can feel the excitement of the Trex Company, Inc. team about the great opportunities we see in front of us. While the current market environment remains challenging, we are investing in our business and aggressively innovating to capture a greater share of the growing addressable market. We remain the undeniable leader in our market, and we are infusing our team with a more focused, nimble, entrepreneurial culture that we had in the early days of my career at Trex Company, Inc. We are confident this is the right time to evolve our approach, leveraging our great history and brand. Before we close, I want to recognize our people. Their commitment, discipline, and focus on the customer continue to be the foundation of our performance. The progress we discussed today is a direct result of their work, and they remain committed to our long-term success. We believe when our people succeed, our shareholders succeed. Operator, we would like to open the call to questions. Operator: We will now open the call for questions. The first question comes from an analyst with Jefferies. Analyst: Hey, guys. Congrats on a really strong quarter—really good execution. And Adam, congrats on the new role. It was very noticeable in terms of the energy you laid out in longer-term strategic plans. Give us a little perspective on some of the things you are looking to impact. We have noticed leadership changes. You called out the new COO role and certainly a new head of marketing. There appears to be a bigger focus on innovation and streamlining efforts so you can put out product quicker. Help us think through how you are approaching things perhaps a little differently and how that potentially unlocks the growth engine and gets products to market a little quicker. Adam Zambanini: Good morning. Thank you for the kind words; we really appreciate it. When I look at the marketplace today, it is a very dynamic and challenging market. You start to look at the consolidation of national accounts and inflation, and you have to ask: do we have the right strategy in place—which I believe we do, and we laid it out on the call. Do we have the right people? Absolutely. Do we have the right structure? And that is really what I am focusing on—making sure that we have the right structure to execute the strategy. Now on top of that, once we have that structure in place, we innovate, and I think that is where I add the most value to Trex Company, Inc., because when I talk about separator technology, it is about what is going to make Trex Company, Inc. a category of one. And so that focus right now is to take what Trex Company, Inc. used to have—let us say 100 initiatives—and boil that down to 20 underneath five imperatives. So we are working on fewer things that are more impactful to the organization. We want $100 million programs on everything that we work on. That has been our focus as an executive team, and I think it has provided the organization with a tremendous amount of clarity moving forward. Analyst: In an uncertain macro backdrop, how did sell-out trends shape up in the quarter? I appreciate the LTM number, but any more color on how that progressed intra-quarter? And perhaps how things are looking in peak decking season—April and May—and how the channel responded to programs you have rolled out and any marketing efforts? Prithvi Gandhi: Okay, a lot to unpack there. Overall, in terms of the quarter itself, as we said in my remarks, we managed sell-in to the channel based on our level-loading strategy, and essentially overall demand is progressing as we expected in our assumptions for the year. As we go through the busy season, the channel is on the lighter end in terms of the inventory they are carrying—closer to 30 to 40 days of inventory. Assuming a normal busy season, we expect more impetus for sell-in as we progress through the second and third quarters. Adam Zambanini: The lower inventory on the channel side is a function of our decision to take out volatility. For some high-level context as we look at Q1, January and February were fairly challenging. I think most people came out of those two months wondering how this year was going to pan out, but we saw a nice rebound in March as we moved into April. Everybody is still projecting flat to slightly down in the market, but we are expecting to outperform. One trend we have seen over the last year or two is more national accounts acquiring independent lumber yards and carrying less inventory. In many cases, they would carry 90 or even up to 120 days of inventory, and now we see some of them carrying around 30 days. That means probably fewer trucks in Q1, but when in-season demand hits in Q2, you must make sure you have inventory on the ground to execute because there is going to be quick pull-through. Analyst: Thank you. The next question comes from an analyst with William Blair. First topic is gross margin. You beat your internal expectation nicely. Can you unpack what happened? It sounds like mix might have been favorable. Prithvi Gandhi: Yes. Thanks for the question. In Q1, relative to our forecast, we were ahead by about 100 basis points, largely driven by favorable mix from decking. If you recall, we announced a price increase around our aluminum railing in January, and we did see some pull-forward in Q4 and, as a result, a lower mix of railing in Q1. That was the primary driver of why gross margin performed better in Q1. Analyst: Got it. And then SG&A also beat a little bit. I guess the guide still assumes that it is up year over year the rest of the way. Was there some timing issue in Q1? Prithvi Gandhi: In Q1, SG&A came in about $5 million lower than we had planned, driven by two things. One is favorability in medical claims, and that is a hard one to forecast. We feel good about the full year, but in any quarter, things can move around, and that is what we think happened here. Second, there was timing around certain expenses related to our investments in growth and brand awareness. We expect those to come through in the second quarter. To level set, we still expect full-year SG&A to be around 18% of sales. In Q2, we expect a significant sequential dollar lift in SG&A, based on certain expenses that should have been incurred in Q1 moving into Q2 and our continued investment in marketing and innovation that drive growth and brand awareness. With those things, you should see a dollar step-up from Q1 to Q2. Adam Zambanini: We also were trying to be responsible. The war in the Middle East broke out in Q1, and we managed the manageable. That was one area we looked at from an SG&A perspective. As things have calmed down, we are going to continue with the execution of our plan. Analyst: Thank you. The next question is from an analyst with UBS. Good morning. The revenue outlook seems to imply a decent deceleration in the second half. It does seem to imply roughly 5% year-over-year growth in the second half despite a fairly easy comp in the fourth quarter. Is this really just conservatism given the conflict in the Middle East and macro uncertainty, or is there anything else you are trying to message? Prithvi Gandhi: You nailed it. In terms of growth, it is around 5%—our number is about 4%. When we look at this year, there are still some things we want to see in terms of how the war is going to pan out. If it keeps going on over the next several months, then yes, there is some conservatism. If we think this will settle down, there are opportunities for us in terms of execution. One wildcard is the lower-end consumer, who is still struggling. We still see the high end doing really well on the decking side, and we are definitely focused on converting more of the wood market—about 75% of the market is still wood—and we are getting more creative as to how we will convert that opportunity. A couple other things around the second half. We introduced a refuge PVC product; most of those sales will occur in Q2 to Q4. That should help revenue growth. Second, in line with the industry, we announced a mid-quarter price increase again around aluminum railings; that was not in our prior forecast. Third, our continued investments in marketing and innovation are showing green shoots—lead generation, sample orders—all progressing really well, and we expect to drive some conversion from that. Analyst: That is helpful. On the quarterly cadence of adjusted EBITDA margin, second-quarter revenue is expected to be up sequentially, but is it possible EBITDA margin is actually down quarter over quarter given factors like the step-up in SG&A? Prithvi Gandhi: From Q2 2025 to Q2 2026, you should expect EBITDA margin to be lower this year. We expect a little more than half of the Q1 gross margin favorability to reverse in Q2, and SG&A will see a significant dollar step-up between Q1 and Q2. Those two together create a different EBITDA profile versus Q2 of last year. Analyst: But sequentially, Q1 to Q2, EBITDA margin could be down as well? Prithvi Gandhi: Yes, Q1 to Q2 as well—you should see some decline in EBITDA margin. Analyst: Thank you. The next question comes from an analyst with J.P. Morgan. Analyst: Hi, this is [inaudible] in for Michael. First, on cadence throughout the year and the back half, can we get an update on how you are looking at the R&R backdrop and how that connects to the full-year guidance range? Prithvi Gandhi: Looking at the home center business, there has been a lot of forecasts from negative 1% to 1% growth. We have seen many forecasts at flat to slightly down. We are doing low- to mid-single-digit growth. For the full year, it is about 3% right now in terms of our year-over-year growth. Our overall macro assumption on repair and remodel is unchanged—still flat to down with the back half better than the first half, in line with indicators like LIRA. Analyst: You mentioned the relative strength between DIY and pro and how it shifted through the quarter. Could you provide more detail and how you are thinking about that going forward? Adam Zambanini: We are a marketing powerhouse, so we had to get back to our roots. That is the territory I have come from. We reinvested in that platform, made structural changes in marketing, and filled out that department. I feel like we are in a great spot. That really helps drive the high end of the marketplace. Once again, products like Trex Transcend and even our Select decking are doing really well, along with higher-end lines of railing. Those are the consumers buying right now. The focus is also on converting the low end—converting more wood users over to Trex Company, Inc. On the high end, there has been focus on the PVC area—not just with the introduction of Trex Refuge; we have other products that compete in the fire segment. There is plenty of opportunity, and a lot of the mid-to-premium end is doing well because our marketing is working. Analyst: Thank you. The next question comes from an analyst with D.A. Davidson. I was hoping to talk more about the shelf-space commentary. Can you help frame the magnitude of that expansion and how you expect that business to ramp over the next couple of quarters? Maybe some sense on price point? Prithvi Gandhi: Good morning. We would characterize it as meaningful. We have picked up both decking and railing slots in the recent line reviews. Trex Company, Inc. was one of what we believe are two winners at retail, and some peers did not do as well. We will not give a specific number, but it is meaningful for growth. In terms of timing, shelf resets are always challenging to time exactly. We will start to see some of those reset and some products in place now as we move into Q2, with momentum building from Q2 into Q3 and Q4. Analyst: A two-parter on railing. Can you talk about the pace at which you can drive improvements in controllable costs and how M&A may factor? Second, does lowering cost act as a catalyst for market share objectives and the pace of volume growth? Adam Zambanini: Great question. Railings are about material science. We have seen things this year that we are going to unlock on the material science side of the portfolio that will lower raw material cost of railing. In many cases, this will drive margin expansion. Trex Company, Inc. is aggressively priced in every segment—from the opening price point at home centers that can be $20 to $25 a foot, all the way up to systems at $250 a foot. Most of the material science benefits will drop to the bottom line. On vertical integration and acquisitions, these are very small companies we are looking at, but with meaningful impact in lowering raw material streams. In some cases, we can be more aggressive to convert, but we are satisfied with where railing sits today. The focus is on expanding margins. Prithvi Gandhi: Just to add, back in 2023 we said we would double our business by 2028. We are on track to do that. Analyst: Thank you. The next question comes from an analyst with Goldman Sachs. Analyst: Good morning. This is [inaudible] in for Susan. On the high priorities you mentioned earlier, where do you see the biggest opportunity to drive above-market growth in the near term relative to those more helpful in the long run? Analyst: Could you repeat which priorities? Analyst: Yes—within the five you mentioned, which provides the biggest near-term upside to drive above-market growth versus those that are longer-term? Adam Zambanini: Near term, it is creating an unbreakable bond with end users—getting back to basics on marketing and having the right people in the right spots to convert more downstream with contractors and consumers. Not far behind that is launching high-performance innovation. We will start regional launches in 2027 and see a much more meaningful impact from 2028 to 2030 with national launches. But near term, it is the unbreakable bond with end users. Analyst: You talked about optimizing channels for growth. Does that mean expanding presence in retail versus making changes to wholesale? We are seeing consolidation at the wholesale level—how does that provide more opportunities, and where do you see the biggest ones? Adam Zambanini: We created a pricing department to price our products by channel. You want to avoid channel conflict between home centers and the pro channel, and sometimes products cross-pollinate. Our perspective is to have the right products in the right channels at the right price. The market is very dynamic with a lot of consolidation at the dealer and distributor levels. As there is consolidation, there will be channel changes long term. We need the right pricing strategy for each channel with the right products. We have been creating that structure to allow us to take market share while maximizing margins over time. Analyst: Thank you. The next question comes from an analyst with BMO Capital. Analyst: Good morning. Looking at your full-year guidance, what is embedded within that in terms of sell-out—both decking and railing? Prithvi Gandhi: In total, our sell-in growth is about 3%. In terms of sell-out, we are assuming something close to that in the overall market. Analyst: That would imply a meaningful slowdown from the trailing 12 months, which was about 6%. But you are not seeing anything today that suggests that slowdown is happening—is that fair? Prithvi Gandhi: As Adam said, the year started slow, some of it driven by weather. Since March we have seen good order intake, and that continues through April. Overall, we do not see anything that would cause us to think otherwise. Analyst: Switching to capital allocation. You talked about CapEx coming down. As we sit here today and you have been active with share repurchases, can you talk about the M&A pipeline and how you rank priorities between repurchases and M&A? Prithvi Gandhi: Good question. Lee just joined us a couple of months ago, and we are actively doing the work. Adam has talked about areas of interest: number one, vertical integration and margin expansion; two, the whole outdoor living space from the fence back to the deck and house; and third, more distant, the exterior building envelope. That is the playfield. We are doing the strategy work now to identify targets and areas that would be very synergistic. We should have a point of view shortly, and then we will build out the pipeline. It is still early days around M&A. In terms of capital allocation, I always look at M&A against share buybacks—where is our share price, how much cash flow do we have, what is the intrinsic value, and the return of buying back shares versus using that capital for an M&A transaction. The big difference is M&A gives you future growth options; buybacks do not. That is the analysis we go through. Analyst: Thanks. The next question comes from an analyst with Wolfe Research. On your goal to lower the cost of railing and drive margin improvement, are there any numbers you can put around the opportunity in terms of cost reduction or margin improvement? You talked about eventually pushing margins closer to decking—can that happen in a five-year time frame? Adam Zambanini: In our strategic plan, that can happen in a five-year time frame. We have it broken out by year, but we are not sharing that detail at this time. Analyst: Expectations for inflation in 2026. You mentioned reasons why you should be shielded from inflation on LDPE. Can you put numbers around potential inflationary impact and what you are expecting in terms of price/cost relative to that inflation? Prithvi Gandhi: As we said at the start of the year, price/cost for the full year is relatively neutral, and we continue to have that expectation. Three areas have some exposure, but we have taken steps to mitigate it. One is around virgin resins—on that front, we essentially have a fixed cost for the rest of the year, and that is baked into the forecast. Second is diesel prices—we pay for inbound freight and transfers between plants. We have pushed back against vendors on the cost of raw materials to offset some diesel inflation and are managing internal transfers to mitigate impact. Third is PVC—the new product we have introduced. Our costs are fixed through the balance of 2026 with our third-party sourcing. On all these fronts, we are well positioned in managing any inflationary impact. Analyst: Thank you. The next question comes from an analyst with Loop Capital. You mentioned the cold start to the year in January and February. Did you see delays with the start of the spring selling season in seasonal markets such as the Northeast that could benefit Q2 sell-through? Adam Zambanini: Looking at the northern markets—New England across to Minnesota and that upper northern belt—we were down double digits in Q1. In the Mid-Atlantic—draw a line across the U.S.—about flat. In the southern U.S., we started to see double-digit growth again. We could see the weather influence, and we are just now starting to see some northern territories wake up. The promising part is where the weather has been good, we have seen nice numbers across the board. Analyst: Very helpful. And on the mid-quarter railing price increase, any impact from the new Section 232 valuation on your railing products, and will the increase fully offset inflation pressure you are seeing? Prithvi Gandhi: In terms of tariffs, in our overall cost position it is less than a 5% impact, and through our pricing initiatives we are able to cover most of that cost increase. Analyst: Thank you. The next question comes from an analyst with Benchmark Company. Most of my questions have been asked. Follow-up about inventory in the channel and your own inventory. Your inventory looks a little higher than usual in Q1. Is that just an extension of level-loading? Was it in part because of the slow start to the year? Or being prepared for a bounce-back? Adam Zambanini: We have our level-loading strategy in place. We want to be there to serve the market when demand is ready. Channel inventory is about flat to prior year, but with pricing in there, on a lineal-foot basis external to Trex Company, Inc., inventory is slightly down. As discussed earlier, larger customers like national accounts did not take as much inventory. We believe demand will be there in Q2; therefore, we have a little higher inventory now in Q1 because those customers are going to need it right away as we move into Q2. That is the key change. Analyst: Thanks, and congrats again. The next question comes from an analyst with Stephens. I want to dig into the railing impact on margin a bit more. You mentioned that lower railing sales helped margins in Q1. I think the expectation was for a higher mix of railing sales through this year to have roughly an 80-basis-point impact to gross margin. Is that expected to normalize in Q2 fully? With movements in raws and pricing and initiatives to grow margins—which I understand you are not ready to fully quantify—is that still the best way to think about the margin impact for this year, and then improvement from there more in 2027? Prithvi Gandhi: Let me start by reminding everyone of what we said back in November when we reported Q3 2025 results. At that time, we stated we expected about 250 basis points of headwind to adjusted gross margin in 2026 on a full-year basis. We continue to have this expectation for 2026, and we finished 2025 with adjusted gross margin of 40% for the full year. Also in November, we said 170 to 180 basis points of that 250 was entirely from the depreciation associated with bringing Arkansas to production readiness. The balance—70 to 80 basis points—is from railing growth, and we continue to expect that for the full year. In Q1, we saw about 100 basis points of gross margin favorability from railing being smaller in the mix. In Q2, we expect a little more than half of that to reverse, and the rest will reverse through the balance of the year. That is how to think about it. Analyst: Thanks. And Adam, you mentioned Trex Company, Inc. has historically been a marketing powerhouse and you are getting back to your roots. Is the thought that branding and marketing spend will continue at a similar level as a percentage of sales and grow with sales, or will there be a need to ramp that up more with new product rollouts? Adam Zambanini: As long as I am here, we are going to be investing in marketing. The 18% is a really good number. During COVID, you saw SG&A plummet—we were out of capacity—and we delivered strong numbers. If I go back in time, I would have invested more then to create more awareness around the Trex Company, Inc. brand. Will there be some leverage over time on SG&A? Sure, but it will not be 100 or 200 basis points. It might be 10, 20, 30 basis points as we expand and grow, because I want to make sure we are still investing in that platform to get more contractors and more consumers to buy Trex Company, Inc. We will continue to invest; when we can leverage, we will, but investing in marketing will remain very important. Analyst: Last one—on M&A appetite. Is there potential or appetite for larger deals, or more tuck-in, complementary stuff? Adam Zambanini: Our five-year strategic plan is tuck-in M&A, and we have been very consistent. Number one, vertical integration—this is about margin expansion. Number two, we have the license to own the backyard—from the threshold of your sliding glass door all the way out to the fence, Trex Company, Inc. could be anywhere in that backyard. That is where we would go next. Lastly, the envelope of the house. We view this as smaller tuck-in acquisitions that can add value. Our brand is our number one asset; there are a lot of smaller companies where the Trex Company, Inc. brand makes a lot of sense and helps us potentially grow our TAM. We reside in a $75 billion outdoor living market. Our TAM is around $14 billion, and if we can expand that over four to five years to $20 billion to $25 billion, that benefits Trex Company, Inc. in terms of opportunities to grow market share. Analyst: Thank you, and congrats on the quarter and new role. The next question is from an analyst with Barclays. First, on capacity dynamics: given demand trends and contractor sentiment, how does this support your strategy around incremental capacity, and how would you adjust the capacity network as the Arkansas facility ramps? Is Arkansas displacing any production elsewhere? Adam Zambanini: At the contractor level, we still see books out six to eight weeks on the low end, and in some areas eight to ten weeks. In some cases, contractors feel slightly better this year than last year. Part of that is our marketing investment—we are seeing significant double-digit growth in leads we are giving to our contractors, which may be extending backlogs. On capacity, we have been consistent: as we look at Little Rock and our growth, we would be looking at opening that in 2027 from where we sit today. Even if we did not see as much growth, Little Rock provides leverage—it is going to be our lowest-cost facility. We have one facility in the Winchester footprint that is over 30 years old. We will maximize our manufacturing footprint over the longer term. Our expectations are for good growth in 2027 through 2030, and we are going to need all that capacity—from Little Rock to Winchester to Nevada. Analyst: With the introduction of your PVC product, how is it faring regionally—Northeast, West Coast? And more broadly, on pro versus DIY, is higher-end luxury still outperforming the opening price point? Adam Zambanini: We still see outperformance from the middle to higher-end consumer, which has been consistent over the last several years. Trex Company, Inc. is putting more marketing effort into conversion from wood. We have a new campaign called “No Regrets.” If you have seen it on TV, it shows a dock owner maintaining wood versus a dock owner with a Trex deck who can go enjoy the boat for the day—No Regrets. It is a strong visual. Targeting wood is a huge focus. On PVC, we had a great rollout on the West Coast and are ahead of expectations on manufacturing. We are getting increased supply from our supplier. The largest market for PVC is in New England and the Mid-Atlantic, and we have quickly opened those two regions as we rolled into Q2. It is a roughly $0.5 billion market, and Trex Company, Inc. had not played in it. We plan to expand that over time as a great growth opportunity. Analyst: Thank you. The next question is from an analyst with Bank of America. Can you talk about the right level of leverage for the business longer term, and would you be open to buying back more stock as free cash flow frees up next? Prithvi Gandhi: Thanks for the question. We want to manage company leverage between 1x and 2x. This year, free cash flow will increase by about $100 million versus last year. We expect to complete $150 million in buybacks by the end of this quarter. Then we will look at the rest of the year—where free cash flow is and how the business is doing. With the board's new authorization, we have capacity to do more buybacks. Based on where the stock price is relative to intrinsic value, it is still a compelling opportunity. Going forward into 2027, we will have even more free cash flow because we will essentially be done with capacity expansion. Share buybacks will continue to be a significant part of capital allocation. Analyst: And on reinvestments you are making, can you give more color on allocation and priorities between hiring more sales versus marketing? Adam Zambanini: A bigger portion will be marketing-related and the investments we are making to create awareness—linear TV, streaming, podcasts, and all forms you can think of to get the Trex Company, Inc. name out. Then drive to trex.com—there are investments in the website—and investments in innovation. If you want game-changing innovation, you have to invest in R&D. The major buckets are marketing and innovation, with some in sales to support and execute the strategy longer term. Operator: That concludes the question-and-answer session. I would like to turn the floor to management for any closing remarks. Adam Zambanini: Thank you, everyone. Prithvi and I look forward to speaking to you and seeing you at upcoming conferences in the coming weeks. Operator: This concludes today's teleconference. Thank you for attending today's presentation. You may now disconnect your lines.
Operator: Hello, everyone. Thank you for joining us, and welcome to FrontView REIT, Inc. First Quarter 2026 Earnings Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Pierre Revol, Chief Financial Officer. Please go ahead. Pierre Revol: Thank you, Operator. And thank you, everyone, for joining us for FrontView REIT, Inc.’s first quarter 2026 earnings. I will be joined on the call by Stephen Preston, Chairman and CEO. Before we get started, I would like to remind everyone that this presentation contains forward-looking statements. Although we believe these forward-looking statements are based on reasonable assumptions, they are subject to known and unknown risks and uncertainties that can cause actual results to differ materially from those currently anticipated due to several factors. I refer you to the Safe Harbor statement in our most recent filings with the SEC for a detailed discussion of the risk factors relating to these forward-looking statements. This presentation also contains certain non-GAAP financial metrics. Reconciliations of non-GAAP financial metrics to the most directly comparable GAAP metrics are included in the exhibits furnished to the SEC under Form 8-Ks which include our earnings release, supplemental package, and investor presentation. These materials are available on the Investor Relations page of our company website. With that, I am now pleased to introduce Stephen Preston. Stephen? Stephen Preston: Thank you, Pierre, and good morning, everyone. This quarter demonstrates the operational and portfolio advancements we have made over the last year. We have elevated the strength of the management team, enhanced our portfolio, deepened tenant and industry diversification, and continued to focus on attractive markets with replaceable rents and high profile street frontage locations. Since the IPO, we have reduced our largest tenant exposure to 3.1%, lowered our top 10 tenant concentration to 23%, and reduced our restaurant exposure from 37% to under 23%. At the same time, we have invested in technology, data, and processes that improve scalability and decision making. FrontView REIT, Inc. is in its strongest position since inception and is poised to deliver compounding growth. Our scalable real estate-first strategy is focused on acquiring fungible, frontage-based assets typically located in dense retail corridors where underlying land value provides downside protection. Today, 77% of our properties are located within a top 100 MSA, and our average five-mile population is 175,000 people, highlighting the vibrant, desirable markets in which we own and operate real estate. Consistent with this strategy, we disclose each of our property locations through Google Maps links on the portfolio page of our corporate website. We also disclose every tenant and its ABR in our filings. I encourage investors to review these best-in-class disclosures which provide detailed, industry-leading visibility into the merits of our real estate, tenant credit, box sizes, and portfolio diversification. As I mentioned last quarter, we will be featuring an acquisition each quarter on the front cover of our investor presentation. This quarter, we are highlighting a Jiffy Lube in Baton Rouge, Louisiana, the second-largest MSA in the state and a top 100 MSA nationally. Jiffy Lube is a national automotive service brand and subsidiary of Shell USA, with more than 2,000 locations across North America. We acquired the property at a 7.4% cap rate on a 10-year net lease. The site sits directly in front of a Walmart Neighborhood Market and across from Raising Cane’s, with direct frontage on Kersey Boulevard and approximately 37,000 vehicles per day. At roughly $160,000 of annual rent, the rent basis is replaceable with arguable upside given the visibility, traffic counts, and surrounding retail demand. We were able to acquire the asset at an attractive price and at a significant discount to market by accommodating a seller-specific time and requirement. This acquisition demonstrates FrontView REIT, Inc.’s reputation as a buyer that can solve problems for sellers and source transactions that are not widely marketed. To summarize, we bought a fungible asset with frontage, with replaceable rent, in a desirable retail node, all at an elevated cap rate relative to the market. Including this asset, we own three Jiffy Lubes representing about 60 basis points of our ABR. In addition to this Jiffy Lube, I would also call your attention to the cover of our annual report where we highlight another one of our properties: a two-tenant building leased to Wells Fargo and T-Mobile. This is an A+ location across from a Walmart Supercenter in urban Dallas. The property is under-rented at $313,000 annual rent, with over 6,000 square feet of rentable area and is situated on approximately one acre of land on a corner with over 295,000 vehicles per day. This is emblematic of the type of real estate we are focused on securing. For the quarter, we acquired 10 properties for $34 million at an average cash cap rate of 7.5% and a weighted average lease term of 9.4 years. These acquisitions were consistent with the characteristics we target across the portfolio, including a median purchase price of $2.3 million, a weighted average Placer.ai score of 26 indicating top 30% of the category within the state, and a median rent per box of $170,000. With respect to acquisition cap rates, we anticipate Q2 2026 to settle around 7.3% to 7.4% with volumes generally in line with our guidance. We continue to see significant depth in the marketplace, particularly in smaller transactions where FrontView REIT, Inc. has real advantages. Since we are not dependent on larger transactions or portfolio deals, we rarely compete directly with large institutional buyers, REITs, or private equity capital. This allows us to secure attractive transactions from multiple sources where our execution and reputation provide us with a competitive edge relative to other, less sophisticated parties in the space. We are also seeing select development opportunities where our extensive retail development experience may allow us to achieve meaningfully wider yields while maintaining a disciplined approach to risk. Our team’s decade of historical experience developing outparcels along with developing retail and large-format shopping centers makes us uniquely qualified to underwrite and evaluate development opportunities. This capability is already established at FrontView REIT, Inc. We have completed several successful, value-creating developments including a Miller’s Ale House to a Raising Cane’s, a Sleep Number to a Seven Brew, a Burger King to a Chipotle, a Twin Peaks to a Jaggers and a Panda Express, and a new Bank of America ground lease in front of our Walmart in Rochester. Collectively, these projects created about $10 million of incremental value, representing an approximately 90% increase in value to our shareholders over and above our original purchase price. Although we do not currently have any third-party development assets under formal contract, we expect to begin a limited development program over the next few quarters and look forward to generating outsized risk-adjusted returns on these assets. Regarding dispositions, we sold five properties for $10 million during the quarter at an average cash cap rate of approximately 6.9% for the occupied assets, with a weighted average lease term of eight years. We sold a Dollar Tree in Vermillion, South Dakota which did not align with our real estate-first focus, and an underperforming McAlister’s Deli. Asset recycling is part of our strategy, and we expect dispositions to be incrementally focused on fine-tuning the portfolio and pruning less optimal locations and concepts. Switching to the portfolio, we ended the quarter at approximately 99% occupancy, with only four vacant assets. Importantly, our view of vacancy is shaped by the quality of the underlying real estate. Historically, when we have re-tenanted properties, we achieved rent spreads north of 110% of prior rent, which reinforces our willingness to be patient and pursue the right long-term outcome rather than defaulting to a quick sale. During the quarter, we successfully re-tenanted three expiring locations: a CVS in Chicago, a Dollar Tree in Newark, and a Twin Peaks in North Carolina. As highlighted on page 3 of our investor presentation, these transactions in total generated over 23% increases in rent relative to the prior tenants, reinforcing the embedded value of our real estate and the strength of our locations. These properties create a temporary drag in 2026 because repositioning takes time. However, the right answer is to be patient. By focusing on quality locations, fungible boxes, and replaceable rents, we can generate stronger outcomes. These re-tenantings create meaningfully greater long-term value than simply selling the asset quickly and redeploying the proceeds. Over time, this approach enhances organic growth as our high-quality real estate appreciates. With multiple proven levers to create value, including active asset management, re-tenanting, and accretive acquisitions, we are well positioned to generate returns both through growth and expertise, not simply relying on outside capital or market conditions. We are aligned with our shareholders and we will continue to capitalize on value-enhancing opportunities, positioning us to outperform. With that, I will turn the call over to Pierre Revol to review the quarterly numbers and guidance. Pierre Revol: Thanks, Stephen. We had a strong operational quarter driven primarily by improved cash NOI and accretive capital deployment. Our adjusted cash revenue, which excludes reimbursement income and non-cash items, increased $707,000 sequentially to $16.3 million. The increase was driven by $75 million of acquisitions completed over the two quarters, as well as a $274,000 lease termination fee related to a dark Take 5 property. We subsequently sold the vacant asset for $1.7 million, generating close to a $700,000 gain over our original purchase price, highlighting the strength of our basis and underlying real estate. During the quarter, we enhanced our revenue disclosure by separately presenting other operating income, which includes termination fees, late fees, and other miscellaneous income generated through active portfolio management. These amounts are a normal part of operating a diversified real estate portfolio, but they are more episodic than base rent or percentage rent. Although this level of detail is not commonly broken out by net lease REITs, we believe the additional transparency helps investors better understand the underlying drivers of our results. This change is consistent with our broader commitment to best-in-class disclosures, is reflected in our Form 10-Q, and is highlighted in both our supplemental and investor presentation. Our non-reimbursable property costs decreased $385,000 sequentially to $263,000 or 1.6% of adjusted cash revenue, compared to 4.2% last quarter. This meaningful improvement was driven by improved occupancy, higher recovery income, and the impact of portfolio optimization work completed in 2025. As Stephen mentioned, we also have three properties currently being re-tenanted that contributed $181,000 of base rent in the first quarter. These three properties have already been leased to four tenants, with the majority of the rent commencement staggered over the next 12 to 18 months. Once stabilized, we expect orderly rent from these assets to increase to approximately $225,000. First-quarter cash NOI benefited from termination income, rent from the three properties currently being re-tenanted, and unusually low property cost leakage relative to the 2%–3% range we anticipate for 2026. After normalizing for these items, second-quarter run-rate cash NOI on the current portfolio would approximate $15.7 million before the incremental benefit from the recently executed re-tenanting leases, or approximately $700,000 lower than Q1 actuals. Our adjusted cash G&A was $2.4 million, consistent with the prior quarter. As we continue to grow our asset base, we have meaningful opportunity to create operating leverage by building the business the right way, through disciplined processes, better data and technology, and a platform that can scale with limited incremental G&A. Beginning last fall, we began investing in select technology partnerships, enterprise licenses, data analytics, and workflow applications to improve the efficiencies and operations of our business. These investments are building blocks in our effort to create an AI-native net lease REIT. Importantly, these tools and process changes are not a substitute for real estate judgment. They complement the deep real estate experience built over decades as private developers—what we often refer to as our developer DNA. Our objective is to build scalability, improve decision making, enhance risk management, and drive efficiency with an emphasis on data analytics. Turning to the balance sheet. Our revolver balance decreased modestly to $114 million, and our cash interest expense declined $86,000 sequentially to $3.8 million. Net debt to annualized adjusted EBITDAre improved by three-tenths of a turn to 5.3x, while LTV fell to 32.6%, and our fixed charge coverage ratio remained strong at 3.5x. Including the remaining $50 million of available convertible preferred equity capacity, adjusted net debt to annualized adjusted EBITDAre was 4.4x. We also announced a quarterly dividend of $0.215 per share, which represents a 63.2% AFFO payout ratio. This is our lowest payout ratio since becoming a public company. It provides more free cash flow to fund higher growth. Turning to guidance. We are maintaining our fully funded net investment target of $100 million and raising our AFFO per share guidance range to $1.29 to $1.33. At the midpoint, this represents 5% year-over-year growth, and at the high end approximately 7% growth. The increase in AFFO per share guidance is primarily driven by our strong first-quarter operating results and continued portfolio performance to date. We remain disciplined in capital allocation; our fully funded investment target provides meaningful visibility into our ability to grow while maintaining a conservatively levered balance sheet and dividend policy. As we said before, our smaller size is a structural advantage. With only $100 million of net investment, we can generate elevated AFFO per share growth while remaining disciplined in our capital allocation criteria. Our cash flow per share growth is built on a frontage-focused portfolio that is intentionally diversified across tenants and industries, yet concentrated in the attributes that matter most as real estate investors: targeting top 100 MSAs, fungible boxes, and replaceable rents. When combined with our discount to NAV, our growth profile is not yet reflected in our forward FFO per share. To help frame that disconnect, we included pages 24 and 25 in our investor presentation, which compare FrontView REIT, Inc.’s growth, diversification, and valuation relative to peers. FrontView REIT, Inc.’s growth profile is already among the most competitive in the net lease sector, while our AFFO multiple relative to growth remains among the lowest. In our view, that gap does not reflect the quality of the real estate we own, the multiple avenues that drive FrontView REIT, Inc.’s growth, or the long-term value creation embedded in the portfolio. With that, I will turn the call over to the Operator to open it up for Q&A. Operator? Operator: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, please press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from Anthony Paolone with JPMorgan Chase. Please go ahead. Anthony Paolone: Oh, great. Thanks. Good morning, everybody. My first question is, you brought up the idea of looking at development deals. Could you maybe expand on that a little bit and give us a sense as to what order of magnitude you are looking at right now, who your partners might be, how you might structure these sorts of things? Just a little bit more detail would be great. Stephen Preston: Yeah, sure. Good morning, Anthony, and thank you. Good question. I will start with, as a management team, we have been historically involved in significant retail development activities. We are going to look to develop when risk is mitigated, and certainly that will mean that we have a signed lease, that we have entitlements in place—that means your site plan is in place. We have costs in place through a general contracting contract. We have, of course, zoning, and then we are going to have building permits in tow as well. We are going to start small. We think that it is going to be small capital allocations—maybe $1 million to $3 million of equity for any one transaction. Ultimately it is very important that we make sure we have sufficient spreads—that is certainly why you are doing development in the first place—built into the project. And so we expect that we will be doing our own development and that we will be developing with sophisticated partners as well, and expecting somewhere between 100 to 200 basis points of spread built into the projects. I think it is also important to note that development is certainly not new to FrontView REIT, Inc. as well. We have already completed several developments in our portfolio. We have completed a Miller’s Ale House to a Raising Cane’s, a Burger King to a Chipotle, we did a Sleep Number to a Seven Brew. Of course, the Twin Peaks that we have been talking about to two separately box-suited tenants, Jaggers and a Panda Express. And then ultimately we created a Bank of America in our Walmart Rochester outparcel from scratch under vacant land. So we are very suitable and ready to embark upon a development program. And these activities too, I think it is important to note, have brought about $10 million of value increase over and above our purchase price across those assets. So this can be a good engine for us and very accretive, and again we are going to take it slow in the beginning. Pierre Revol: I would just add to that, Anthony. The legacy of the company as a developer goes back even in the NADG days. They were partners with Kimco in a lot of projects as well. There is a lot of understanding on how these partnerships work. And then both Stephen and the team here have these relationships with these developers and have done it for a very long time. That is why it makes sense if you find the right partnership and the right deal with the right real estate qualities that we are pursuing. Anthony Paolone: Okay. Thank you for all that color there. And then just my second question is on the leasing side. You seem to be off to a good start there. Can you maybe give us a little bit of a look ahead and anything you are picking up in terms of potential known move-outs, or how things are going as you look out into 2027? Stephen Preston: Yeah. I mean, I think that is maybe kind of a credit watch list or call it a bad debt question. Everything feels pretty good right now as we look forward. We have the watch list. I think it is pretty minimal. Again, coming from last quarter as well, we have no material changes or additions to that watch list. It seems very healthy. We are watching a GoHealth, a Sleep Number, a couple of small urgent cares, and a couple of gas stations. But otherwise it feels pretty good. We have worked through the pharmacy throughout the portfolio, and that exposure is roughly about 2% or less. And then our total Sleep Number exposure is roughly 70 basis points across all three. To extrapolate a little bit on that, we expect bad debt to be in that 50 basis points range. Right now very little is known, so mostly it is about the unknown at this point. Pierre Revol: And then in terms of lease expirations, we have 10 expirations coming up. There is nothing really in there that we expect to be problematic. We have a couple of vacancies. We have four properties. We are working through those. I think that we talked about Smokey Bones last quarter. We are working to sign a lease on that one. And we have a Walgreens as well that we are working to sign a lease. Those would be potential pickups as we look forward. But we feel very comfortable around the expiration schedule. Stephen Preston: Yeah, actually, that will be a good one. The Smokey Bones is an asset that we decided to take our time on, and that is looking like it is going to become two tenants as well. So again, the virtues of the real estate we buy and the demand that tenants have for this real estate. And then that one other Walgreens that closed—we have hopefully a good tenant that is going to backfill that; we are very close to finalizing that. Everyone will be very happy to hear and learn about it. So again, very excited about our ability to continue to re-tenant and create very strong recapture rates relative to where we were prior. Anthony Paolone: Great. Thank you. Operator: Next question comes from Eric Borden with BMO Capital Markets. Please go ahead. Eric Borden: Good morning. Thanks for taking my question. Just following up on the recapture rates and the lease expiration schedule, just curious if you could help quantify the mark-to-market or recapture rate that you are hoping to achieve on the 10 lease expirations this year and then the 33 in the following year. Thank you. Stephen Preston: Yeah, sure. Of course. Just to expound upon the expirations, I will start with the theme: it is accurate. We have quality real estate. It is desirable. It is fungible, and our portfolio is exceptionally diversified. We view these lease expirations as opportunities for us, and we are not looking to quickly sell these off before expiration. For some context, Eric, since 2016, we have had 51 tenants renew—45 have renewed to the same tenant and six renewing to a new tenant—and we are about at 106% rental rate recapture. Our overall renewal rate is about 90%. So the comment about 2026 and coming up on 2027: the tenants that are renewing or are about to expire are in the top quartile in Placer, so they are performing well. In 2026, we are already through half of the expirations, and we have increased rent income. We only have about nine left, so we expect 2026 to, again, just like historicals, be a very positive year. And then we expect 2027 to follow that same suit, and we are already in discussions with a number of those tenants. Again, very real estate-focused and tenant-driven based on that quality of real estate. Pierre Revol: And I would also add, Eric, to point you to page 12 of our investor presentation. There are several stats here around the Placer scores and the populations, but the one I would call out is a median rent per box over the next five years of all the expirations of $156,000. So if you go to our website, you look at our boxes, you sort of know what is there. That is very good basis. So most people will renew as expected, but on the off chance of the 10% that may not renew or choose not to renew, maybe in 2027, we will be able to resolve that and get higher rents. Eric Borden: Thank you. Appreciate all the detail. My follow-up question is on the disposition spread over acquisitions that you achieved in the quarter—it was approximately 60 basis points. Just curious, how repeatable is that spread as you look to complete your net investment goals this year? Thank you. Stephen Preston: I would say very repeatable, and we will just use historical data to hit that home. So far, in 2025 and into 2026, we have sold off about $86 million of property at about a 6.97% cap rate on average. That is obviously considerably below where we are trading at—close to an 8% or in the upper 7s. Those are the assets that we have sold off that are not our best assets—certainly not our Chipotles, not our Raising Cane’s, not our Walmart, not our Lowe’s. These are assets that we sold off to optimize the portfolio. To give everyone a little bit of flavor on the types of assets that were sold off: Twin Peaks that filed for bankruptcy; Red Lobster; we sold off Ruby Tuesday’s that was previously in bankruptcy; Cafe Rio, which has been closing some stores; we sold a dark Bojangles; and a Denny’s franchisee. If you go through that list—again, these are not the best assets that we have in the portfolio, and they were sold off to optimize. We certainly expect to continue with cap rates in that realm. If we were to add in a couple of the hot assets, then you would see that drop materially. Operator: Your next question comes from Ronald Kamdem with Morgan Stanley. Please go ahead. Ronald Kamdem: Great. Maybe just staying on capital recycling—could you talk a little bit more about the acquisition pipeline and cap rates, how those have been trending, and then on the disposition side, clearly there is always pruning to be done, but are you mostly through, or how should we think about what is left to be filled? Thanks. Stephen Preston: Yeah, let me just start with dispositions. I think the optimization is fairly close to complete. I think it is always prudent to be managing the portfolio, so we expect that we are going to continue to have dispositions, and we probably expect somewhere in the $40 million to $50 million range this year in the aggregate, down about half from prior. With respect to cap rates, we were about 7.5% for the quarter. The market is pretty stable. We expect—we are sort of forecasting—cap rates in Q2 somewhere in that 7.3% range, maybe similar in Q3. In the market, there is increased institutional interest just generally in net lease. There is an abundant amount of capital that is really setting the tone for the market. We play in a different market. Leverage for the smaller buyers is a little bit easier to obtain from some of the smaller banks. Cap rates in the shopping center retail area have come in pretty significantly, not quite the same for our space. We still feel very good with that stable market. I think also the 7.3% versus some of the historical cap rates we have seen— we are going to be focusing a little bit more on what we call “good hot states.” We have got Texas where there is increased population growth, Florida, Georgia, Arizona, etc. Cap rates can be a little bit tighter there. They are generally more landlord-friendly states. To hit on your pipeline question, we have a very strong, deep pipeline. At this point, Q2 is expected and in tow. We have Q3 right now effectively set and in tow. We are seeing a lot of great opportunities. We are buying the same stuff that you see in our portfolio: great real estate with frontage, low rents, typically from motivated or circumstantial sellers. Credit is solid. These are large operations that are long-term operating businesses. Our market, Ron, is attractive, and it is open to us. Just to give a couple of tenants that are in our pipeline: Hawaiian Bros would be a new tenant; Burlington—new tenant; Bob’s Furniture—new tenant; Tropical Smoothie; Spec’s—new tenant; we are looking at a PNC; a pair of veterinarian clinics—new tenants; a Giant Eagle grocery store—new tenant. So we are expanding and buying these great tenants in great markets with great real estate and great credit. The market is there for us, and we certainly have the ability, if we wanted to, to increase the acquisition cadence. We established that availability when we first went public with about $100 million in a quarter. Right now we have the $100 million with our capital in tow, and we are set for this year. But we could certainly expand that, Ron, if we needed to. Ronald Kamdem: Great. Really helpful. And then for my follow-up—on the guidance raise, could you just go through the pieces? Is it bad debt? Is it higher rents? Just quickly the guidance raise components. Thanks. Pierre Revol: The guidance range is primarily driven by the portfolio doing really well. If you think about what we printed in the first quarter at $0.34, at the midpoint of the range, you are effectively doing $0.32–$0.33 in the remaining three quarters. We are not seeing any issues in terms of the portfolio leasing. We do not have any dispositions that are required—these are just portfolio optimizations, nothing distressed. We are seeing good things in the portfolio. We feel comfortable with the range. With most of our bad debt just being unidentified reserves on the things that we are watching, we thought it was a good time to continue to move it forward. Ronald Kamdem: Helpful. Thank you. Operator: Your next question is from Yana Golan with Bank of America. Please go ahead. Yana Golan: Hello? Just following up on the guidance range. Like you said, it kind of implies $0.32–$0.33 per quarter AFFO. So I guess sequentially, how should we think about the cadence for the balance of the year? And then what factors are expected to drive the implied moderation? Pierre Revol: Sure. In my prepared remarks, I walked you through the NOI components in terms of what was in place in the first quarter that will drop a bit into the second quarter. The other income that we called out, and those three tenants that expired and are being re-tenanted—those re-tenantings will not really impact 2026, but will flow into 2027. All in, that drops the effective NOI from Q1 going to Q2 by $700,000. So when you think about the cadence in terms of AFFO per share, you would expect that sort of drop into Q2 from the $0.34, but then as we have these assets coming in and being deployed, and the rent escalators, AFFO should increase from there to get within that roughly $1.31 midpoint. Stephen Preston: Midpoint. Yana Golan: Thank you. Yana Golan: And just sticking to cadence, given where the current share price is and the maintenance of the net investment guidance, how should we be thinking about the timing of deployment of the remaining $50 million of the preferred capital? Pierre Revol: It might be helpful to just go over that. The preferred equity capital we put in place last year on November 12 was $75 million at 6.75% with a convertible feature at $17 a share, which we are over. We have until November 12 to call it, and our idea was to hit our target of $100 million of acquisitions and fund it with the $75 million of equity capital this year. For two years after that final draw—so as late as November 2028—we cannot convert it. There might be a question of whether or not they would convert it, which is possible, but I would doubt that they would, considering that the yield they are getting is 6.75% versus our dividend yield which is much lower than that. But we are fully funded. I expect that we will match fund our acquisitions with the equity and some debt on a 25% LTV ratio as I talked about before. Our second quarter and our third quarter, as Stephen mentioned, are pretty well built, and we will just time the deployment of that preferred equity to fund those deals. Thank you. Operator: Your next question comes from John with B. Riley Securities. Please go ahead. John: Good morning. Maybe thinking about investment yields—I know you talked a little bit about where you want to see development spreads; I am assuming relative to your cost of capital—but how could that impact or maybe uplift the historical cap rates you have seen on your more traditional investments? Stephen Preston: When we are investing in developments, we are going to be expecting to receive a preferred return at the beginning on the capital. What we will be able to do on the development side with the spreads is end up acquiring assets that we would not otherwise be able to acquire due to that spread. For example, if we were wanting to acquire a Chick-fil-A today at a 5% cap rate—as much as we would like to have a few Chick-fil-As in the portfolio—that does not necessarily make sense. But from a development standpoint, it is going to give us access to tenants that we could not otherwise be able to acquire because you add your spread of roughly 150 to 200 basis points, and then now you are putting a Chick-fil-A on the books in the high 6s or low 7s. That is a really good, accretive way to create value for the portfolio. The stable cash flow would be there; we could then turn around and sell that in the open market and create that widened spread. John: That makes sense. And then as I am thinking about the rent roll-ups on the leasing activity, how much of that was tied to replacing tenants that had credit issues? I am assuming the Twin Peaks was kind of repositioning within that number. And was any of it just purely lease expirations where you felt you needed a better rent with a new tenant and therefore did not keep the old tenant in place? Stephen Preston: I think it is a little bit of both. It is credit, it is lease expirations, and it is also being proactive and getting ahead of where we think we may have something that could be a problem. Like our Miller’s Ale House to Raising Cane’s, for example—that was a paying, operating tenant. We understood that sales volumes were not performing well. We proactively reached out and worked through a buyout, and then replaced that tenant with a Raising Cane’s ground lease, which was a huge uplift. So throughout the portfolio, it is a combination of everything, driven by strong underlying real estate value and rents that are low throughout the portfolio. Pierre Revol: I would just highlight on the three we talked about. The Twin Peaks was actually expiring in the first quarter, so we knew that that was an expiring lease. We knew that they were doing so-so, so we solved it before it expired, which is where we can add value. We knew it was coming, we monitored it, and we got a 92% rent increase. The other one is CVS. We knew that the CVS in Chicago was not certain to stay open or renew. They decided not to renew, and we put in Path USA, a child care, which will get an 18% rent increase once that tenant goes in. It is about knowing what is coming and whether or not they are going to stay open or close. If you do not think they are going to renew, get ahead of it and figure out who is the best tenant to replace it. Broadly in net lease, a lot of times people talk about recapture and growth, but they miss the people that do not renew. For us, the ones that do not renew, we are actually finding opportunities to grow there, which ultimately leads to less earnings going away because you have leases that will come on later. It goes to the fact that we have good real estate and good locations where you can find new tenants to replace these boxes, which will help us in 2027 and beyond. Stephen Preston: It is a lot of proactive portfolio management. It is our decades of experience in the real estate space. It is our constant discussions with tenants that allow us to get ahead of these renewals and probabilities. And it is the relationships that we have with real estate directors and tenant rep brokers so we can get a very good understanding of how a tenant is performing, and then we make the appropriate decisions as well. John: Appreciate that color. Thank you. Operator: Next question comes from Daniel Guglielmo with Capital One Securities. Please go ahead. Daniel Guglielmo: Hi, everyone. Thanks for taking my questions. We have talked a few times about development, but I do know over the past couple of years, really since rates went up, it has been hard to get development investments to pencil. What has changed over the past few months around the underwriting math that makes it more attractive? Stephen Preston: You are 100% spot on. Development absolutely does depend on the market and the cycle of cap rates for acquisitions. As you can buy finished product at a higher cap rate, your development spreads begin to narrow, and conversely they widen when cap rates come in or start to fall. The timing needs to be right, and we have all seen—certainly in the retail space—cap rates come in. It is an opportunity for us to create wider returns and accretive values in the development space without taking on very much additional risk. Again, we are going to start small, and we are going to watch it as that cycle of cap rates evolves. That is absolutely important, and it is effectively why it did not work for the last several years. Daniel Guglielmo: Okay, great. That is very helpful. And then on the transaction market, recently what has been driving owners to sell the properties that you are acquiring? It would just be a helpful refresher because you focus on niche property types with less competition. Pierre Revol: The market is filled with individuals and unsophisticated sellers—that is just the nature of the market that we play in—with very little institutional competition. We do not compete on big portfolios. We do not really compete on large assets or vastly marketed deals, which is an advantage for us because we are buying assets that are sub-$10 million. We do not have to deploy large sums of money. We are up against unsophisticated individuals—1031 buyers—that make decisions for a variety of reasons. It could be they just want to sell something, they need capital for something else, they are refinancing their house, they are moving to Miami, there is a death in the family. These are a lot of the reasons why we continually see liquidity and turnover in the marketplace, and why we can, as a buyer, buy better than the other smaller groups because we do not need finance contingencies, we can close quickly, and we are sophisticated. That is why we tend to see elevated or wider spreads relative to the marketplace when we are acquiring an asset. Daniel Guglielmo: Great. Thank you. Operator: Your next question comes from Matthew Erdner with Jones Trading. Please go ahead. Matthew Erdner: Hey, thanks for taking the question. You talked a little bit about the dispositions and that part being somewhat pruned out by now. As you look to refine that a little further, are there any geographic concentrations—Illinois kind of sticks out to me—or certain sectors that you are looking to move out of? Stephen Preston: It is interesting—Illinois does get a bit of a bad rap, but some of the suburbs in Illinois are some of the strongest suburbs in the country, and they are safe and vibrant. All that being said, we have brought Illinois in, and we want to bring Texas up. We want Texas to be our number one state at some point. From an industry perspective, we are always going to continue to keep diversification—that is a prime focus—while focusing on real estate quality and our rents. We like certain medical, getting a little bit of financial, automotive—again keeping diversity. We are adding a couple of vet clinics this quarter. Fitness—we like fitness. QSR/fast casual, and certainly some retail concepts. Fitness is generally sitting in a pretty good place right now—coming back from post-COVID levels and exceeding them. There are new concepts like yoga and HIIT moving into the LA Fitnesses of the world, and they are performing well. Where we are being careful—this is a bit of a new add for us—not that we have any high exposure to this at all: we are careful with gas as you see that model unfold, and pharmacy we have always been continuing to bring down, and that is right around 2% of ABR. Car wash we are sensitive to, even though ours perform well. And certainly with restaurants, we have continued to reduce older, tired concepts—concepts that were popular in the 1990s and early 2000s that just are not cutting it today. We want to stay away from that. With respect to restaurants, we like what we do own. It is not that we do not like restaurants; we have reduced exposure to tired concepts. If you are getting a restaurant—a QSR with a drive-thru—that has a versatile, fungible box that can work for 10 different types of uses at low rents, we are going to continue to be happy owning those as well. Pierre Revol: I would just add, Matt, on the disposition component: we do look at whether it is a tertiary market. We do target top 100 MSAs; we want to bring that higher. Some tenants might be really good tenants, but they are not good tenants for FrontView REIT, Inc. They are good tenants that people will buy because of their credit or national brand, but if they are in a tertiary market with a lot of land, with nothing around it, with not a lot of population, it is not really for us. You might see some of that. Those assets are still really sought after by a lot of different buyers. That could be a component. The nice part is we can choose to do these; we do not have to do these. It is completely improving the real estate quality of the portfolio as well. Matthew Erdner: Got it. That is very helpful. I appreciate all the comments. Thanks. Operator: There are no further questions at this time. I will now hand the call back to Stephen for closing remarks. Stephen Preston: Yes. Thank you, everyone, for your time today, and we appreciate your interest in FrontView REIT, Inc. and our differentiated approach to net lease. We look forward to seeing you at the BMO conference next week and, of course, NAREIT in June in New York. Please do not forget to check out our properties on our website. Be safe and be healthy. Thank you all. Operator: This concludes today’s call. Thank you for attending. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the Murphy Oil Corporation First Quarter 2026 Earnings Conference Call and Webcast. [Operator Instructions] I would now like to turn the conference over to Atif Riaz, Vice President, Investor Relations and Treasurer. Please go ahead. Atif Riaz: Thank you, Rebecca. Good morning, and welcome to our first quarter 2026 earnings conference call. Joining me today are Eric Hambly, President and CEO; Tom Mireles, Executive Vice President and CFO; and Chris Lorino, Senior Vice President, Operations. Yesterday after market close, we issued our first quarter earnings release, a slide presentation and a stockholder update. These documents can be found on Murphy's website, and we will reference them today throughout our call. As a reminder, today's call contains forward-looking statements as defined under U.S. securities laws. No assurances can be given that these events will occur or that the projections will be attained. A variety of factors exist that may cause actual results to differ. For further discussion of risk factors, please refer to our most recent annual report filed with the SEC. Murphy takes no duty to publicly update or revise any forward-looking statements, except as required by law. Throughout today's call, production numbers, reserves and financial amounts are adjusted to exclude noncontrolling interest in the Gulf of America. I will now turn the call over to Eric for opening remarks. Eric Hambly: Thank you, Atif, and thanks to everyone for joining us this morning. I hope you've had a chance to review our stockholder letter, which provides a detailed overview of our first quarter operational and financial performance. Before turning to results, I want to touch on the broader context. Ongoing geopolitical developments, particularly in the Middle East, contributed to elevated volatility across energy markets during the quarter. While Murphy does not have direct exposure to the region, these global dynamics influenced realized pricing and reinforce the importance of operating with discipline and a long-term mindset. On today's call, I will briefly discuss this market environment, review our first quarter performance and provide an update on our exploration and appraisal program. Against the backdrop of significant commodity price volatility, Murphy delivered a strong quarter. Our oil-weighted unhedged portfolio allowed us to fully capture prices as they moved materially higher. We generated cash flow of $429 million and adjusted net income of $47 million, including $67 million of exploration expense related to 2 unsuccessful wells in Cote d'Ivoire. Cash flow was supported by higher oil prices late in the quarter with realized prices exceeding $90 per barrel in March. It's worth noting that March prices were not representative of the full quarter as prices rose roughly 50% from January to March. Our average realized oil price for the full quarter was $72 per barrel. Given the ongoing commodity price uncertainty, we view flexibility as a competitive advantage and have chosen to remain unhedged at this time. This reflects the strength of our balance sheet and our ability to manage through cycles without relying on market timing or hedging for financial stability. On activity and capital, our approach continues to be driven by market fundamentals and our long-term strategy, not short-term price movements. Accordingly, we are maintaining our capital guidance range of $1.2 billion to $1.3 billion. Externally, as our non-operated partners evaluate how to respond to the current environment, we're seeing a range of approaches emerge. We're engaged with our partners on their plans, and we'll assess the merits of participating in any new activity on a case-by-case basis where it clearly creates shareholder value. Turning to operations. What stands out most this quarter is our execution, and that execution starts with our people. I want to recognize our teams for once again delivering robust, consistent execution across our portfolio. We delivered production above the high end of guidance, operated efficiently and advanced key projects across the globe in line with schedule and within budget. Our production outperformance was driven roughly evenly by our onshore and offshore operations. Onshore, Eagle Ford exceeded expectations by nearly 3,000 barrels of oil equivalent per day, supported by strong performance from the 15 new wells brought online during the quarter. Longer laterals and continued innovation in drilling and completions are delivering strong wells efficiently, reinforcing the quality of this asset. Offshore, the Gulf of America also outperformed by about 3,000 barrels of oil equivalent per day, driven by high facility uptime and efficient execution of planned maintenance. Turning to exploration and appraisal. We are making meaningful progress across our program. In Cote d'Ivoire, drilling continues at the Bubale exploration well. We recognize the interest in this well and remain committed to disciplined, transparent communication. We will provide an update once operations are complete and the data have been fully evaluated. In Vietnam, at our Hai Su Vang, Golden Sea Line field, we are finishing operations on the HSV-3X appraisal well and we will move next to the HSV-4X well, the final well in the appraisal program. Together, these wells will help define the field's full potential and inform next steps on development. As we have previously communicated, we will provide results and an updated resource range at the conclusion of this appraisal program. To close, this quarter was a real-world test of our strategy. In an environment defined by rapid price movement and elevated uncertainty, our focus remains unchanged. We executed with discipline, exceeded production expectations and delivered solid financial results while continuing to create long-term shareholder value. Looking ahead, our strong balance sheet positions us effectively across a range of outcomes, providing resilience in a weaker environment and full participation if prices remain strong. With that, we will open the call for your questions. Operator: [Operator Instructions] Your first question comes from the line of Arun Jayaram with JPMorgan. Arun Jayaram: Eric, totally understand how you're not yet at TD and Bubale. But I was wondering if you could maybe comment a little bit on just your overall geologic concept for that well. And we did note that it is taking a bit longer to reach TD. So I was just wondering if you could provide just a little bit more color on your geological concept, how drilling is going and just overall, how you'd characterize progress on that well? Eric Hambly: Yes. Thanks, Arun. Thanks for the question. We are actively drilling Bubale. We have -- the main objective of the well is the Cenomanian target. There is a secondary objective in the Turonian, which is shallower. We are currently drilling the well in the Turonian section. We have experienced slightly slower drilling progress than we had hoped for. So the well is taking a little longer to announce a result because we're still drilling it, and we've had a little bit slower rate of progress drilling. It's just a bit of hard rock to drill in part of that Turonian section. It's taking a little longer than I had hoped. I can assure you, there's no one in the world who would like more than to be able to give an update on Bubale because I'm watching it very closely. I'm happy with our team's progress. We just don't have a definitive result to talk about as we're actively drilling it and have not yet reached the primary objective. Arun Jayaram: I was wondering, as we look forward to your updates on the third and fourth well in Vietnam, and appreciate, obviously, the 3-part series that you held on exploration and the PSC, et cetera. But talk to us about some of the development options that you're thinking about in Vietnam for HSV, which obviously has a lot of promise at this point. Eric Hambly: Yes. We talked a little bit about this on our webinar series. So for anyone who's listening, if you haven't listened to our webinar series, I'd recommend you do that. The concepts that we're currently evaluating for HSV, while it's still early days, are 2 primary opportunities. The first would be an FSO paired with a series of platforms that would be processing platforms and/or wellhead platforms. And the alternative to that would be an FPSO concept, either a new build FPSO or a potential redeployment of an existing FPSO. We don't yet know the ideal approach forward. But we're hoping after we collect the data from our appraisal program, we will use that information we collect to design a field development plan. We will seek an optimal development based on capital efficiency and timing. And we'll probably about a year from the conclusion of our appraisal program, we'll likely have clarity on our path forward. So FPSO or an FSO with some wellhead platforms and processing platforms. Operator: Your next question comes from the line of Carlos Escalante with Wolfe Research. Carlos Andres E. Escalante: I'd like to ask first on your reinvestment rate framework moving into the end of the year into 2027. It looks like the collective aggregate of the estimates of my peers and I have you at around 185,000 barrels of oil equivalent per day for 2027. I know I'm being very specific here, and I'm not asking you for any type of guidance. But if I layer in Chinook first oil at LDV and then you recently sanctioned Banjo and Cello plus your incremental efficiencies in the Eagle Ford, it starts to look like a very conservative read into your 2027 number. So I would ask you to help us calibrate the production versus capital efficiency equation, particularly as nonproductive CapEx converts into producing assets that are free cash flow positive in 2027. So help us think about your reinvestment rate into 2027 relative to 2026. Eric Hambly: Yes. Obviously, Carlos, we don't have a budget for 2027 yet, but I'll give you a little color around what I think is going to be constructive for us as we head toward the end of this year and into next year. The volume addition from the Chinook 8 well that we expect to come online in the second half of this year will be significant. And Lac Da Vang Golden Camel field starting up in the fourth quarter of 2026 and ramping through 2027 will add to additional volumes in 2027. What we haven't yet come up with is a detailed plan for exactly what to do with our onshore assets. I think we have a lot of thinking to do around how much we spend on exploring next year. We have a target-rich environment to explore in Vietnam and some exciting opportunities to test in the Gulf of America in 2027. So we have work to do before we form a 2027 budget around how much we spend on exploration in the Gulf and Vietnam versus deploying for investing in Eagle Ford, Tupper Montney, Kaybob Duvernay. So I don't have clarity yet on exactly what our forecast of production will look like for '27 because we have a lot of choices to make. I think we're fortunate to be in a mode where we can choose all those trade-offs. But just circling back, I think production additions are pretty significant from Chinook and then ramping up with the addition of Lac Da Vang field being online. And then Cello and Banjo is, we expect that will be a 4,000 barrel a day net contribution in 2028, not 2027 because we're expecting to bring it online late in 2027, just for clarity. Carlos Andres E. Escalante: That actually does help a lot. And then if I can come back to Cote d'Ivoire real quick. Following your development plan submitted to the Ivorian government in 2025 for Paon specifically, is that in your mind still -- well, first of all, can you give us a brief overview of what may be taking a bit longer than you expected? What's the sticking point perhaps you're having with conversations with the government? And then second, is that still progressing in your mind as a stand-alone development? And I know this is too much to ask because it's hypothetical, but in the event of a discovery at Bubale, would that underpin a joint development to add scale? Eric Hambly: Yes. Great question, Carlos. So we did submit the field development plan as part of our work obligation. We -- in parallel with preparing and submitting that field development plan, we negotiated with various Ivorian parties to try to come up with a gas pricing arrangement that would allow that development to move forward. The Paon field is an oil field with a relatively thin oil column and a large gas cap. So roughly 2/3 of the BOEs produced from the field, based on our estimation, will be gas and the rest will be oil and gas liquids. So gas pricing is really critical for that project having economics that meet a threshold that we're willing to invest. We were so far unsuccessful in agreeing with the Ivorian government on a gas pricing structure that would inspire us to sanction the project. So while we know what we'd develop, how we would drill the wells and the facilities we would install, pipelines we would install, et cetera, we didn't get to a point where we were ready to move forward with the development. We're not obligated from our agreements with the Ivorians or the PSC to do the project, we are obligated to submit a development plan, which we've done. We're interested in doing the project if it can make money at a threshold we're willing to invest in. Going back to your question in a bit more detail, any resource that is discovered near Paon could help add scale that could make the project commercial at a gas pricing structure that could be maybe lower price, which is in line with Ivorian desire and make the project move more economically. Resource density would help justify the cost of a gas pipeline from the field or fields to the shore to deliver gas for power generation in Cote d'Ivoire. So any discovery even by third parties nearby might also be helpful for bringing that project forward at some point. Carlos Andres E. Escalante: Just to clarify, so would -- does Paon lower the threshold of your consideration of commercial hydrocarbons at Bubale? Eric Hambly: It would, yes. Operator: Your next question comes from the line of Chris Baker with Evercore ISI. Christopher Baker: Eric, hoping you could just maybe help frame up the opportunity in Cameroon, what you guys are seeing there and what sort of next steps we should expect? Eric Hambly: Yes. Thanks, Chris. We are interested in Cameroon for a few reasons. It has attractive geology and allows us to do what we are -- in communicating we're trying to do with frontier and emerging international exploration, which is get into opportunities that are at a relatively low cost of access and allow us to test prospects with relatively low-cost wells that target large resource. Cameroon is a bit interesting and unique in that it offers both shallow and deepwater exposure with a variety of play types, attractive geology, a proven source rock system and discoveries in the country, particularly in shallower water. And it also -- we recently acquired and analyzed some newly reprocessed seismic data, which points to some prospectivity that was not obvious to us when we were previously in Cameroon about a decade -- over a decade ago. And so we see some opportunity that's attractive, and we get into the country relatively cheaply and can assess it. And at some point, if we decide to drill a well, we think we can test large opportunities with low well cost, which is what we're trying to accomplish. That's kind of the setup, Chris. Christopher Baker: That's great. Just as a follow-up, the macro has obviously changed quite dramatically here. It sounds like for the most part, the '26 program has been seeing some early wins and remains largely on track. I guess one of the big themes you've seen from some of your peers this quarter is a focus on flexibility when it comes to cash returns. I'm just curious, as you guys look out for the rest of the year, under a strip scenario, there's obviously quite a bit of excess cash. And I saw in the release, obviously, remain committed to the 50%. Can you just help frame up some of the flexibility and how you're kind of thinking about share buybacks from here and how that fits into the story for the rest of the year? Eric Hambly: Yes, it's a great question. We are committed to delivering a competitive dividend to our shareholders as we've done since 1961. And we also have a desire to be a somewhat consistent repurchaser of our stock so that we can concentrate wealth in our existing shareholders. Having said that, we are not attempting to be very rigorous around a target of share buyback per quarter. We will likely approach share buyback with a bit of a more opportunistic assessment. And if we think that our share price is really cheap, then we'll probably move more quickly. If we think our share price is a little higher in the range, we may be a little more patient. So we'll sort of watch where we think that's heading. If you look at Murphy's share price trading performance over the last several years, even maybe longer, we tend to trade in a very tight correlation with oil price. I think that most prognosticators would guess that oil price will likely come down after resolution of the conflict in the Middle East. And so we're going to kind of watch that and see, does it make sense to move quickly or does it make sense to wait because I anticipate it's likely oil price falls significantly that our share price may come down with it. And so it maybe makes sense. So we're going to be a bit careful and disciplined around that, and we'll act if it makes sense, and we'll wait until a better opportunity if we think that is coming in the future. Operator: Your next question comes from the line of Greta Drefke with Goldman Sachs. Margaret Drefke: My first, I'm just wondering is if Murphy has any exposure to the Gulf specific crude pricing that has seen an outsized positive move in recent weeks and months? And if so, what's the lag on earnings impact to realized pricing that we should be mindful of? Eric Hambly: So we don't have any direct exposure to crude in the Middle East. We benefited from higher oil prices, and we've seen a little bit around pricing differentials move a little bit. I may let Tom, our CFO, who also oversees our marketing team, just give a little more color around differentials and part of our production from the U.S. Thomas Mireles: Yes. We are definitely seeing some more constructive pricing in the U.S. Gulf. Some of our crudes that benchmark to WTI, but the differentials are starting to show more strength than where we were a few months ago. So those lag by about a month. Usually with WTI, our benchmarks, we see those average prices as we market our crude. But the diffs -- the differentials are set. There's a bit of a lag on those. So through April, going forward, we'll start benefiting from those more constructive diffs in our crudes. Margaret Drefke: Great. I appreciate that color. And just my second question is just if you can speak to how the exploration blocks that Murphy was awarded for the new federal lease sales compete for capital relative to other prospective areas in your existing Gulf of America position. Eric Hambly: Yes. The blocks that we picked up in the most recent lease sale from December of last year are a combination of blocks near our existing infrastructure where we'll target what are likely high chance of success, but not very large opportunities that allow us to put additional future volumes over facilities that we own and operate today. And the other part of the blocks we picked up are a little more sort of emerging part of the basin. And we are going to assess and evaluate the optionality we have there and think about an exploration program in '27, '28 that balances near field versus a little more emerging part of the Gulf. Operator: Your next question comes from Leo Mariani with ROTH Capital. Leo Mariani: I wanted to just follow up a little bit on Bubale. I think, obviously, the well is taking longer than expected. You did mention there was some kind of harder rock in Turonian. Was that kind of the primary driver around the well taking longer? Is it just slower drilling? Or was there any other kind of like mechanical snafu or did it get started late? Anything like that? And then I also wanted to ask, it sounds like you're drilling through the Turonian, have you seen any shows in that zone at this point? And do you have kind of an updated estimate in terms of when you think the well is done? Are we just a couple of weeks away? Is it relatively imminent? Just any more color would be great. Eric Hambly: Sure, Leo. Unfortunately, the issue is we've had slower drilling than we'd hoped for. It's not shocking because there are offset wells drilled by other people that have also seen some slow drilling in the section. It is a little slower than we were hoping for. And as I said before, we don't have any definitive conclusive results to talk about, and I don't want to speculate as we're still drilling through and have not even seen the primary objective. So we'll wait until the well is done, and we'll give you an update. Leo Mariani: Got it. Okay. And then just sticking with exploration. Obviously, you announced Cameroon. It seems like it wasn't too long ago where you guys talked about Morocco as well. So it definitely seems like the company is kind of stacking up some opportunities internationally. Clearly, you've had success in Vietnam, which looks very promising. Should we really be thinking about just Murphy kind of continuing to, maybe I'll just say, move some of these exploration priorities come up in the stack. I know you're drilling with more exploration dollars this year. And obviously, that will depend on the oil price environment, but should people just generally think that perhaps over time, Murphy will continue to spend a little bit more on exploration than maybe it has in past years? Eric Hambly: Yes. I think this year, we're spending a little more than typical because we were quite excited about the prospectivity in Cote d'Ivoire, and we felt it made sense to drill those prospects at 100%. So our spend this year is a little higher percentage of our overall capital. And then if you pair that with our Vietnam appraisal program, which is quite active, it's just a bit of a heavier year than normal. I think if you look longer then we're likely to spend probably 10% to 15% of our capital program on exploration, and that would be all forms of spending, that would be on our people, our seismic data and our drilling wells. So that could change if we had a compelling reason in the future, but I think that's a pretty good way of modeling us. We're trying to keep opportunities in front of us. So where we find attractive entry points, where we can do what I said before, which is get in relatively inexpensively and test prospects that have large resource with relatively low-cost wells, we want to set up a stack of opportunities that can do that for us. And these things take time to progress and mature. So we want to have a program where every other year or so, we have a new thing we're testing because we think the world needs ongoing exploration and exploration success to supply demand growth that's expected in crude oil. So that's what we're trying to do. Leo Mariani: Okay. That makes sense. Maybe just last one for me here, Eric. So obviously, Murphy had a bit of a rigorous capital return framework that was laid out a handful of years ago. You commented on this on the call. It sounds like you're kind of moving a bit away from that when maybe that framework made sense when oil was a little bit more range bound. Now that oil has seen just tremendous volatility, should we kind of assume that the rigorous framework is somewhat abandoned here and you guys are just going to be kind of opportunistic and not necessarily give 50% of adjusted free cash flow back? Eric Hambly: Yes, Leo. I think I wouldn't characterize our framework as still fully in place. The only thing that I think we'll try to do is be a little more opportunistic around timing of execution of our framework. We still want to buy back our stock. We still want to occasionally increase our dividend. We still want to use part of our cash flow to target to our balance sheet. Obviously, with our debt towers now, it's very difficult for us to remove -- reduce long-term debt, but we can build cash on the balance sheet to affect net debt. Those are all things we want to do. There's no change to our framework, although I think that we are in the face of what I would characterize as extreme commodity price volatility, we'll probably be a little more opportunistic around timing of executing what we desire to do. Operator: Your next question comes from Phillip Jungwirth with BMO Capital Markets. Phillip Jungwirth: I had a couple of questions on the Eagle Ford, where well performance continues to be really strong. First, can you just talk about what's changed in the program over the last year to drive the better results? Would it make sense to kind of revisit the 30,000 to 35,000 a day plateau for this asset given the inventory? And then just lastly, I wanted to ask if the planned Catarina wells later this year are mostly Lower Eagle Ford? Or does this also again include the Upper and Austin Chalk? Eric Hambly: Yes. I'll give you my high-level thoughts around how we're allocating capital, and then I'll let Chris Lorino provide more context on what's driving well performance. So we have guided kind of a midterm perspective of Eagle Ford in the 30,000 to 35,000 barrel a day range net to us. Last year, we exceeded that on the back of really strong new well performance. This year, our guide is also higher than 35,000 barrels a day, around 38,000 barrels a day because we're kind of carrying that performance in from last year. We did allocate less capital to Eagle Ford in '26 than prior because we saw strength of performance, and we've seen some early strong performance from our Eagle Ford program this year. So really happy with how that's going. We haven't decided yet if we're going to allow that asset to decline back down to a 30,000 to 35,000 range in future years or if we'll try to keep it at 38,000 barrels a day or close. I have a guess that we're likely to try to keep it a bit higher, but that's something that we have choices to make on as we formulate a budget for next year. And so that's kind of how we're thinking about the asset. It's not quite clear to us yet the best use of capital. It will compete for capital with other opportunities we have across our portfolio. So we have to think about that as we formulate a budget for next year. And I'll let Chris Lorino give a little context on what's driving well performance and maybe the well mix that's left the rest of the year. Chris Lorino: Phillip, yes, the performance has been a pretty simple story. It's been a lot around the capital efficiency improvements that we've made, a lot about longer laterals and taking advantage of the additional footage and driving down our cost per foot. So -- and also, we continue to tailor each location to specifics around the rock and all the things that go into what's nearby and what adds up to those locations. So that's -- we've really got down to where we've got it down to a science in each location and continue to see surprises to the upside. And if you look on the earnings deck, you can see some of the Catarina performance, a really great shallow decline that we're seeing there. So we've got a lot of running room in Catarina and continue to have some running room for longer laterals as well to take advantage of these capital efficiency stories. Phillip Jungwirth: And then I also wanted to ask about the Gulf of America lease sale, but more specific to those Alaminos Canyon blocks that you kind of referenced there. I know it's early, but I was wondering if you could at least be able to talk about what drew you to this part of the basin as far as seismic or anything else just because it is a newer area. Eric Hambly: Yes. We acquired some seismic data in advance of the lease sale that pointed us to some opportunities that we thought were compelling enough that we should target those blocks. And we're excited about the potential. We have more work to do to work through our exploration prospect assurance process and get comfortable that we've done everything we can to make a decision around drilling what looks like an interesting prospect or 2, and that work is ongoing. And I think there's a good chance that we may have a well out there in Alaminos Canyon in our '27 or '28 exploration programs. Operator: Your next question comes from the line of Tim Rezvan with KeyBanc Capital Markets. Timothy Rezvan: I want to ask first on expected oil prices in Vietnam. Eric, when I last saw you and the team in Houston in March, you mentioned a $12 premium to Brent you were seeing for oil in Vietnam. And you sort of suggested this wasn't sort of a one-off issue with like refinery demand. So I know volatility is really high across the globe. But can you kind of give some context on what you're seeing on oil pricing in Vietnam and maybe how you think that could look by the time you get first production there? Eric Hambly: Yes. I really wish I knew what oil prices would do in the future. What we expect from Vietnam on a long-run basis is based on location and crude quality, we would expect Brent plus maybe $2 or $3. Right now, there is a significant disruption to oil flows to Asia and physical deliveries of crude in the region have been seeing elevated differentials to Brent. So Brent plus $12 was what was on the market in March, which obviously, that's a fairly -- we expect that to be a short-run thing. I don't know what Brent pricing will be when we come on stream in the fourth quarter. And I don't know how limited physical cargoes will be in Asia in the fourth quarter of this year when we come online. But I do think that we expect to see Brent plus something. I don't know if that will be Brent plus $2 or $3 or Brent plus $12. I think we are fortunate to have a growing business in Vietnam, where there's strong demand for crude. And I think the world is likely to price in crude deliveries to Asia with a little more geopolitical risk premium than maybe they were before the conflict. So I think that sets us up for some success. Timothy Rezvan: Okay. I appreciate the context there. And then as my follow-up, I just want to ask on the CapEx cadence for the year. It's very front-end loaded. It looks like about 68% of the spend in the first half, those of us with gray hair are used to seeing companies really struggle to hold the line on spending when they have such a heavy front-loaded skew. So can you talk about your confidence that you can stick to that budget? And perhaps I know you talked about non-op opportunities, like what may cause you to deviate if Brent does hold at such a high price? Eric Hambly: Sure. I'm very confident in our ability to deliver a capital program that's in line with our guided range. I think if you look at our performance over the last few years, we've been pretty good at coming in really close to the range. Last year, we actually underdelivered on the range. We came in a little lower on CapEx. Our program is front-loaded a bit for 2 reasons, we have a heavy onshore program that's weighted to the first half of the year in terms of drilling and completing wells. And our exploration and appraisal program in Vietnam and Cote d'Ivoire is heavily weighted to the first half of the year. So I feel good about the things that are in our control allowing us to deliver capital within the range. We do think it's possible there may be non-operated opportunities in our Eagle Ford business that come up that may be something that makes sense for us to participate in. I think those things would not be very significant. And I think today, when I look at what may develop, I feel good that our range covers what is likely to happen. I will caveat that with one thing, if we are fortunate enough to have a success at Bubale, we are likely to drill an appraisal well at Bubale immediately. We have a rig available and equipment available to do that. We've signaled that in the past investor engagements that that's something we would likely do if we were fortunate to have success. I don't know what we have yet, so I don't know if that will happen. But another well at Bubale this year is not in our capital range, and it would push us either to the high end or maybe perhaps beyond the high end of that range. [ indiscernible ] Operator: Your next question comes from the line of Josh Silverstein with UBS. Joshua Silverstein: In Vietnam, I wanted to see if you could talk a little bit about the LDT exploration prospects there. I think you guys are set to spud in the back half of the year. Maybe just some similarities and potentially if a discovery, a quick tieback opportunity to LDV. Eric Hambly: Yes. The LDT North prospect is White Camel North. That prospect is targeting the same age reservoir as the Lac Da Trang or White Camel discovery that we made in 2019. It's a different compartment, but the same age reservoir. We are expecting it to have a mean to upside gross recoverable resource range of 40 million to 80 million barrels oil equivalent. Again, our expectation in this basin is it's quite oily. With success there, it would likely be a tieback to the infrastructure that we're developing for Lac Da Vang or Golden Camel. If it happened to be extremely on the large end, it could anchor an additional hub. But I think the most likely outcome is that it will be tied back to the FSO that we're using to develop the Lac Da Vang field, which will be installed later this year. Joshua Silverstein: And then just maybe on the new country entry front, Cameroon this quarter, Morocco earlier this year. Can you just talk about kind of broadly the strategies for entering these new countries and areas versus, say, doing a bit more in the Gulf versus, say, Alaska or other parts of Africa that have kind of established basins there? And maybe along the same lines, how would you kind of think about the risking of these prospects versus, say, what you were doing in Cote d'Ivoire? Eric Hambly: That's great. What we're trying to do is use regional study to guide entry into opportunities that we like. So instead of saying, hey, there's a prospect in one block in one country, let's go get it. We're actively assessing opportunities over a large geography, doing detailed regional study and identifying opportunities where we think we can assess -- cheaply assess and test large opportunities. Those are going to be mostly in what we would characterize as emerging basins. So there's a working petroleum system identified by either past discoveries or other exploration wells that allow us an opportunity to test large resource with low well cost. That's what we're trying to do. If I characterize our portfolio today, I would say that we have a limited ability in the Gulf of America to identify large opportunities. The well costs in the Gulf are expensive because of the complexities of drilling, either the depth or the sub-salt, et cetera, and the resource ranges are becoming smaller and smaller in the Gulf as a trend. We do have some compelling larger prospects in our portfolio. Most of our opportunity set in the Gulf is going to be smaller opportunities near infrastructure, whereas internationally in Vietnam, and Cote d'Ivoire, in Cameroon and Morocco, we have an ability to test larger things with cheaper wells, which is kind of what we're trying to do. I think we're fortunate to have a capability that we've maintained to be an international explorer and we execute generally quite efficiently in our well programs. If you look at the risk profile across our business, the near infrastructure prospects in the Gulf of America are our highest chance of finding hydrocarbons. The opportunities we're drilling in Cote d'Ivoire and the kind of things we'll test in Cameroon are likely to be kind of the next up on the risk profile. I would characterize the Morocco opportunity as frontier and the highest risk profile in our portfolio now. We are planning to do some seismic reprocessing in Morocco, which may help us derisk that prospect. And that's kind of the setup for how we're going to move through assessing the portfolio we have to explore in West Africa and in the U.S. Operator: Your final question comes from the line of Charles Meade with Johnson Rice. Charles Meade: Forgive me if I'm -- I missed the few minutes of your call, I don't know hard time getting on, but -- so forgive me if I'm asking something you already covered. But I wanted to ask you to speak kind of at a high level about Chinook because it's going to be at that 15 MBOE a day gross, that's going to be a big increment to your Gulf production. And I think an earlier caller was asking about that. But can you give us the big setup here? I mean, this field has been producing over a decade. It used to produce a lot more. This looks like it's going to be a big new producer. Can you just give us a reminder, what is the setting of this -- of your reservoir here? Are there follow-up opportunities that are contingent on how this #8 well performs? And how much capacity is there available at the Pioneer FPSO? Eric Hambly: Yes. So the well is targeting the Wilcox, 2 Wilcox sands that are currently producing in another well in the field in the same fault compartment, the same reservoir section. There was a well that had produced back in 2019, and that well had a mechanical issue, and we have not produced that well since. And we believe that the well is something that we cannot effectively produce going forward. So we planned a development well to go develop the reservoir. I would characterize the reservoir as having a large in-place volume and a low current recovery factor. It is underdeveloped and needed additional wells to produce the field. We have identified this opportunity many years ago, but we didn't want to act on it for a couple of reasons. First was we were leasing the FPSO that is used to produce the field. And we identified that the terms were not that great after we took on the assets from our Petrobras joint venture deal, MP GOM. When we got it into our operatorship, we realized it wasn't a great lease agreement, and we worked to purchase the FPSO, which we did last year, which allows us to have improved economics on any future activity in the field. We also have a very expensive well that takes a long time to drill and complete. And while we were on a debt reduction journey to get close to our ultimate debt target, we didn't want to allocate capital to this just because it was a singular very large thing, and we wanted to wait until we had the FPSO purchased. So we've really done a great job, I think, of setting up this field to have a good financial outcome. Again, it's a development well in an existing reservoir. It will add additional production from the same reservoir that's already producing. So we don't really have a contingency plan. It's just an additional development well, kind of effectively replacing a well that had previously been producing in the field, but in a more optimal location. There's probably additional opportunities in this field, both exploring untested fault blocks and maybe an additional production well that we are currently evaluating and the results from this well will also help inform whether or not we think an additional well will be necessary. Charles Meade: Got it. That is great color. And then just as a quick follow-up. I think it was a couple of years ago, we were wondering what was going to happen with the Petrobras assets, your NCI volumes. And that just kind of seemed like it fizzled out. Is there still any process underway or any chance for you guys to acquire that? Or would you have a pref on that if someone else announced a deal for it? Eric Hambly: Yes. We would love to acquire it at the right price. Today, I don't believe that Petrobras is actively marketing their ownership in the joint venture. We do have a pref right if such a deal was struck. So at the right price, it would be great. Operator: I will now turn the call back over to Eric Hambly for closing remarks. Eric Hambly: Thank you all for another engaging Q&A session. Paul Cheng, if you're listening, we had expected you to pop up with a question on this call. Paul covered Murphy as an analyst for over 30 years and just retired from Scotiabank in March. We always appreciate his thoughtful questions, and I'm sure the incoming team will be happy to carry the baton. Thank you all for tuning in, and thank you to our shareholders for their ongoing trust. This concludes our call. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Thank you for your continued patience. Your meeting will begin shortly. Team will be happy to help you. Welcome to Forward Air Corporation's first quarter 2026 earnings conference call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions following the presentation. Lastly, if you should require operator assistance, please press 0. I would now like to turn the call over to Tony Carreño, Senior Vice President of Treasury and Investor Relations. Thank you, operator. Tony Carreño: Good afternoon, everyone. Welcome to Forward Air Corporation's first quarter earnings conference call. With us this afternoon are Shawn Stewart, President and Chief Executive Officer, and Jamie G. Pierson, Chief Financial Officer. By now, you should have received the press release announcing Forward Air Corporation's first quarter 2026 results, which was also furnished to the SEC on Form 8-K. We have also furnished a slide presentation outlining first quarter 2026 earnings highlights and a business update. The press release and slide presentation for this call are accessible on the Investor Relations section of Forward Air Corporation's website at forwardair.com. Please be aware that certain statements in the company's earnings release announcement and on this conference call may be considered forward-looking statements. This includes statements which are based on expectations, intentions, and projections regarding the company's future performance, anticipated events or trends, and other matters that are not historical facts, including statements regarding our fiscal year 2026. These statements are not a guarantee of future performance and are subject to known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For additional information concerning these risks and factors, please refer to our filings with the SEC and the press release and slide presentation relating to this earnings call. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this call. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, unless required by law. During the call, there may also be discussion of metrics that do not conform to U.S. Generally Accepted Accounting Principles, or GAAP. Management uses non-GAAP measures internally to understand, manage, and evaluate our business and make operating decisions. Definitions and reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in today's press release and slide presentation. I will now turn the call over to Shawn. Shawn Stewart: Good afternoon, everyone, and thank you for joining us. I appreciate your interest in Forward Air Corporation. There are three main topics that I would like to cover on today's call. First, I will provide an update on the customer transition and our strategic alternatives review that we announced in our press release. Second, I will share some thoughts on our first quarter results and the logistics market in general. Third, I will comment on recent awards earned by our team before turning the call over to Jamie. Let me start with the customer transition. While no formal notices have been delivered, we are in discussions with one of our largest customers to transition a significant portion of their business to other providers. How much of the business will be transitioned and the timing thereof are still being discussed, but we are currently anticipating that the majority of what will ultimately transition will start in early 2027 and take place throughout the balance of the year. It is important to note that we believe this has little, if anything, to do with the impeccable level of service that we provide them and more about their own internal diversification strategy. We are still in active discussions to retain as much of the business as possible, and we are doing everything we can to minimize the impact to our company. I want to reiterate that we believe the customer's decision is entirely related to their own operation and supplier diversification initiatives and has nothing to do with the exceptional service we have provided them during our long-term partnership. This leads me to an update on our strategic review and the new actions we are now pursuing to enhance value and help offset this potential impact. As you know, in January 2025, the Board initiated a comprehensive review of strategic alternatives to maximize shareholder value. We have had extensive negotiations and discussions with multiple parties. However, due to a variety of factors, including the developments that I just mentioned, no actionable proposals for sale of the company were received. We continue to consider all opportunities to enhance shareholder value, and we are now pivoting our focus to pursue a sale of non-core assets, including our intermodal segment and two of our smaller legacy Omni businesses, which in aggregate represent approximately $394 million of our 2025 revenue. These targeted sales are intended to advance our efforts to delever the balance sheet and further focus our services around the core of what we do every single day, which is providing service-sensitive logistics to our customers around the world in air, ocean, ground, and contract logistics markets. With that, let us turn to the second topic, our quarterly results. In the midst of an incredibly complex integration, a fairly weak industry backdrop, changing tariff regulations, and the disruption in the Middle East, our team continues to make progress executing our transformation plan, overhauling operations, and improving the quality of our earnings results, which is reflected in our results. For the first quarter, we reported operating income of $20 million compared to $5 million last year, and consolidated EBITDA, which is calculated pursuant to our credit agreement, was $70 million compared to $73 million a year ago. Regarding the overall logistics market, domestic transportation supply has continued to tighten, driven in large part by increased regulatory and enforcement actions over the past year. These dynamics have accelerated carrier exits, particularly among smaller operators, while limiting capacity additions. A tightening supply environment is a component in rebalancing the freight market and supporting a return to more favorable market dynamics after years of prolonged freight recession. However, supply is only one side of the equation. Improvement in demand will ultimately determine the pace and sustainability of a recovery. Encouragingly, early indicators suggest that the industrial economy, which has weighed on freight demand, may be approaching an inflection point. Manufacturing PMIs have now remained in expansion territory for four consecutive months. Readings above 50 have historically served as a leading indicator for increased freight volumes, as rising manufacturing activity typically drives higher shipment of raw materials and finished goods. Additionally, the ratio of inventory to sales continues to decline. Outside of the post-COVID destocking, the current levels are at or slightly below the 10-year average, with shippers operating with conservative inventory levels amid ongoing tariff uncertainty and evolving trade policy. Depressed freight demand in the most recent past also creates the potential for a restocking cycle, which could serve as a meaningful tailwind for freight volumes when demand improves. Also, do not lose sight of the recent increase in truckload spot rates and corresponding spike in tender rejection rates. That said, while the VIX may have settled, macroeconomic risks remain. Ongoing geopolitical tensions in the Middle East and the associated rise in fuel prices introduce a key source of uncertainty. Sustained increases in energy costs could pressure manufacturers and consumers, raising input costs, compressing margins, and ultimately dampening demand. Outside of this week's announcement and subsequent sell-off in oil, if elevated fuel prices persist, they could lead to tempered demand, offsetting some of the positive momentum emerging in the industrial economy and delaying a recovery in the freight markets. While we are optimistic about the improving freight dynamics, we remain focused on prioritizing customer service and thoughtful cost management. We have been operating as one company for over two years now, and I am proud of what our team has accomplished and even more excited about our future. Finally, it gives me a great deal of pride for our team of dedicated logistics professionals to be recognized for their hard work, diligence, and commitment to our customers. Forward Air Corporation was recently named the 2026 Surface Carrier of the Year by the Air Forwarders Association, whose members are freight forwarders that rely on our expedited ground network to maintain the integrity of their airfreight schedules. This recognition reflects the strength of our network, our team's performance, and our commitment to delivering exceptional service on a consistent basis. Forward Air Corporation was also recently named to Newsweek's list of the Most Trustworthy Companies in America 2026. The annual ranking recognizes companies across industries that have earned strong trust among customers, employees, and investors. This award follows the company's selection to Newsweek's list of Most Responsible Companies in 2025. This recognition underscores the significant transformation our team has achieved over the past two years in optimizing operations, improving performance, and enhancing customer relationships. Both of these honors are a reminder of the high service standards that we are known for. They reflect the dedication of our people whose efforts continue to drive our reputation for excellence. With that, I will now turn the call over to Jamie to go through the detailed results of the first quarter. Jamie G. Pierson: Thanks, Shawn, and good afternoon, everyone. As you heard from Shawn, we reported consolidated EBITDA of $70 million in the first quarter compared to $73 million in 2025. As a reminder, the comparable results a year ago were favorably impacted by $4 million of annualized cost reduction initiatives that were actioned in 2025. The credit agreement allows for the inclusion of the unrealized and pro forma savings from these actions to be included in our historical consolidated EBITDA and requires that they be spread back in time to the period in which the expense would have occurred. On an LTM basis, consolidated EBITDA was $3[inaudible] million. Like we normally do, we have detailed the information used to reconcile the adjusted and consolidated EBITDA results on Slide 30 of the presentation. On an adjusted EBITDA basis, we reported $70 million in the first quarter compared to $69 million in the first quarter of last year. Turning to the segments. Expedited Freight reported EBITDA improved to $28 million compared to $26 million a year ago, with the exact same margin of 10.4%. The Expedited Freight segment's first quarter results also improved sequentially compared to the $25 million of reported EBITDA and a margin of 10.1% in 2025. At the OmniLogistics segment, reported EBITDA of $25 million in the first quarter of this year was in line with the $26 million we reported a year ago. The margin improved from 7.9% to 8.3% year-over-year, driven by an increase in contract logistics volume with a higher margin compared to a decrease in air and ocean volumes that have lower margin. At the Intermodal segment, we continue to see a challenging market, especially from reduced port activity. International trade-related softness among several core customers contributed to declines in shipments and revenue per shipment compared to a year ago. In the first quarter, the Intermodal segment reported EBITDA and margin were $5 million and 10.1%, respectively, compared to $10 million and 16.4% a year ago. Externally, and going back into the back half of the year, we expect to see capacity tighten as JIT supply chains for our BCO customer base loosen as tariffs stabilize, and as additional capacity exits the market due to financial difficulties and bankruptcies of smaller drayage carriers. Internally, we have a strong pipeline and have recently enacted strategic rate increases to several key accounts. Turning to cash flow and liquidity. Net cash provided by operating activities in the first quarter was $46 million, an improvement of $18 million, or more than 60%, compared to $28 million in the first quarter of last year. As for liquidity, we ended the first quarter with $402 million, which is an increase of $35 million compared to the end of 2025 and about a $10 million increase from last year's comparable $393 million. The $402 million is comprised of $141 million in cash and $261 million in availability under the revolver. And as usual, I would like to leave you with a couple of additional thoughts. The first of which is liquidity and how we manage the business, especially in uncertain times. As you heard earlier, our ending liquidity included $141 million in cash, which is the highest ending cash balance in the past eight quarters. When compared to our publicly traded peers, we are at the upper end of the spectrum when calculating liquidity as a percent of both total assets and LTM revenue. And on Slide 22 of the earnings presentation, you will also see, on a non-GAAP basis, we generated $58 million in operating cash flow in the first quarter, which is approximately $12 million better than last year's comparable result. Secondarily, as you heard from Shawn, we are cautiously optimistic about improvements in freight demand, especially in the most recent past. However, there are numerous crosscurrents, including potential continued improvement in the freight demand counterbalanced by ongoing headwinds from inflation, subject to consumer confidence, and macroeconomic risks. We will need these to play out to see if the improvement in demand is sustainable. Regardless of when we see the market fully turn in a positive direction, we plan to continue focusing on the customer, increasing sales, and tightly managing expenses. I will now turn the call over to the operator to take questions. Operator? Operator: We will now open the call for questions. The floor is now open for questions. To provide optimal sound quality. Thank you. Our first question is coming from J. Bruce Chan with Stifel. Your line is now open. Andrew Cox: Hey, good afternoon, team. This is Andrew Cox on for Bruce. I just wanted to touch on the customer loss or customer transition here. We understand that nothing is set in stone, but we are talking about 10% of total revenue. Would just like to get some more details on what segment it is in and what the margin profile is, and how much fixed or structural costs are associated with this customer, and how fast you expect to be able to flex down either the cost or backfill the revenues? Thank you. Shawn Stewart: Hey, Andrew, thank you for the question. Yes, it is quite diverse and dynamic in terms of the service offerings we provide them. It is mainly in contract logistics and some transportation. So margins are different depending on what segment of that business it sits in. We are still in conversations, so it is very fluid. Obviously, we do not want to be overly transparent today. But we are still in heavy conversations, and it is a very good relationship. So it is not a situation of anything other than what we understand and believe to be diversifying their overall supply chain portfolio between providers. Jamie G. Pierson: Yes, if I can add on there, Andrew. We are positioning ourselves to hold on to as much of this business as possible. Shawn said it perfectly, which is our belief that this is about their growth and their concentration with us. It is a simple diversification play. It is important to note that we do not see any meaningful impacts to the current year, and as you noted, it is ongoing. To date, the conversations have been positive. Stephanie Moore: Hi, good afternoon. I guess maybe going back to the situation with the customer, maybe I will ask this a little more directly than the prior question. I am trying to understand how much leeway or time you saw this coming. Has this been a conversation that has been going on for some time? It is hard to believe for a customer of this size to make these changes quickly. If you could give a little bit of color on what services this customer provides or end market, just to get some color there, maybe a little history on other customer losses. If it is not due to service and it is just diversification, that is obviously having a really large impact this year. If you could touch a little bit more about when this started happening, and then at the same time, what can be done on your end to hopefully try to retain this as much as possible? Jamie G. Pierson: Hey, Stephanie, Jamie here. In terms of the timing, it is still happening. The dialogue to date is active and constructive. We are putting ourselves in the best possible spot to hold on to as much of the business as we can. If it were a service-related issue, I might feel differently, but if we look at our service KPIs with this customer, they are incredible, in my opinion. These are my words, Stephanie, not anybody else’s. We are incredible. So it is more about their concentration with us. They have grown with us. They have been a long-term partner with us. I think it is more about a risk management perspective on their behalf than anything else. In terms of how quickly, it is May. It is going to take some time. The best that we can tell is there is not going to be any impact to 2026. It will not be until early 2027 that we see anything meaningful and material, if at all. We are not throwing in the towel, but we felt that it was the right thing to do to let you know that we are in these discussions as quickly as we possibly could. Stephanie Moore: I worded it today, and then in the release, that part of the strategic alternative review process was impacted by this development with this customer. As we think about this, how much does this weigh on the strategic process? And then once there is some definitive decision—whether it is bad or if this customer does decide to walk away—what does that mean in terms of ongoing strategic processes once this is cleared up? Jamie G. Pierson: I cannot answer that second question about what will happen after it is cleared up. In terms of the impact, anytime you have a large customer concentration like this, it is going to weigh either positively or negatively. In terms of its impact on the strategic alternatives process, the fact that you look at a customer that is approximately $250 million, plus or minus, in revenue is going to have an impact. Stephanie Moore: Absolutely. I guess one last one for me—just on the core business itself, we wanted to get a sense of the ongoing pricing environment. There are certainly some green shoots and some positives in the freight environment. If you could talk a little bit about pricing across your business and your level of comfort given we are seeing what appears to be a bit of an uptick in the underlying freight market? Shawn Stewart: Hi, Stephanie, it is Shawn. We feel really strong about pricing. We had the hiccups in a prior period, and I feel strongly that we are extremely solid in all of our revenue streams, whether it be in the global freight forwarding market, the ground LTL business, or in truckload. I am extremely confident in what we are doing both on a cost management basis and on a revenue generation basis. And as you can see, the consistency in our margins and profitability is proof that we learned a lot and have continued to enhance our sales from there going forward. Jamie G. Pierson: If I can jump in. If you look at the spot rate over the last six months, it is up about 40% since late last year. Tender rejections are up almost 2x, so up 100%. Inventory-to-sales ratios continue to lean out. PMIs have been positive for four months in a row. I think the macro indicators are pointing in our direction. My experience in this space is it generally takes three to six months for it to really take effect, and we are coming into that third to sixth month now. We are not pricing for yield, and we are not pricing for volume. We are pricing for profitability. Scott Group: Hey, thanks. Good afternoon, guys. Just to follow up on the business trends. Tonnage was down about 2% and yields ex-fuel down about 1%. What are you seeing as the quarter progresses so far in Q2? Are things accelerating? I know you said you feel good about price, but yield ex-fuel down a little bit—just a little more color would be great. Thank you. And then, Jamie, I want to clarify that you said the business that you are selling is $390 million of revenue. That is intermodal plus the two smaller Omni businesses, right? What are the two smaller Omni businesses? Any sense of profitability there? And then your intermodal business—are there containers here, or is it all asset-light? What exactly is your intermodal business? I do not think it is like a J.B. Hunt intermodal business, but maybe I am wrong. And do you own trucks, or do you have owner-operators? Lastly, with this customer loss, I know the leverage thresholds as the year plays out start to get a little bit harder. Maybe this customer is more 2027, but any conversations with the lending group at all? How should we be thinking about this? Shawn Stewart: Hey, Scott. I am going to let Jamie go because I know he wants to say he is not going to give you guidance, but great question. Let us see if he is nicer today. Jamie G. Pierson: At the risk of not giving guidance, I would say over the last two weeks of the quarter and going into April, we have seen a fairly strong volume environment from our perspective. I do not want to preordain that the recovery is here. I stick by what I said about the spot, the tender, the inventory-to-sales ratio, and the PMI—there is a lag. But I would say the last couple of weeks of the quarter and going into April, we have seen a fairly strong volume environment. On the asset sales, that is exactly right—about $390 million of revenue across intermodal plus the two smaller legacy Omni businesses. I am not going to disclose which those two are; there is confidentiality with buyers. You can see the $390 million, with roughly $230 million intermodal, so you are talking about approximately $160 million that is remaining for the two Omni businesses; it is not that much. On intermodal, it is mainly port and railhead drayage with what we call C/Y or container yard management—storage of containers on chassis—and mainly port and railhead drayage to final customers. We utilize owner-operators and we have owned and leased chassis. On leverage and the lending group, it is the right question. We ended the quarter with $40 million in cushion. This is a small step down from where we ended the year, but we ended the quarter with the highest cash balance we have had in two years and over $400 million in liquidity. If you look at liquidity as a percent of total assets or liquidity as a percent of LTM total revenue, we are at the upper echelon of that spectrum of our publicly traded peers. So $40 million in cushion is a position I can live in, and $400 million-plus in liquidity is a very good place to be. Harrison Bauer: Hey, thanks for taking my question. One quick follow-up on the Omni businesses that you are selling—about $160 million. Is there any crossover of the potential lost business of the $250 million? And then taking a step back—general competitive dynamics. With the announcement of Amazon Supply Chain Services this week, is there any relation to that and the loss of this business at all? Are there other areas of your business that are potentially exposed to what Amazon is trying to lay out and some aggressive pricing actions they may take? Lastly, in the remaining Omni business and in Expedited LTL, now that you have a handful of capacity that you may need to backfill, how are you thinking about pricing for that going forward—the trade-off of volume and price? Jamie G. Pierson: Not that I can think of, Harrison. If there is any crossover, it is certainly not material. Shawn Stewart: I will take the Amazon question. There is no correlation between Amazon and our customer. The news of Amazon is fairly new, but we know them extremely well over the years. We are not surprised by their announcement, but we also need to let things evolve a bit and see where it goes. Ultimately, we are not particularly susceptible to this announcement by our volumes, etc. We respect what they are doing and respect Amazon a lot. We will keep an eye on it and not be naive, but we are not overly concerned today as we sit here about the impact to us from this announcement. On pricing and backfilling, we are not going to get into any kind of desperate situation. We have a great organization, great solutions, and a fantastic product, and we will continue to price aggressively but with profitability in mind. We will get strategic where it makes sense in a given customer or a given origin-destination pair, but not at the detriment of the company and our overall margin. You have seen us pick up new logos and new business, and we will continue with that mantra. We are not going to overreact—we will stick to what we do well and move forward with replacing any potential loss in different areas as we see fit. Christopher Glen Kuhn: Hey, guys. Good afternoon. Thanks for the question. I just wanted to clarify. So that customer loss is $250 million—that is the total amount of the customer's business with you, and you may or may not lose all of it. You are in negotiations for that right now. Is that the case? And if you do lose some of this, would that change the margin profile—within the Omni business—or is it relatively similar to where your EBITDA margins are? And is the negotiation on price? Because the service seems pretty solid there. What would be the issue aside from just diversification? Lastly, if you lost any of it, is there a way to backfill it with another customer? Is there a plan for that? Shawn Stewart: It is a total 2025 revenue of $250 million. We are giving you a holistic view of what the revenue is. That does not, by any means, state that we are losing $250 million. That was the total spend in 2025. Jamie G. Pierson: It will be less than that. Shawn Stewart: On the nature of the discussion, it is diversification. You have to think about what we do for some of our customers—we handle an incredible amount of their supply chain. It is wise from a risk management perspective for them not to put too much of a percentage in any one particular supplier’s hands. Throughout the years, we have grown with them and provided that level of service. In our opinion, it is simply a diversification play, and that is understandable. Jamie G. Pierson: We do not talk about margins on any one particular customer. We will see how this shakes out here in the near future. The takeaway is threefold. One, the conversations have been both active and constructive. Two, we see no impact occurring in 2026 given the complexity of what we do for our customers. And three, the discussions have been fairly positive to date, and we will continue them. Shawn Stewart: On backfilling, that is the plan every day, whether we are losing customers or seeing down-trading customers. Growth is the number one strategy of our combined organization. It has been a tough market, but at the same time, you have seen us be very sustainable over the last two years. We need this market to turn, but we are not changing anything because of this announcement. We may just run a little faster, with an already sprinting organization. Jamie G. Pierson: The only thing I would add, Chris, is that, as best as I can tell going back and looking at history, we are a fairly high-beta performer. We do better in times of volatility and especially when capacity gets tight. We all do well when capacity gets tight; we seem to do better than our peers when that occurs. That is certainly part of the plan. Christopher Glen Kuhn: You have talked about this in the past, but have you seen any truckload-to-LTL conversions in your business? Shawn Stewart: We have heard “yes” because of rising truckload rates, and I do not want to get too far ahead of ourselves—back to Scott’s question, we are seeing volumes—so it could be, but we do not have enough information to say that definitively. As you have probably been watching in the true domestic intermodal market, you are seeing a lot of diversions from over-the-road onto the domestic intermodal. You are also seeing, slowly, an influx of the ocean containers coming back in. There is going to be a point of inflection where a lot of things are going to shift as the demand comes through. It could be the early stages, but do not quote me on that; we are watching it. We have heard from certain customers that the transition is starting because of the overall price of truckload. Operator: At this time, there are no further questions in queue. Let me turn it over to Mr. Stewart for any final remarks. Shawn Stewart: Thank you so much for your time, attention, and interest in our organization. In closing, in recent quarters, we have navigated a challenging environment with discipline and focus while taking actions to strengthen our company and our overall business. We are extremely confident in the foundation we are building and the steps we are taking to improve our performance. We really appreciate your time today. As usual, if you have any follow-up questions, please reach out to Tony directly. Thank you. Operator: This concludes Forward Air Corporation's first quarter 2026 earnings conference call. Please disconnect your line at this time and have a wonderful evening.
Operator: Hello, everyone. Thank you for joining us and welcome to the Outfront Media Inc. First Quarter 2026 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, press 1 again. I will now hand the call over to Stephan Bisson with Outfront Media Inc. Please go ahead. Stephan Bisson: Good afternoon, and thank you for joining our 2026 First Quarter Earnings Call. With me on the call today are CEO, Nick Brien, and CFO, Matthew Siegel. After a discussion of our financial results, we will open the lines for a question and answer session. Our comments today will refer to the earnings release and slide presentation you can find on the Investor Relations section of our website, outfront.com. After today's call has concluded, an audio archive replay will be available there as well. This conference call may include forward-looking statements. Relevant factors that could cause actual results to differ materially from these forward-looking statements are listed in our earnings materials and in our SEC filings, including our 2025 Form 10-K, as well as our Q1 2026 Form 10-Q, which we expect to file tomorrow. We will refer to certain non-GAAP financial measures on this call. Any references to OIBDA made today will be on an adjusted basis. Reconciliations of OIBDA and other non-GAAP financial measures are in the appendix of the slide presentation, the earnings release, and on our website, which also includes presentations with prior period reconciliations. With that, let me hand the call over to Nick. Thanks, Stephan. And thank you everyone for joining us today. Nick Brien: We are pleased to be here reporting our first quarter results, which came in better than we had anticipated when we spoke two months ago. The strong demand and the excellent execution from our entire organization drove the performance. As you can see on Slide 3, it summarizes our headline numbers. Consolidated revenues were up 10% driven by 22% growth in transit and 7% growth in billboard, while consolidated OIBDA was up 56% to about $100 million and AFFO more than doubled to $61 million. Notably, these results include $13.5 million of combination billboard revenues and OIBDA that we highlighted when we provided our guidance in February. Slide 4 shows our more detailed revenue results. Billboard revenues were up 7.1%. Included in our comparative billboard results are two notable items this quarter. First, approximately $13.5 million of revenue in Q1 2026 related to the billboard combinations I just mentioned. Second, our previously announced exit of a large marginally profitable billboard contract in Los Angeles, as the revenues and expenses of this contract are still included in our reported 2025 financial statements. Excluding the billboard revenue generated by both of these items, billboard revenue growth would have been up over 4%. The strongest billboard categories in the quarter were legal and tech. Transit grew by 22%, again led by the New York MTA, which was up over 26% in Q1. Our strongest transit categories in the quarter were tech and financial. Slide 5 shows our detailed billboard revenue, which, as I mentioned earlier, was impacted by the outsized combination revenue and the large Los Angeles billboard contract that we exited. On a reported basis, static and other billboard revenues were up 7.6% during the quarter, and digital billboard revenues were up 6.1%. However, excluding the revenue generated by both of these items, static and other billboard revenues would have been up nearly 2%, and digital billboard revenues would have been up over 10%. Slide 6 shows our detailed transit revenue, which grew over 22% during the quarter. Our digital transit revenues were up over 26% to about $45 million, and static transit revenues were up almost [inaudible]. The strength in our transit business was led by our commercial team this quarter, which grew their revenues at a clip of 35%. We remain immensely proud of the performance turnaround in this important line of business, continuing to be driven through smarter product marketing and innovative focused sales approaches. While technically occurring in the second quarter, I would like to highlight a recent activation with British Airways in the New York MTA that you can see on the cover of our slide presentation. As part of this innovative campaign, we wrapped the shuttle to resemble an airliner and enabled their flight attendants to visit Grand Central and Times Square to hand out English biscuits to hungry commuters. Slide 7 shows our combined digital revenue performance, which grew over 11% in the quarter and represented about one-third of our total revenues. Even more impressive, excluding the aforementioned Los Angeles contract, digital revenues would have grown by nearly 15%. Programmatic and digital direct automated sales increased nearly 40% during the period, now representing 20% of total digital revenue, up from 16% a year ago. On the topic of programmatic growth, I would like to also highlight the recent addition of a very senior digital sales leader from the [inaudible] with deep expertise across programmatic advertising, data analytics, measurement, and omnichannel media activation. This strategic hire further advances our evolution into a modern media company built around digital expertise, audience intelligence, and measurable outcomes. Jeff Hackett’s leadership will help us maximize the value of our unified ad tech stack, update the management platform and trading partnerships, while strengthening our position with programmatic buyers who are increasingly extending audience-driven strategies into premium IRL media environments. In turn, we believe we are better positioned to capture this growing demand and demonstrate how IRL media enhances platform-based omnichannel campaigns through greater targeting precision, breakthrough creative, and measurable performance in the real world. Moving on, the breakdown of commercial and enterprise revenues can be seen on Slide 8. Commercial revenues were up 19% during the quarter, or 13% excluding the $13.5 million combination revenues that we realized during Q1. Enterprise was down about 2% during the first quarter, predominantly related to the exit of the large Los Angeles contract. Slide 9 shows our billboard yield growth, which was up 11% year-over-year to over $2.9 thousand per month, driven by higher rates as well as billboard combinations. Excluding combination revenue from both periods, billboard yield would have been up about 6.5% given our strong revenue performance and continued practice to prudently optimize our billboard portfolio. Summing up, we are pleased with our Q1 performance, and I am happy to report we are seeing these strong top-line trends continue into the spring and summer. I will discuss in greater detail later. With that, let me now hand it over to Matt, who is going to review the rest of our financials. Thanks, Nick. Good afternoon, everyone. Matthew Siegel: Please turn to Slide 10 for a more detailed look at our billboard expenses. In total, billboard expenses were up about $5 million, or approximately 2% year-over-year. Zooming in on lease costs, these expenses were up about $2 million, or about 2% year-over-year. The increase was driven by higher variable lease costs and contractual escalators on fixed leases, offset partially by $4 million of savings related to the large billboard contract in Los Angeles that we exited. Excluding the impact of the Los Angeles portfolio exit, billboard property lease expense would have been up about 5%. Posting, maintenance, and other expenses were up over $1 million, or about 4%, due to higher maintenance and utilities, higher site-related costs, and higher compensation-related expenses. SG&A expenses grew just over $1 million, or about 2%, due primarily to higher professional fees, including software and technology expenses, and a higher allowance for bad debt, partially offset by lower credit card usage by customers and lower compensation-related expenses. This $5 million increase in total billboard expenses, combined with the growth in billboard revenues Nick described earlier, led to billboard adjusted OIBDA increasing by about $17 million, or 18%. Excluding the impact of the billboard combinations in the quarter, billboard OIBDA would be up around 4%. Now turning to transit on Slide 11. In total, transit expenses were up $4.5 million, or just under 5% year-over-year. Transit franchise expense was up 3% due primarily to the annual inflation adjustment to the MAG for the MTA contract. Posting, maintenance, and other expenses were up just over $1 million, or about 8%, due primarily to higher display production costs and higher posting and rotation costs. SG&A expenses were up $1.5 million, or about 9%, due primarily to higher compensation-related expenses and higher professional fees, including software and technology expenses, partially offset by lower credit card usage by customers. The 5% increase in total transit expenses, combined with the 22% transit revenue growth described earlier, led to transit adjusted OIBDA improving by about $13 million during the quarter to an adjusted OIBDA loss of a little over $1 million. While on the topic of transit, I would like to quickly discuss some important developments regarding the New York MTA. Given our strong Q1 results and an improved outlook for the remainder of the year, we now believe that our 2026 New York MTA revenues will surpass the defined baseline revenue level, which we often describe as the MAG level. As a reminder, based on our prior expectations at the beginning of the year, we continued to record the MAG on a straight-line basis rather than account for the contract on a revenue share basis. Due to the seasonally lower revenues in Q1, this resulted in approximately $7 million of additional expense than if we had recorded the contract on a revenue share basis. We expect to account for this benefit from the straight-line MAG in Q2 and Q3 when the revenue share expense would have exceeded the MAG. By the end of Q3, we will be caught up on a year-to-date basis. Then for the fourth quarter, we will book the full calculated revenue share amount, which will show a substantial increase in transit franchise expense from the prior period when we were just recording the MAG. A benefit of being above the MAG level means that we will return to recouping the digital investments we have made in the MTA since the inception of this contract in 2018. Let me remind you how this works, as it has been a number of years since we last recouped. Any incremental transit franchise expense due to the MTA above the MAG will not be paid in cash, but rather utilized to reduce our significant recoupable investment balance with the MTA, meaning each incremental dollar of revenue will remain extremely accretive on a cash basis. Recoupment will positively impact our net working capital and cash balances but will not impact adjusted OIBDA, AFFO, or net income. Given the recoupment will not flow through net income, the monies recouped will not be subject to the redistribution requirements. On Slide 12, the company's adjusted OIBDA in the first quarter benefited from lower corporate expense, which declined by about $6 million due primarily to lower compensation-related expenses, including last year's severance, and lower professional fees. Combined with the billboard and transit OIBDA, which includes a benefit of the condemnation discussed earlier, adjusted OIBDA totaled about $100 million, up 56% compared to last year. Before moving on, I would like to quickly discuss some important growth investments we are making at Outfront Media Inc. during 2026 to support our ambitious revenue targets for this year and beyond. First, we are investing in our technology. We have modernized many of our systems in 2025 and early 2026, including a new CRM, training modules, and our partnership with AdQuick. While each of these improvements is more costly than the systems they are replacing, we expect that each will assist us in accelerating our top-line revenue growth. Second, we are investing to continue improving our workflow and processes. So far, we have started to improve how we approach inter-region revenue opportunities and our RFP response process. We have brought back the same consultant who assisted us last year, but importantly, much of their potential fee is success-based and, as such, will only be paid should we realize benefits from their efforts. Turning now to capital expenditures on Slide 13. Q1 CapEx spend was about $24 million, including about $7 million of maintenance spend. We converted 14 new billboards to digital in Q1 and expect to add a total of about 125 in the full year. For 2026, we still expect to spend approximately $90 million of CapEx, with $30 million to $35 million of this total expected for maintenance. Looking at AFFO on Slide 14, you can see the bridge to our Q1 AFFO of $61 million. The improvement is principally driven by higher adjusted OIBDA. Based on the first quarter results, our expected revenue growth for the remainder of the year, and our investment in our business, we now expect that our reported 2026 consolidated AFFO will grow in the mid-teens relative to our reported 2025 AFFO of $338 million. Included in this guidance is previously noted maintenance CapEx, interest expense of approximately $145 million, and a small amount of cash taxes. Please turn to Slide 15 for an update on our balance sheet. Committed liquidity is over $700 million, including $70 million of cash, around $500 million available via our revolver, and $150 million available via our accounts receivable securitization facility. As of March 31, our total net leverage dropped to 4.3 times, well within our four to five times target range. Turning to our dividend, we announced today that our board of directors maintained a $0.30 cash dividend payable on June 30 to shareholders of record at the close of business on June 5. We spent just over $8 million on acquisitions during the quarter, and looking at our current acquisition pipeline, we continue to expect our 2026 full-year deal activity to be similar to levels reached in recent years. With that, let me turn the call back to Nick. Let me jump in. Nick is having some audio problems. I will keep going. As Nick mentioned earlier, the top-line strength we saw in the first quarter has continued into the spring and summer, and from where we sit today, we expect second quarter revenue growth to accelerate to over 10% year-on-year, driven by about 30% growth in transit and mid-single-digit growth in billboard. These figures include a benefit related to the U.S. role as a World Cup host in June and July, as well as a headwind created by our strategic decision to exit a large marginally profitable billboard contract in Los Angeles, which generated about $4.4 million of billboard revenue in Q2 2025. Outfront Media Inc. has gone through significant change over the past year, executing the strategic imperatives we shared with you at that time. At the same time, we have reimagined out-of-home and our company's leading role within it. An important part of this process has been refining how we communicate our value proposition to the world, and just last week, we launched our new brand platform as a declaration: Outfront is the leader in IRL media. In a world of endless scrolling, muted ads, and algorithmic noise, we exist in the one place no one can opt out of, the real world. Our media does not just reach people. It moves them. IRL media is where culture lives. It is where brands stop interrupting and start belonging in the cities and communities that shape daily life. For far too long, our industry has defaulted to talking about inventory and impressions. That is not our story. Our story is influence and impact: the breakthrough experiences we create, the cultural moments we amplify, and the real outcomes we drive for partners looking to build trusted brands in the real world. Our clients know this and are increasingly choosing IRL media to drive the results they seek. To close, we are redefining what out-of-home means in a rapidly changing, agentic advertising world. The physical world is the last uncluttered, brand-safe, fully viewable canvas in media, offering brands the ability to show up and interact with people where their attention is the highest. Our premium inventory is immersive and experiential with national scale. In our view, the sky is the limit. Operator, let us now open the lines for questions. We will see if we can get Nick back on the line. We will now open the call for questions. Operator: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, press 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Daniel Osley with Wells Fargo. Daniel, your line is open. Please go ahead. Analyst: Thanks. Maybe a bigger-picture question: I wanted to get your industry outlook on measurement modernization. I saw the OAAA recently announced a new pilot program. What is your view on the timing of all this and the potential benefits the industry could see on the other side? And then as a follow-up, how do the measurement partnerships that Outfront Media Inc. has recently announced tie in here? Matthew Siegel: Dan, sorry. Nick is still having some audio problems. Obviously, measurement is a key factor for the industry overall. It is been something the industry has been lagging behind on. Nick and the other leaders of the industry are working with OAAA and Geopath, bringing in consultants, and really trying to move the measurement dialogue and capabilities forward. Some of the partnerships we have signed up, like AWS and AdQuick in particular, we think will help us. AdQuick has some great measurement capabilities, demonstrating a viable currency, and hopefully, over time, maybe a proof of concept for greater industry adoption. We will see how it works for us first. Thanks, Dan. Operator: Your next question comes from the line of Cameron McVeigh with Morgan Stanley. Cameron, your line is open. Please go ahead. Analyst: Great, thank you. First, I was curious about your view on one of your peers potentially being taken private and the implications on asset sales in your acquisition pipeline as you think through the remainder of the year. Is this a potential opportunity for you going forward? And then secondly, you mentioned this in the prepared remarks, but could you help size the potential impact of the World Cup over the next couple of quarters and the midterm elections in the back half of the year, just as we think through the cadence of growth? Matthew Siegel: Sure. First, peers. Obviously, we level our peers. They are fine people. With one of the large peers or competitors going private, it is interesting. A capital infusion will likely make them healthier, which I think is great for the industry. They can be more nimble and invest in the business and invest in the industry overall. We have not heard that there are any asset sales coming out of that, but to the extent there are asset sales from them or really from anyone else that are material in our footprint or would make strategic sense, we think our balance sheet is in a much better place than it has been in the last few years. Our capabilities are strong, and we would expect to participate in something that is interesting. As far as sizing the impact for the World Cup, we are not prepared to share numbers there. We have about 70 customers overall. The numbers that we have heard in media seem to be in the right neighborhood, but we are still calculating. We still think we have business to book in the second quarter and certainly in the third quarter, and we will give you a much greater in-depth explanation in August. Nick Brien: I just wanted to add on the World Cup. As Matt said, we have got over 40% of the FIFA sponsors. What is exciting is that a lot of those significant brands and the big sponsors actively use our medium, but they do not use it as much as we would like. We see FIFA and the World Cup as a way of really attracting some of the biggest brands to demonstrate how they are building their brands in real life. It is an exciting time for us. Matthew Siegel: Thanks, Cameron. Operator, next question. Operator: Your next question comes from the line of Kaleksi Filipov with JPMorgan. Your line is open. Please go ahead. Analyst: Yes, thank you very much. Transit grew 22% in the quarter, well above your high-teens guide that you gave in February. Can you help us understand what drove that upside relative to your preliminary expectations in February? And you mentioned 26% for New York MTA specifically. It looks like other transit contracts are also doing rather well. Is there an unexpected turnaround there too? And if I may follow up related to transit: thinking about FIFA benefit, is it primarily around billboards, or do you expect this to be a meaningful thing for New York MTA? Wonder how your clients think about that. Transit officials in New York already note the work-from-home impact on traffic inflow, so just qualitatively, how to think about benefits for New York? Thank you. Matthew Siegel: Sure, thanks for the question. I will start, and Nick, you can jump in. First, transit is going well. It is led by the MTA and, frankly, for the last few years, when transit was not, it was the MTA. The MTA is more than half of our transit revenue. It is about seven or eight times the next largest transit franchise. We have a great focus there. So the 26% growth in the MTA is obviously what is leading transit. Other transit franchises like BART in San Francisco are doing pretty well. San Francisco is one of our best performing markets in the first quarter. I think one of our peers also had very strong San Francisco growth, led certainly by tech and the repopulation of the city. As far as FIFA, we are taking business in both billboard and transit. Frankly, the influx in all the big cities of tourists—it is not just near the stadiums—but the influx of attractive demographic tourists and the ability for them to move around cities and move underground and above ground are hitting our inventory, again above and below ground, and we are very happy to have it. Nick, you want to add something on FIFA and transit? Nick Brien: Thank you for your question. As I mentioned earlier on the New York MTA, this has been significantly strengthened by dedicated focus on the product market and the unique attributes of our transit within the context of the cities that they serve, as well as the innovation and the opportunity for creating brand experiences. As you saw on the front cover, the British Airways wrap demonstrates that this is becoming more exciting because transit is a really compelling platform for IRL media activation. The experiences can be created, and we are celebrating those and pricing them accordingly. That has made a big contribution. Operator: Your next question comes from the line of Patrick Scholl with Barrington Research. Patrick, your line is open. Please go ahead. Analyst: Hi, thank you. Congratulations on the milestone on the MTA. Could you remind us how the revenue share on the MTA works when revenue generation is above the MAG? Matthew Siegel: Sure. It has been a while, so it is good to refresh everybody. The MTA is a 70% revenue share contract. The gap between 70% and the MAG level—which historically was around a 55% equivalent—was intended not to be a cash payment, but to allow Outfront Media Inc. to recoup the investment that we made in the screens upfront. We would qualify for that recoupment if we got above that baseline revenue line, which is what we commonly refer to as the MAG line. So while we will be expensing a 70% revenue share cost to the MTA, we will not be sending the MTA a check for the gap between the MAG and the revenue share. We will be using that to pay down some of our recoupable balance and offset some working capital. Obviously, it is a big number. It is not going to be paid down all this year, but it is good to get back to that recoupment plan and start to get paid back for some of the screens we invested in. Analyst: Okay, thank you. You had mentioned San Francisco doing a little bit better, and so has one of your peers. I was just curious, post-events, if that has been sustained and to what extent, and if there is a benefit from the World Cup on some of the depopulated cities to the extent that could benefit those markets as well. Thank you. Nick Brien: Yes, Patrick. We have definitely seen the early success, as well as having a very strong team. Also, obviously, the strength in San Francisco with AI developments. When I look at the size of not just the big players like OpenAI and Anthropic, but also the pure-play native AI companies, we have Genspark, CodeRabbit, Nebius, Arise.ai, and they are shifting towards a physical reality. These are pure-play technology companies that have a huge interest in the trust and the physical nature of our medium. Those campaigns are extending now outside of San Francisco, but that is providing a very solid revenue stream for us in that important market. Operator: There are no further questions at this time. I will now turn the call over to Nick Brien. Nick? Nick Brien: Thank you. I do not think I could have articulated my closing summary for the earnings better than that. I apologize again for the technology mishap here. The one thing that I want to close with is the fact that we have various conferences and events across the spring and summer, and I will continue to be with the team articulating how I see and feel this remarkable shift that we are experiencing now in the agentic advertising world: the power of this medium that I have always believed has been undervalued when we think about its tremendous scale, tremendous value, and proven trust, and therefore, the influence it has for consumers and people. As I said at the close, and Matt shared, the sky is the limit. I am excited that the organization has really stepped up to follow all those initiatives we set out for transformation velocity in March 2025, and here we are not far—about a year—after that and seeing the fruits start to appear. It is really a testament to the remarkable focus and hard work of the entire organization. I look forward to sharing more of that on the road and look forward to presenting our Q2 results to you in August. Thank you so much for your time. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Alarm.com Holdings, Inc. first quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. To ask a question during the Q&A, please press star 11 on your telephone; you will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that this conference is being recorded. I would now like to hand the conference over to your speaker today, Matthew Zartman. Please go ahead. Matthew Zartman: Thank you. Good afternoon, everyone, and welcome to Alarm.com Holdings, Inc.’s first quarter 2026 earnings conference call. Please note that this call is being recorded. Joining us today are Steve Trundle, our CEO, and Kevin Bradley, our CFO. During today’s call, we will be making forward-looking statements, which are predictions, projections, estimates, and other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. We refer you to the risk factors discussed in our Form 8-K and the associated press release which were filed with the SEC earlier today. The call is subject to these risk factors and we encourage you to review them. Alarm.com Holdings, Inc. assumes no obligation to update forward-looking statements or other information that speak as of their respective dates. In addition, several non-GAAP financial measures will be discussed on the call. A reconciliation of GAAP to non-GAAP measures can be found in today’s press release on our Investor Relations website. I will now turn the call over to Steve Trundle. Steve? Steve Trundle: Thank you, Matt. Good afternoon, and welcome to everyone. We are pleased to report first quarter results that exceeded our expectations. Our SaaS and license revenue in the first quarter was $181.5 million, up 10.8% year-over-year. Our adjusted EBITDA in the quarter was $49.6 million. Our results continue to reflect contributions from across our businesses, with nearly every area running at or slightly above the plan we set out for the year. We had a bit of revenue in the EnergyHub business move forward from the third quarter, but aside from this modest anomaly, the results are a broad-based reflection of how our various business units performed. While our results are more than solid, there were a few bumps along the way in the quarter. First, in January and February, we saw new homebuilding and other business activity impacted by the long spell of snow and ice due to the extreme cold weather that impacted much of the U.S. Installation activity was greatly reduced for about three weeks and then bounced back strong and accelerated through March, reflecting the durability of demand. Toward the end of the first quarter, we also began to deal with supply chain volatility related to standard memory availability as manufacturers shifted more production to sell into the HBM category for AI data centers. This has led to the widely reported substantial cost increases for the memory we use in cameras and other products. We are actively working to manage both supply chain availability of memory and the cost expansion caused by this market dynamic and expect these challenges to continue until the memory market corrects. As a reminder to investors, the portfolio of businesses that we consolidate into our quarterly results spans multiple markets at different stages of development. Our commercial business includes Alarm.com for Business, OpenEye, CHeKT, and Shooter Detection Systems. These commercial businesses are all growing as the security and access control markets evolve toward integrated, cloud-based, AI-driven solutions. Our energy business, EnergyHub, continues to be a meaningful growth contributor and represents a growing share of our overall revenue mix. The EnergyHub platform provides mission-critical distributed IoT management solutions that help utilities address long-term structural pressures on grid reliability and infrastructure. Our core residential business provides a large, durable foundation with a large TAM and a highly productive service provider channel. Structurally high revenue retention is due to the wide range of physically installed devices that subscribers interact with through our application every day. In each business, we deliver software that orchestrates connected devices at scale. This enables us to leverage AI to improve ease of use, unlock new use cases, and make our solutions increasingly essential to both security and operational workflows. In our commercial offerings, where an enterprise may have dozens or even hundreds of video cameras installed, AI-driven use cases are particularly valuable. OpenEye, our enterprise commercial video business, released several capabilities during the quarter that fit this profile. One is a powerful new capability called AI Visual Check. AI Visual Check can detect and issue real-time notifications when a fire exit is blocked, a shelf needs restocking, or a security post is unattended. Customers managing large properties or multisite environments can use AI Visual Check to reduce reliance on manual safety protocol oversight, enabling faster responses to operational issues and improving security compliance across geographically disparate locations. OpenEye also introduced AI Visual Search. This allows security personnel to describe what they are looking for using natural language and retrieve relevant forensic results. They can quickly locate specific moments, objects, or activities across their broad video environment. Both capabilities are included in OpenEye’s premium video subscription service, and end-customer adoption of that service is rapidly growing. Before I hand things over to Kevin, I want to discuss our share repurchase program. During the last two quarters, we purchased over 800 thousand shares of our common stock, including over 400 thousand shares during the first quarter. Last week, our board authorized the purchase of up to an aggregate of $150 million of our outstanding common stock over the next two years. As I expressed on last quarter’s call, we believe that AI is primarily an opportunity for Alarm.com Holdings, Inc., and we will therefore seek to take advantage of any SaaS universe dislocations in the market while still maintaining balance sheet capacity to also pursue acquisitions opportunistically, as we have done over the last several years. In summary, I am pleased with our first quarter results. We remain focused on creating long-term value for our service providers and their customers across residential, commercial, and energy markets, and in the process creating value for our long-term shareholders. I want to thank our service provider partners and our team for their hard work and our investors for their continued trust in our business. With that, I will turn things over to Kevin Bradley to review our detailed financials for the quarter and our updated guidance. Kevin? Kevin Bradley: Thanks, Steve. I will begin by reviewing highlights from our first quarter financial results, and then close with our updated guidance for the second quarter and full year 2026, including several moving parts in our hardware outlook. A few months into the year, I am pleased to report results that continue to demonstrate the durability and resilience of our target markets and business model. We are fortunate to have partnerships with thousands of talented operators who time and again prove their ability to navigate complex and dynamic market environments while delivering mission-critical IoT-based services across the globe. SaaS and license revenue grew 10.8% year-over-year to $181.5 million during the quarter, exceeding the midpoint of our guide by $5.6 million. A driving factor here is our revenue retention rate of over 95% for the quarter, one of the highest readings on this metric in the past ten years. Another factor contributing to the SaaS beat is the continued outperformance at EnergyHub. As a reminder, EnergyHub revenue recurs on an annual basis, and seasonality can vary based on utility program activity and other factors. Hardware and other revenue totaled $83.7 million, up 11.5% year-over-year, and total revenue grew 11% year-over-year to $265.2 million. As you will recall, on January 1, we began passing through the higher tariff rates that had been implemented under the International Emergency Economic Powers Act. Approximately $5 million of our Q1 hardware revenue is from those pass-throughs. We continue to charge those fees today, consistent with the rates we paid to U.S. Customs and Border Protection upon import for the inventory we are currently selling. I will address the expected impact of the February Supreme Court ruling on hardware revenue when I provide our updated guidance for full year 2026. Hardware gross margin came in to the upside at 25.2%, which can be attributed to the mix of products sold skewing toward commercial products generally, and in particular in the commercial video business. Total operating expenses, excluding depreciation and amortization, as well as stock-based compensation and other items we adjust from G&A for non-GAAP purposes, were $125.1 million, a 9.3% increase year-over-year. Note that sales and marketing expense in the quarter includes our presence at ISC West, our largest trade show presence of the year. The event moved from the second quarter last year into the first quarter this year. R&D expense in the quarter, inclusive of stock-based compensation, was $72.1 million, a 5.4% increase year-over-year. The total number of employees we have in R&D functions at the end of Q1 2026 was 1.14 thousand, up 1% year-over-year. Non-GAAP adjusted EBITDA was $49.6 million, slightly higher than we anticipated due to the revenue outperformance we saw during the quarter. GAAP net income was $23.6 million in the first quarter, down from $28 million in the prior year. The primary driver here is lower interest income because we are holding less excess cash after retiring $500 million of convertible notes in January 2026. Non-GAAP adjusted net income was $34.7 million in the quarter, an increase from $32.2 million in the year-ago quarter. We produced $0.65 of earnings per diluted share, which is up 14% year-over-year. We ended the quarter with $497.4 million of cash on the balance sheet and produced $49.7 million of free cash flow. We repurchased 428 thousand shares of stock during the quarter for $20 million, bringing our total share repurchases since the beginning of 2025 to 1.2 million shares. As Steve mentioned, our board recently authorized $150 million of repurchases over the next two years. Before turning to our financial outlook, I wanted to comment on an improvement that we have made to the definition of our non-GAAP profitability metrics. Several times in the past year, you have heard us refer to results being impacted by mark-to-market gains or losses on equity positions included in our treasury portfolio. Because we are not in the business of active investing, we have determined that the fluctuations in market value of these securities do not relate to the operating performance of the business from period to period. As such, we will be excluding these fluctuations from our non-GAAP profitability metrics prospectively, including any reference to comparable periods in the past. Under this new definition, for example, our non-GAAP adjusted EBITDA during fiscal year 2025 would have been $201.3 million rather than $206 million. Our non-GAAP adjusted net income would have been $142 million versus $145.7 million, and our non-GAAP earnings per diluted share would have been $2.55 versus $2.62. I will reiterate that we clearly articulated this $4.7 million non-GAAP adjusted EBITDA tailwind for 2025 on our last earnings call and have been disclosing it in our quarterly filings as well, and we currently plan to continue providing similar disclosures in our filings. I will turn now to our financial outlook. For the second quarter of 2026, we expect SaaS and license revenue of between $185.5 million and $185.7 million. For the full year of 2026, we are raising our SaaS and license revenue outlook to between $749.5 million and $750.5 million. This is an increase from prior guidance of $6 million at the midpoint. We are raising our total revenue outlook for 2026 to be between $1,059.5 million and $1,070.5 million, which includes hardware and other revenue of between $310 million and $320 million. The modest reduction at the midpoint on the hardware line since our February update reflects a couple of exogenous dynamics. The primary factor in our updated hardware outlook follows the Supreme Court ruling in late February 2026 that tariffs implemented using the International Emergency Economic Powers Act were unauthorized. While it does not change the fact that we paid those tariffs on products imported through that date, it does mean that once we have sold that product subjected to those tariffs, we will be lowering our tariff pass-through fees to reflect the new lower tariffs that the administration put into place immediately following that ruling. As a general rule of thumb, those new tariffs are about half of what the old ones were, as of right now. We anticipate that change occurring toward the end of Q2. So if we were running at $5 million of tariff pass-through fees per quarter in Q1, this represents approximately $5 million less in tariff pass-through fees during the second half of the year relative to our prior outlook. A second factor is something that Steve just mentioned, and that is that we are monitoring the turbulence in the memory market and evaluating the impact to our hardware business. The cost impacts that we are seeing there will require that we increase prices for our products that use memory, and we do not yet know if or how these price increases will affect demand. As such, our outlook on the hardware revenue line is cautious at this point in the year, despite the outperformance in Q1. We are raising our non-GAAP adjusted EBITDA outlook for 2026 to between $215 million and $216 million, a $1.5 million increase at the midpoint. The 20.2% adjusted EBITDA margin implied by the midpoint is consistent with our prior guide and represents 30 basis points of margin expansion year-over-year. Non-GAAP adjusted net income for 2026 is projected to be $151.5 million to $152 million, or $2.81 to $2.82 per diluted share, a 10% year-over-year increase. EPS is based on approximately 56.9 million weighted average diluted shares outstanding for the year. We currently project our non-GAAP tax rate for 2026 to remain at 21% under current tax rules. We expect full year 2026 stock-based compensation expense of between $35 million and $37 million. In closing, I am pleased with the broad-based momentum in the business that we have seen so far this year. We delivered a solid quarter against our plan, and we believe we are well positioned to deliver continued revenue growth and profitability while investing to expand our long-term growth opportunities. With that, operator, please open the call for Q&A. Operator: Thank you. We will now open the call for questions. To ask a question, please press star 11 on your telephone. If your question has been answered, you will be removed from the queue. Adam Hotchkiss: I guess, Steve, with the widest beat I can remember on the SaaS and license line in at least a number of years, what would you say drove that? It is particularly interesting to see that line reaccelerate when I know historically we had been talking about ADT being a couple hundred basis-point headwind. It does not really seem like that is showing up in your numbers. So maybe just walk us through the moving pieces and what is driving the maintenance of that roughly 10% growth rate here. And then as a follow-up on OpenEye in the commercial space, how fast is the broader market moving on software and hardware with AI use cases versus what OpenEye is doing? When you are talking to customers, what does demand look like around AI capabilities? Are they patient and willing to wait, or do they tend to go with the first mover? Steve Trundle: Sure, Adam. At a high level, everything was slightly above plan, so we had a bit of a tailwind against our plan. The big drivers were the revenue retention rate, which was unusually high versus our traditional range—we were at about 95.4%—and a little bit of revenue that moved from the third quarter on the EnergyHub side into the first quarter as we had one meaningful agreement adjusted in its structure. Those are the primary drivers. On OpenEye and AI demand, purchasing behavior has changed a bit. Our pipeline looks very solid. We are seeing broader awareness of what a commercial customer can do with AI to enhance not only security but also business operations—delivering business value in addition to security value as we derive insights from rich video content. Customers are looking at products through an AI lens and asking which product solves a problem best with AI. For example, with a large specialty grocery retailer, their highest-margin item is sushi, and it must be freshly stocked between 4 PM and 7 PM. AI Visual Check is now being used to monitor stockouts in that case using an existing security camera view of the sushi refrigerator. It is a good illustration of how customers are thinking about devices and the business insights they can glean. We feel solidly positioned versus competitors in AI capabilities in this domain. Kevin Bradley: I will add a few numbers on the first part. The difference between running at 95.4% revenue retention versus about 94%, the high end of our historical range, is roughly $2 million to $2.5 million per quarter, which is the biggest chunk of the beat. The EnergyHub component was another couple of million dollars, with about half of that pulled forward from Q3. In retrospect, we were probably slightly too conservative on modeling revenue retention going into the year, and we have accounted for that somewhat in our guidance. Matthew Filek: Can you talk a little bit about the gross margin profiles across your growth segments and how those compare to consolidated gross margins? Just trying to get a sense of what continued growth at EnergyHub and the others could mean for consolidated gross margins over the mid to long term as the revenue mix continues to shift toward those faster growing parts of the business. And then on R&D, do you still expect it to remain roughly flat as a percentage of revenue in 2026? Over the next couple of years, where do you see the biggest opportunities for operating leverage across the business? Kevin Bradley: Sure. If you look at our two public reporting segments, in Q1 the SaaS gross margins in the Alarm.com segment are about 87% to 88%. In the “Other” segment, which is where EnergyHub currently sits, they were closer to 60% for Q1, which is probably a bit low due to temporary depression related to the RGS acquisition. Longer term, you are more likely to see gross margin in the “Other” segment at about 65% to 70%, and the Alarm.com segment staying in the 87% to 88% range. So as you model those two components going forward, that is how I would think about the profiles. On R&D, we see it roughly flat as a percentage of revenue for the remainder of this year. As AI unfolds, the question is whether we do more with the same people or the same with fewer people. Our view is to remain very competitive and continue to pursue evolving market opportunities, so we are not betting on massive R&D leverage right now. As growth initiatives mature and reach scale, we expect natural operating leverage from areas that currently drag down consolidated operating margin; that is the primary place we see operating margin expansion. Jack Vander Aarde: Congrats on the solid results and strong retention rate. On EnergyHub, how do you see the number of utility partners and your wallet share with them growing over the next couple of years? It sounds like you have a lot of blue sky left there. And as a follow-up, any updates on the PointCentral business? Steve Trundle: On EnergyHub, after completing the RGS acquisition and adjusting how we categorize utilities, we now work with over 155 utilities, which we define as entities with more than 100 thousand meters in their territory. We are working with utilities that service roughly 75 million to 77 million meters, out of about 130 million total meters we would like to reach. The next game is driving up enrollment within each territory: what percentage of consumers have connected thermostats and, among those with connected thermostats or other devices—EV chargers, batteries, solar inverters—how many get enrolled into programs. We feel we are in a good position on TAM coverage and solution completeness, and we are focused on increasing device attachment and enrollment with our utility partners. On PointCentral, it continues to ramp at a double-digit growth rate, contributing positively to consolidated EBITDA, though it is not a massive consolidated growth driver at the moment. We believe PointCentral is likely number two in the multifamily space, and we are well into six digits of apartments or multifamily units serviced. We remain committed and are probably taking share, but it is not growing at 30% right now. Jack Vander Aarde: And for Kevin, a couple of quarters ago you provided exit-year 2027 targets for hardware margin and adjusted EBITDA margin. Any updates to those? I think you were targeting about a 21% adjusted EBITDA margin. Kevin Bradley: No changes. We are still anticipating and working toward exiting 2027 at about a 21% adjusted EBITDA margin. Hardware margins are harder to pin down and will depend on tariffs and memory prices, but we will manage through that volatility while still targeting the 21% adjusted EBITDA margin. Eleanor Smith: First on EnergyHub, as you think about your internal projections, what does growth look like across expanding within existing customers, cross-selling new products, and adding new logos? And second, what synergies, if any, exist between EnergyHub and your security business, and to what extent have you tapped into those cross-sell synergies? Steve Trundle: We do not break out EnergyHub’s exact growth rate, but you can deduce it is a strong contributor to our growth initiatives, which we have said we expect to grow 25% to 30% this year including any inorganic activity. Inside EnergyHub, growth is a mix of adding new logos, expanding programs within existing utility customers, and driving up device enrollment. Originally, much of the VPP capability came from modest adjustments to residential thermostats. Today the software supports a broader set of edge resources—batteries, EV chargers, solar inverters—which utilities increasingly need as supply becomes more variable. That drives program expansion with existing customers, alongside ongoing new-logo wins and higher consumer enrollment in programs. On synergies, our core residential business is smart security or smart home, and many properties today get connected thermostats through our service providers. Each one of those is an opportunity for the customer to become an EnergyHub participant, which creates natural synergy. We have an R&D sandbox to test features that increase engagement or enhance thermostat-level capabilities that create downstream utility value. There is also channel synergy, helping our service providers offset costs of other consumer services we deliver. In terms of how far along we are, I would say we are in the third inning. We are seeing security increasingly defined to include “energy security”—certainty of energy supply. Some of our security partners are moving beyond generators to batteries. We expect more synergy to develop over time. Operator: I am not showing any further questions at this time. This does conclude today’s presentation. You may now disconnect, and have a wonderful day.
Operator: Good day, and thank you for standing by. Welcome to the Evaxion Business Update and First Quarter 2026 Financial Results Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, CEO, Helen Tayton-Martin. Please go ahead. Helen Tayton-Martin: Thank you, and welcome, everyone, to Evaxion's Q1 2026 Business Update Call. I'm very pleased to be joined today by our CSO, Birgitte Rono and COO, recently promoted, we will talk more about that; and Thomas Schmidt, our CFO; and our Head of Investor Relations and Communications, Mads Kronborg. So if we move to the first slide, just to provide some orientation as to what we will cover today. We will spend a little bit of time on our achievements in the first quarter of this year and some notable changes that we have made in order to address and focus on our strategy. I will then hand over to Birgitte, who will talk through some of the recent highlights from our R&D portfolio and AI-Immunology platform. Birgitte will then hand over to Thomas, who will walk you through our Q1 financial results. And then we will have some concluding remarks before opening up the call for Q&A. So if I move to the next slide, just to reiterate, we may make some forward-looking statements on the call today, and investors and all listening are guided towards our SEC filed documents. So if I go past our introduction to Slide 5. I just wanted to, as before, emphasize our 4 key focus areas within the organization and give you a sense of the momentum as we perform an update in each of those areas. First of all, our core focus around business development and partnering is very much underway and strengthened. By the way, we have reorganized the organization somewhat, and I'll come on to that to focus on the external outreach and positioning of the company to a broader audience and also to raise the awareness of exactly what it is that Evaxion can deliver in terms of products and the platform. And I'm pleased to say that we have many discussions ongoing there, and we hope to report more on that later as the year progresses. Secondly, in our R&D focus areas, we are delighted to talk about our recent data from our EVX-01 lead program Phase II study in which we were able to update some of the translational data recently at AACR, and Birgitte will talk in more detail about the performance of the cells that we produce in relation to the vaccines given to the patients and the 86% immunogenicity conversion rate we have there. We also were able to present at AACR, a new set of data preclinically in collaboration with our collaborators at Duke University on the scope to use the AI-Immunology platform in glioblastoma. We have always felt that the approach could be applied to other high mutational burden tumors, but also to others where high mutational burden was not a feature, and that is very much part of how we were able to demonstrate the broader applicability of the platform in glioblastoma. And again, Birgitte will speak more to that. Finally, we were able to confirm the completion of the last patient, last visit in the extension phase of our EVX-01 program and our Phase II trial, and more to come on that later in the year. More broadly on the AI-Immunology platform, we continued to optimize and strengthen that around its ability to deliver products across our infectious diseases as well as oncology portfolio and again, also in autoimmune disease, again, where we'll update later in the year. But in this first quarter, I'm delighted to say that we were able to show some initial data on a new polio vaccine concept presented in collaboration with The Gates Foundation. And finally, as Thomas will come on to, we have maintained our disciplined allocation of resources aligned to our stated aims with the portfolio and the platform, and our cash runway remains unchanged into the second half of 2027. Moving to Slide 6. As mentioned, we have reorganized slightly inside the organization. I'm delighted to announce the promotion of Birgitte to the combined role of CSO and COO, which really reflects on how we organize the company and how well it's been run in recent times, but also to enable me, in particular, to have a greater focus externally on behalf of the company in terms of our business development and our investor interactions. Separately, and in parallel, we were able to welcome Jens Bitsch-Norhave to our Board of Directors. And Jens comes to us with a huge amount of experience in BD and corporate strategy and outreach in general, both from a biotech perspective but more recently from J&J and Hengrui, where he is currently Corporate VP and Global Head of Corporate Development. So we're delighted with the way that we've been able to strengthen the organization to focus on our stated strategy, to build and maintain what we have and build greater partnerships. So on Slide 7, just to summarize, we remain a lean and capable and focused team in terms of the management organization. Two of the members are here on the call with me today, and Andreas continues to support and drive the organization's innovation strategy around AI-Immunology. And our Board remains the same but with the addition of Jens, as I mentioned. Finally, moving to Slide 8 to set up our objectives and key milestones for this year. Just a reminder that Evaxion over many years now has the privilege of having a pipeline in Phase II in oncology with our EVX-01 asset in advanced melanoma, our personalized neoantigen-directed peptide-based vaccine, where we've got great data, which Birgitte will touch on in terms of now and what's to come. We have our EVX-03 program, which is a combination of personalized and IRF-based antigens on our DNA platform. And then we also have coming along in preclinical development, aiming for clinical readiness by the end of this year, our off-the-shelf vaccine program, EVX-04 targeted to AML, which will be a single vaccine approach for multiple AML patients. More to come on that. Infectious diseases, we remain focused on driving forward our preclinical assets, EVX-B1 against pathogen staph aureus, our B2 program against Neisseria gonorrhea and also in collaboration in -- with Afrigen on an RNA platform. EVX-B3, our options partner program continues to move forward with MSD. And before our more recent newer program on Group A Streptococcus is making great strides in initial early discovery component design. And our first viral program is continuing to make progress in terms of confirming the candidate components. So a lot going on in the organization. In Slide 9, I just wanted to remind the audience of our 2026 milestones and the fact that we have achieved the first one of those in our EVX-01 additional biomarker and immunogenicity data, and we remain on track in terms of updating on the approach of AI-Immunology in autoimmune disease, our 3-year data for the EVX-01 melanoma program, our planned strategy with the EVX-04 AML program and the early work maturing in our preclinical EVX-B4 program against Group A Streptococcus. And fundamentally, we are driving the partnership strategy to focus on the platform and the assets so that we can continue to build value in the company and focus on delivering those into early development where we believe we can add value. So at this point, I'd like to hand over to Birgitte, who will talk you through our R&D and AI-Immunology update. Birgitte Rono: Thank you, Helen. So today, I'll be focusing on our lead candidate, EVX-01. And as mentioned, this is our personalized neoantigen cancer vaccine currently in Phase II in advanced melanoma. And then I will present the exciting new data demonstrating the scalability of our AI-Immunology platform into the hard-to-treat deadly brain cancer glioblastoma. And lastly, I will showcase how we have applied AI-Immunology to design optimized vaccine antigens for an improved polio vaccine. So if you take the next slide. So as Helen mentioned, we presented EVX-01 Phase II biomarker and T-cell immune data at the AACR Annual Meeting here in April. And we reported that 86% of the EVX-01 vaccine target triggered a specific immune response, and this is substantially higher than what has been reported for other similar vaccine candidates. Furthermore, we also reported that 86% of the immunogenic vaccine target induced a de novo T-cell response, meaning that the EVX-01 vaccine specifically triggers novel T-cell responses and not just amplifying existing responses. And this is of great importance as induction of these novel responses have been linked to clinical benefit. Furthermore, we demonstrated a positive correlation between the predicted quality of the EVX-01 vaccine targets and the magnitude of the T-cell response induced by the vaccine targets. And this high vaccine target success rate, together with this positive correlation demonstrates the strong predictive power of our AI-Immunology platform. If you take the next slide. So EVX-01 continues to deliver strong data, adding to the already existing and promising clinical and immunological data package. So at ESMO last year, we reported a 75% overall response rate, including 25 complete responders and 92 sustained responses, indicating a durable benefit. So importantly, more than half of the patients converted into an improved clinical response upon EVX-01 treatment. And with the newly presented Phase II immune data, this further strengthens the picture with the 86% immunogenicity and the 86% de novo immune responses, demonstrating broad and consistent immune activation. So looking ahead, we have a clear development trajectory. We will announce 3-year data, including clinical outcome in the second half of this year. Further, we are evaluating and discussing additional relevant cancer indications and with further trials expected to be conducted in partnerships. And importantly, EVX-01 has already received FDA Fast Track designation, validating both the unmet need and then also the development potential. So overall, this positions EVX-01 very strongly as we move forward into the next phases of value creation. If you take the next slide. So let's turn our focus to the other promising data set presented at AACR. So in collaboration with Duke University, we demonstrated that our AI-Immunology platform scales beyond melanoma. And here, it's exemplified with glioblastoma or GBM. So GBM is the most common and the most aggressive primary malignant brain tumor. And despite surgery followed by chemoradiation, outcome remains very poor for these patients with a median overall survival of approximately 15 months and a 5-year survival below 10%. So using our AI-Immunology platform, we have evaluated tumor omics data from 24 GBM patients and demonstrated that a fully personalized vaccine design was feasible for all these cases. And importantly, these designs were based on 2 classes of antigens or classical neoantigens and also antigens derived from the dark genome so-called endogenous retroviruses or ERs. So in 21 out of the 24 designs, they included both types of antigens, 2 vaccine designs included only neoantigens and 1 design relied solely on the ER antigens. This analysis showcases the flexibility and the scalability of the platform to integrate antigen from different sources, fitting the patient tumor biology. So overall, the data demonstrate that AI-Immunology can address hard-to-treat low mutational burden tumors like GBM and it also supports broader applicability of the platform across different cancers. If you move on to the next slide. So another example of how AI-Immunology can be used to design improved vaccine was showcased at the World Vaccine Congress. And together with The Gates Foundation, we presented a new polio vaccine concept using AI-Immunology, we designed a novel hybrid capsid antigen and a novel de novo B-cell antigen with the aim of eliciting a strong and broad tumor response against all serotypes. And overall, this highlights the potential of AI-Immunology to reinvent classical vaccines with improved simplicity and also improved breadth. Take the next slide. So having highlighted progress across the key R&D program, let's step back for a moment and focus on AI-Immunology and the data validating its ability to generate high-quality product candidates. So AI-Immunology is clinically validated with positive outcomes in 3 out of 3 oncology trials. And preclinically, we have demonstrated proof of concept across multiple disease areas, including cancer with our IRF targeting off-the-shelf vaccine concept as well as in infectious diseases with several vaccine candidates targeting multiple bacterial and viral pathogens. And importantly, the EVX-01 concept is highly scalable with potential in other solid tumors beyond melanoma. Additionally, the platform's applicability in challenging cancer indications was further validated in GBM. So finally, AI-Immunology supports multiple modalities, including peptides, proteins and DNA and RNA, enabling both pipeline and also partnership potential. So in conclusion, we have demonstrated strong progress across our platform and our R&D pipeline, and we are looking forward to keeping you updated as we advance our programs further. So with that, I will now hand over to Thomas, who will present our quarterly financial results. Thomas Schmidt: Yes. Thank you, Birgitte. And as mentioned, I will now then present and take you through our Q1 '26 results. The highlights of the first quarter of the year really is a continued discipline that we have applied in our resource allocation, of course, aligned with our strategy and certainly investing into our value drivers. So really according to plan. And that also means that we are on track to deliver what we expect of an operational cash burn of roughly USD 14 million for 2026. That also underlines and reconfirms that our cash runway is into the second half of 2027 and remains as such. Also, as earlier communicated, not assuming any partnerships or deals that we will hopefully be making and communicating within that time frame. Looking at the P&L, we have operating expenses overall more or less in line with last year, but slightly reduced. It comes from our R&D with a minor increase as we continue, as mentioned before, to progress and advance our pipeline and programs according to plan. On the other side, our G&A expenses are slightly lower versus last year, also mainly driven by the fact that we have lower capital market costs in Q1 '26 versus the same period in '25. The first quarter resulted in a net loss of USD 3.6 million, again, according to our plan. On the balance sheet side of things on the next slide, reconfirming once again, our cash position and equivalent end of the quarter stands at $18.4 million, which confirms runway until the second half of '27. And the total equity has been reduced since year-end, really as a result of the net result of the first quarter, meaning that we have USD 13.2 million as equity at the end of the quarter. So all in all, financials according to plan, allocation into our main priorities and cash runway confirmed until the second half of 2027. With that, I hand it back to Helen for some concluding remarks. Helen Tayton-Martin: Thanks, Thomas, and thanks, Birgitte. And so I would just like to emphasize that we believe we've made a great start to 2026, achieving the first of our milestones with a really encouraging translational data from EVX-01. We've got various presentations that have been made that validate the capabilities and scalability of the platform, as Birgitte has explained. Business development remains a key priority in terms of engaging with organizations on the value of the assets that we have and the capability to develop those assets as we've talked a bit about. And the cash runway is maintained through to the second half of 2027. So we are rigorously following execution of our strategy and engagement externally and making great progress. So with that, I would like to hand back over to take some questions by the operator. Operator: Our first question comes from the line of Thomas Flaten from Lake Street Capital Markets. Thomas Flaten: Two for me. With respect to the 3-year EVX-01 data, ASCO is obviously too soon. But should we anticipate something like an ESMO readout? Or will you do it independent of a broader scientific meeting? Helen Tayton-Martin: So we will be updating in the context of a scientific meeting. We will not be sort of outside of that, that's not our intention. And we'll confirm which of the 4 conferences it will be once we're able to -- once abstracts are released. Thomas Flaten: I think the GBM data that you put out, albeit early, was very exciting, and obviously, a disease state and great need. Is it your strategic intent to take that into humans? Or would you seek a partnership based on the data you have now and perhaps some additional preclinical data? Helen Tayton-Martin: So we are very excited about the data. We agree it's really interesting and it's really exciting in a very difficult-to-treat disease. We would anticipate that that will be something that we will be partnering. It sort of strengthens the overall personalized approach that we have developed with EVX-01, but probably more to come on that as more data and discussions mature, but it would be a partnering approach for that one, too. Operator: Our next question comes from the line of Michael Okunewitch from Maxim Group. Michael Okunewitch: Congrats on all the great progress. I guess to kick things off, I'd like to ask just a little bit about expansion and I guess, your design philosophy and strategy around that. So first off, when thinking about targets for expanded indications in cancer, in particular, is the plan to go after other diseases where PD-1s have historically been ineffective due to that synergistic activity of directing the antitumor immune response? Helen Tayton-Martin: So I think we've taken a lot of parameters into account. But Birgitte, do you want to comment on how we have been marshaling the approach internally to focus on the rare diseases? Birgitte Rono: Yes. So as mentioned, we are looking at multiple different antigen sources currently, and there's further development in this area in the company. So we would like to be able to provide a cancer vaccine for all patients independently of their antigen profiles or landscapes. So we have so far looked at more than 30 different indications, mapping out their seasonal burden, their ERV burden, et cetera, and can see that for many of these indications, we're able to -- with the capabilities we have currently to design a high-quality vaccine. And of course, one would need to further dive into medical need and current treatment landscapes to find the optimal subpopulations where our therapies would fit, but not necessarily in PD-1 low patient, it could also be in high. So it's mostly -- we are mostly focusing on understanding the antigenic landscape and fitting our therapies towards these profiles. Michael Okunewitch: When thinking about designing new vaccines, do you find that it makes more sense to use one personal vaccine and then see if you could expand that to multiple tumor types with the same vaccine for more universal coverage? Or does it make more sense to go tumor by tumor and create a new back of targets that are directed specifically at the common target for that given tumor type like melanoma or like glioblastoma and have an individual vaccine candidate for each of those different cancers? Birgitte Rono: So the way that we are approaching this is to look into a lot of data from certain indication and understanding, as mentioned, the landscape. If we do see that there are these conserved antigens, so antigens that are shared across patients, we would definitely develop an off-the-shelf vaccine just due to the fact that the statistics are more simple and also the cost for the manufacturing would be way lower than for a personalized approach. Further on, you can -- if there's an off-the-shelf therapy, you can immediately treat the patients and not have to wait for that personalized batch to be ready. So that's -- everything comes back to the patient omics data and the profiles that we are seeing in our analysis. For some indications, we know that developing an off-the-shelf cancer vaccine would be very challenging. So it clearly depends on these different biological profiles. Helen Tayton-Martin: I think the EVX-04 illustrates just where in that setting, I think, the high level of conserved has enabled us to produce a single vaccine for those patients. Michael Okunewitch: I appreciate the additional color and looking forward to the 3-year data coming up later this year. Operator: We will now take our next question. And this question comes from the line of Danya Ben-Hail from Jones. Danya Ben-Hail: Congratulations on the update. You mentioned that there are several parallel partnerships and discussions. Can you provide more detail on whether these discussions lean toward broad platform licensing or specific asset-based collaboration in future? Helen Tayton-Martin: So we obviously can't say much at this point. I think we have stated the priority around partnership on EVX-01. But as you've heard, that has broader applicability than melanoma in our minds. And that has obviously also gathered interest externally with partnering conversations also. Across our infectious diseases portfolio there are a number of assets there, which are of interest to a number of companies. So we can't really provide any more details than that. Suffice to say that we are trying to be strategic around the way we have the partnering discussions in terms of maximizing the value, whether it's from an asset group in infectious diseases or the approach with something like the personalized EVX-01, EVX-03 cancer vaccines. So obviously, we will -- as soon as we can tell you more, we'll be delighted to do so, but we're pushing forward on a more strategic basis, if you will, around how to get the most value out of the assets that we can produce from AI-Immunology. Danya Ben-Hail: Just one more question on the autoimmune platform part. So we should expect more details in the second half? Helen Tayton-Martin: Yes, that's our current plan and aligns to -- as is always generally with Evaxion, generally aligns to scientific relevant conferences to report on data. Operator: There are no further questions for today. I will now hand the call back to Helen Tayton-Martin for closing remarks. Helen Tayton-Martin: Thank you. Thank you very much. And thank you to all those who listened into the call, and thank you very much for the questions that we received. I think in summarizing, we are very enthusiastic and excited about the performance so far in Q1 2026. We are really just getting started and we are achieving our milestones as we have stated them to be. So very excited about the initial data, very excited about the additional updates to come later this year. With that, I'd like to thank you very much, and I think we'll be closing the call. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Hello everyone. Thank you for joining us, and welcome to the SandRidge Energy, Inc. first quarter 2026 conference call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Scott Prestridge, Senior Vice President of Finance and Strategy. Scott, please go ahead. Scott Prestridge: Thank you, and welcome everyone. With me today are Grayson R. Pranin, our CEO; Jonathan Frates, our CFO; Brandon L. Brown, our CAO; as well as Dean Parrish, our COO. We would like to remind you that today's call contains forward-looking statements and assumptions, which are subject to risk and uncertainty, and actual results may differ materially from those projected in these forward-looking statements. These statements are not guarantees of future performance, and our actual results may differ materially due to known and unknown risks and uncertainties, as discussed in greater detail in our earnings release and our SEC filings. You may also hear references to adjusted EBITDA, adjusted G&A, and other non-GAAP financial measures. Reconciliations of these measures can be found on our website. With that, I will turn the call over to Grayson. Grayson R. Pranin: Thank you, and good afternoon. I am pleased to report on a strong quarter for the company. Production averaged 18.6 MBOE per day during the first quarter, an increase of 4% on a BOE basis versus the same period in 2025. Oil production increased 31%, and total revenues increased 17% during the quarter versus the same period in 2025, driven primarily by new production from our operated development program. Before getting into this and other highlights, I will turn things over to Jonathan for details on financial results. Jonathan Frates: Compared to 2025, the company saw increases in the market price of both oil and natural gas. We grew production by 4% year-over-year and generated revenues of approximately $50 million, which represents an increase of 26% compared to last quarter and 17% compared to the same period last year. Adjusted EBITDA was $33.7 million in the quarter compared to $25.5 million in 2025. We continue to manage the business with a focus on maximizing long-term cash flow while growing production and utilizing our NOLs to shield us from federal income taxes. At the end of the quarter, cash, including restricted cash, was approximately $104 million, which represents over $2.80 per common share outstanding. Cash was down compared to the prior quarter due to an increase in noncash working capital, primarily related to the timing of payables versus receivables from our one-rig drilling program. Working capital, as represented by current assets less current liabilities, was up by $3.7 million compared to the prior quarter. The company paid $4.4 million in dividends during the quarter, which includes $600 thousand of dividends to be paid in shares under our dividend reinvestment plan. On May 5, 2026, the Board of Directors increased the regular-way dividend by 8%, declaring a $0.13 dividend as well as a one-time special dividend of $0.20 per share, both of which are payable on June 1 to shareholders of record on May 20, 2026. Shareholders may elect to receive cash or additional shares of common stock through the company's dividend reinvestment plan. Following these dividends, SandRidge Energy, Inc. will have paid $5.05 per share in regular and special dividends since the beginning of 2023. Commodity price realizations for the quarter before considering the impact of hedges were $71.11 per barrel of oil, $3.13 per Mcf of gas, and $18.64 per barrel of NGLs. This compares to fourth quarter 2025 realizations of $57.56 per barrel of oil, $2.20 per Mcf of gas, and $14.92 per barrel of NGLs. Our commitment to cost discipline continues to yield results, with adjusted G&A for the quarter of approximately $2.4 million or $1.42 per BOE compared to $2.9 million or $1.83 per BOE in 2025. Net income was $18.7 million for the quarter, or $0.50 per diluted share. Adjusted net income was $21.6 million, or $0.58 per diluted share. This compares to $13 million, or $0.35 per diluted share, and $14.5 million, or $0.39 per diluted share, respectively, during the same period last year. The company generated cash flow from operations of $19.8 million during the quarter compared to $20.3 million during the same period last year. Adjusted operating cash flow was $34.4 million during the quarter compared to $26.3 million in the same period of 2025. Lastly, production is hedged with a combination of swaps and collars representing just under 30% of the midpoint of our 2026 guidance. This includes approximately 37% of natural gas production and 43% of oil. These hedges will help secure a portion of our cash flows and support our drilling program through the year. We continue to monitor prices and take advantage of favorable opportunities, but plan to maintain meaningful upside throughout the remainder of the year. Before shifting to our outlook, you should note that our earnings release and 10-Q will provide further details on our financial and operational performance during the quarter. Now I will turn it over to Dean for an update on operations. Dean Parrish: Thank you, Jonathan. Let us start with a review of the first quarter and discuss recent drilling and completion results. Total capital spend for the quarter, excluding A&D, was $19.9 million, which is better than expectations for the quarter, mostly due to drill schedule adjustments. A rigorous bidding process focused on driving drilling and completion costs down in the Cherokee play and longer artificial lift run times from previous years of improvements kept us on budget. Additionally, we have been securing critical well components needed for the remainder of the year to minimize any supply or inflationary pressures that may affect our capital program. Lease operating expenses for the quarter were $10.8 million, or $6.45 per BOE, which falls right in line with expectations. We are also securing the needed equipment and services that will be critical for production operations in 2026, similar to the capital program. We expect to continue to see pressure on diesel fuel through fuel surcharges passed on through service providers that have strict internal protocol to reduce surcharges when diesel prices begin to decrease. During the quarter, the company successfully completed three wells and brought two wells online from our operated one-rig Parakeet drilling program. We recently brought online the ninth well in our program and are drilling the eleventh, while the tenth well awaits final completion. Our operations team continues to execute, with the tenth well that was just drilled being the fastest, lowest cost to date, driven by the team's focus and ingenuity to reduce costs. It is early, but we are seeing some incremental efficiencies on our eleventh well drilling now, and we will have more to share next quarter. Moving to our 2026 capital program, we plan to drill 10 operated Cherokee wells with one rig this year and complete eight wells. The remaining two completions are anticipated to carry over to next year. A majority of the remaining wells in our development program this year directly offset proven or in-progress wells in the area, and we continue to monitor offsetting results. Gross well costs vary by depth but are estimated to be between approximately $9 million and $11 million. We intend to spend between $76 million and $97 million in our 2026 capital program, which is made up of $62 million to $80 million in drilling and completions activity, and between $14 million and $17 million in capital workovers, production optimization, and selective leasing in the Cherokee play. Our high-graded leasing is focused on further bolstering our interest, consolidating our position, and extending development into future years. With that, I will turn things back over to Grayson. Grayson R. Pranin: Thank you, Dean. Let us start with commodity prices. We started the year with strong natural gas prices, which benefited January and February revenues. During this period, our largest natural gas purchaser elected to move to ethane rejection. This means that more ethane is sold as natural gas and less is separated as NGLs. This typically results in fewer barrels of equivalent in volume, which impacted both our NGL and overall BOE volumes for the quarter, but it benefited natural gas volumes and revenue as the gas was sold at relatively higher prices with an increased BTU factor. This had a positive effect on revenue due to the dynamics of high natural gas and lower relative ethane prices during the period. However, natural gas prices have since declined and, with it, the spread between natural gas prices and ethane. Our largest natural gas purchaser returned to ethane recovery in March and plans to maintain recovery until there is further benefit otherwise. Also, while natural gas prices increased during January, we did experience increased production deferment during Winter Storm Fern, which negatively impacted volumes. Despite this challenge, our team did an amazing job operating through the extreme cold weather and minimizing downtime as much as possible—and, most importantly, doing so safely. Now shifting to oil, the year began with oil prices in the mid- to upper-$50 range, which changed dramatically over the quarter. Despite seeing spot rates reach up to triple-digit levels recently, WTI averaged $72.74 per barrel in Q1 because the shift occurred in late February and early March. For the same reason, the increase in WTI prices only partially benefited our revenues during the quarter, as the entire oil price increase occurred in the back half of the quarter. Thus far, oil prices have remained high in the second quarter and could benefit revenues further. Our commodity prices are driven by market dynamics outside of our control. We have used our favorable position and came into the year with minimal hedges to take advantage of the increases year-to-date, the details of which can be found in our earnings release and 10-Q to be filed later today. Combined with our prior hedges, we have hedged a meaningful portion of our PDP volumes for the remainder of the year, which allows us to secure a portion of our cash flows at prices that are materially above where we started the year and where we budget. The remainder of our PDP oil volumes and all of the volumes from our current drilling program will participate at the market with exposure to current high prices. We have endeavored to balance securing cash flows while maintaining an appropriate level of exposure to commodity upside. That said, there has been a lot of volatility in WTI pricing over the last few weeks and much speculation over futures, with the forward curve remaining in steep backwardation. We are content with the current level of hedging this year. We will continue to monitor geopolitical events and future pricing for further adjustment, with specific focus on longer-term periods. Now let us pivot over to our development program. As Dean discussed, we had first production on two wells this past quarter. One well targeted the Cherokee shale in our core area, consistent with wells last year. These wells had an average peak 30-day of approximately 2 thousand BOE per day, made up of 45% oil, including the newest seventh well. The other well turned in line this quarter and tested the Red Fork formation, a sandstone in the Lower Cherokee group. This was an initial well in a new area for us that offset and delineated a very productive well drilled by a reputable operator. This well allows us to better establish performance expectations in a new target in a new area. The leasing costs have been very attractive. Currently, we do not have any Red Fork wells planned for the rest of the year. However, we plan to monitor the performance of this well, industry and offsetting activity—which has increased over the past year—as well as commodity prices and other factors while evaluating the go-forward plan in the new area. Given the tailwind of WTI prices and the enhancement to returns, we plan to continue our Cherokee development with one rig and further grow oily production. While the program is attractive in a range of commodity environments, our team will continue to be diligent by prioritizing full-cycle returns, monitoring reasonable reinvestment rates, and, when needed, exercising drill schedule flexibility to make prudent adjustments to our development plans in different economic environments. Also, we do not have any significant near-term leasehold expirations and have the flexibility to defer these projects if needed for a period of time. I am very pleased with our team for their continued focus on safety, execution, and cost focus in development and production optimization programs. They have truly championed safety, resulting in the continuation of a record of more than four years without a recordable safety incident. In addition, they continue to operate at a high level with a lean, but very engaged and experienced staff with peer-leading operating and administrative cost efficiencies. I would like to pause here to highlight the optionality we have across our asset base. Coupled with the strength of our balance sheet, it sets us up to leverage commodity price cycles. The combination of our oil-weighted Cherokee and gas-weighted legacy assets, as well as a robust net cash position, gives us multifaceted options to maneuver and take advantage of different commodity cycles. Put simply, we have a strong balance sheet and a versatile kit bag, which makes the company more resilient and better poised to maneuver and adjust, no matter the commodity environment. I will now revisit the company's advantages. Our asset base is focused in the Mid-Continent region with a PDP well set that provides meaningful cash flow, which does not require any routine flaring of produced gas. These well-understood assets are almost fully held by production, have a long history, a shallowing and diversified production profile, and double-digit reserve life. Our incumbent assets include more than a thousand miles each of owned and operated SWD and electric infrastructure over our footprint. This substantial owned and integrated infrastructure helps de-risk individual well profitability for the majority of our legacy producing wells under roughly $40 WTI and $2 Henry Hub. Our assets continue to yield free cash flow. This cash generation potential provides several paths to increase shareholder value realization and is benefited by a low G&A burden. SandRidge Energy, Inc.'s value proposition is materially de-risked from a financial perspective by our strengthened balance sheet, including negative net leverage, financial flexibility, and advantaged tax position. Further, the company is not subject to MVCs or other off-balance-sheet financial commitments. We have bolstered our inventory to provide further organic growth opportunities and incremental oil diversification, with low breakevens in high-graded areas. Finally, it is worth highlighting that we take our ESG commitment seriously and have implemented disciplined processes around them. Not only do we continue to operate our existing assets extremely efficiently and execute on our Cherokee development in an effective manner, but we do so safely. Shifting to strategy, we remain committed to growing the value of our business in a safe, responsible, efficient manner while prudently allocating capital to high-return growth projects. We will also evaluate merger and acquisition opportunities while maintaining financial discipline, consideration of our balance sheet, and commitment to our capital return program. This strategy has five points. One, maximize the value of our incumbent Mid-Con PDP assets by extending and flattening our production profile with high rate-of-return production optimization projects, as well as continuously pressing on operating and administrative costs. Two, exercise capital stewardship and invest in projects and opportunities that have high risk-adjusted, fully burdened rates of return while prudently targeting reasonable reinvestment rates that sustain our cash flows and prioritize a regular-way dividend. Three, maintain optionality to execute on value-accretive merger and acquisition opportunities that could bring synergies, leverage the company's core competencies, complement its portfolio of assets, whether it utilizes approximately $1.5 billion of federal net operating losses or otherwise yields attractive returns to its shareholders. Four, as we generate cash, we will continue to work with our board to assess paths to maximize shareholder value to include investment and strategic opportunities, advancement of our return-of-capital program, and other uses. To this end, the board continues to focus on the company's return of capital to stockholders as a priority in capital allocation, and as a result, expanded its ongoing dividend program by 8% and declared a one-time dividend. The final staple is to uphold our ESG responsibility. Now, shifting to administrative expenses, I will turn things over to Brandon. Brandon L. Brown: Thank you, Grayson. As we close out our prepared remarks, I will point out our first quarter adjusted G&A of $2.4 million, or $1.42 per BOE, continues to lead among our peers. The consistent efficiency of our organization reflects our core values to remain cost disciplined and to be fit for purpose. We will maintain our efficient and low-cost operation mindset and continue to balance the weighting of field versus corporate personnel to reflect where we create the most value. The outsourcing of necessary but more perfunctory functions such as operations accounting, land administration, IT, tax, and HR has allowed us to operate with total personnel of just over 100 people for the past several years while retaining key technical skill sets that have both the experience and institutional knowledge for our business. In summary, at the end of the first quarter, the company had approximately $104 million in cash and cash equivalents, which represents over $2.80 per share of our common stock outstanding; an inventory of high rate-of-return, low breakeven projects; low overhead; top-tier adjusted G&A; no debt; negative leverage; a flattening production profile; double-digit reserve life; and approximately $1.5 billion of federal NOLs. This concludes our prepared remarks. Thank you for joining us today. We will now open the call for questions. Operator: We will now begin the question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Thank you for standing by. My name is Jaylen, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cloudflare, 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, simply press star one again. And now let us turn the conference over to Phil Winslow. You may begin. Phil Winslow: Thank you for joining us today to discuss Cloudflare, Inc.’s financial results for the first quarter of 2026. With me on the call, we have Matthew Prince, cofounder and CEO; Michelle Zatlin, cofounder and president; and Thomas Seifert, CFO. By now, everyone should have access to our earnings announcement. This announcement as well as our supplemental financial information may be found on our Investor Relations website. As a reminder, we will be making forward-looking statements during today's discussion, including, but not limited to, our customers, vendors, and partners; operations and future financial performance; our anticipated product launches and the timing and market potential of those products; our anticipated future financial and operating performance; and our expectations regarding future macroeconomic conditions. These statements and other comments are not guarantees of future performance and are subject to risks and uncertainty, much of which is beyond our control. Our actual results may differ significantly from those projected or suggested by any of our forward-looking statements. These forward-looking statements apply as of today, and you should not rely on them as representing our views in the future. We take no obligation to update these statements after this call. For a more complete discussion of the risks and uncertainties that could impact our future operating results and financial condition, please see our filings with the SEC as well as today's earnings press release. Unless otherwise noted, all financial numbers we talk about today, other than revenue, will be on an adjusted non-GAAP basis. You may find a reconciliation of GAAP to non-GAAP financial measures included in our earnings release on our Investor Relations website. For historical periods, a GAAP to non-GAAP reconciliation can be found in the supplemental financial information referenced a few moments ago. We would also like to inform you that we will be hosting our annual investor day on Tuesday, June 9, 2026. I will now turn the call over to Matthew. Matthew Prince: Thank you, Phil. We had a very strong start to 2026. We achieved revenue of $639.8 million, up 34% year-over-year. We now have 4,416 customers paying us more than $100,000 per year, a 25% increase year-over-year. Revenue contribution from these large customers grew 38% year-over-year, contributing 72% of revenue during the quarter, up from 69% in the first quarter last year. Our dollar-based net retention was 118%, down 2% quarter-over-quarter and up 7% year-over-year. Our gross profit margin was 72.8%. We delivered an operating profit of $73.1 million, representing an operating margin of 11.4%. And we generated strong free cash flow of $84.1 million during the quarter, again exceeding expectations. The strong momentum we have seen in our business continued to build through the first quarter. Some highlights: sales productivity increased year-over-year for the ninth consecutive quarter. Growth in hiring sales force capacity also accelerated in the first quarter, increasing at the fastest pace since 2023. Deals over $1 million were up 73% year-over-year, the fastest growth rate since 2024. We added a record number of our largest customers in the quarter—those spending more than $5 million with us annually. In fact, we added as many $5 million-plus customers in Q1 as we did in all of last year. Bookings from new customers increased at the highest rate since 2023. New pipeline generation grew sequentially at the fastest pace in five years, and we exceeded our planned target by more than any other first quarter since 2021. Our quarterly gross retention reached its highest level in four years, reinforcing that customers understand Cloudflare, Inc. is a must-have rather than a nice-to-have. We are a significant beneficiary of many of the most powerful trends across the economy. To give you some sense, we added 1 million new developers in just the last quarter. Our products were made for this moment, and we are helping our customers build the future on our platform. That is a good segue to talk about some of our customer wins in the quarter. A leading technology platform expanded their relationship with Cloudflare, Inc., signing a two-year $10 million pool of funds contract with initial use cases for application services and our Workers developer platform. With our full portfolio now unlocked under a single rate card, we won workloads from both a hyperscaler as well as point solution competitors. Looking ahead, we are also in discussions on AI pay-per-crawl to control and help monetize AI bot traffic. A rapidly growing technology company in APAC expanded their relationship with Cloudflare, Inc., signing a two-year $8.7 million contract for application services and our Workers developer platform. Driven by the boom in AI-powered vibe coding, this company has seen explosive growth, and Cloudflare, Inc. has become core to their infrastructure, intelligently routing billions of daily requests across the globe. This customer chose Cloudflare, Inc. over a competitive bid from a hyperscaler due to the strength of our unified platform and our seamless low-latency security. A Fortune 100 technology company expanded their relationship with Cloudflare, Inc., signing a two-year $8 million contract for our privacy proxy solution, the fifth privacy engagement with this customer, solidifying Cloudflare, Inc. as their go-to privacy partner. They approached us with an urgent need to handle massive scale with precise geolocation accuracy for user-initiated agentic traffic. We delivered a fully operational solution within one week, demonstrating the speed, trust, and engineering depth that continues to set us apart. A leading insurance company in EMEA expanded their relationship with Cloudflare, Inc., signing a five-year $5.1 million contract for application services and our full SASE portfolio. Driven by years of acquisitions, this customer's IT environment had bloated to over 600 vendors, with some employees literally juggling up to four laptops to access essential applications. By standardizing on Cloudflare, Inc., they displaced six legacy vendors at signing, with 10 more displacements already underway, targeting over $1.3 million in annual savings. Their CTO put it simply: he wanted a high-performance “formula one”-level architecture with Cloudflare, Inc. as the engine. A Fortune 500 aerospace and defense company expanded their relationship with Cloudflare, Inc., signing a three-year $5 million contract for our Zero Trust products, including browser isolation, Access, and Gateway. After a major security breach forced this customer to move from on-premise hardware to the cloud, they discovered that their first-generation Zero Trust vendor’s browser isolation solution could not meet critical government compliance requirements, putting $5.5 billion in government revenue at risk. Cloudflare, Inc. delivered a fully compliant solution in a matter of weeks where the incumbent could not. A leading AI company expanded their relationship with Cloudflare, Inc., signing a one-year $4.1 million contract for application services. As one of the most visible targets for cyber attacks globally, this customer needed a security layer to protect their massive infrastructure buildout. Despite a strong build-over-buy mentality, they chose Cloudflare, Inc., trusting a battle-tested network that has proven its resilience against the largest attacks. This is a customer that moves fast and pushes boundaries, and they are already testing our AI Gateway for their AI workloads. Another leading AI company expanded their relationship with Cloudflare, Inc., signing a 10-month $2 million contract for Argo Smart Routing, coming just one quarter after signing a Workers developer platform deal. This customer wants to be the fastest and most reliable AI provider in the market, and Cloudflare, Inc. is delivering. After deploying Argo, they immediately reduced their average global latency by 30%. In the AI space, that kind of speed is a real advantage that our hyperscaler competitors simply cannot match. In nearly every customer conversation, it is clear: the emergence of generative and agentic AI is not just redefining the economics of the Internet and software companies; it is redefining the business models of all companies, fundamentally reshaping how organizations are structured, operate, and create value. At Cloudflare, Inc., we do not just build and sell AI tools and platforms. We are our own most demanding customer. AI and agents are no longer pilot projects at Cloudflare, Inc.; they are now core parts of our workforce. It has been an interesting journey. We have been selling picks and shovels in the AI gold rush for the last four years, but we ourselves were cautious users, wanting to ensure there was real ROI before making significant investments. We avoided a lot of the performative AI some companies engaged in. Internally, the tipping point was last November. At that point, across our teams, we began to see massive productivity gains—team members that were 2, 10, even 100 times more productive than they had been before. It was like going from a manual to an electric screwdriver. Cloudflare, Inc.’s usage of AI has increased by more than 600% in the last three months alone. For team members in engineering, 97% use AI coding tools powered by the same Workers developer platform we ship to our customers, and 100% of their contributions to our production code bases are now reviewed by autonomous AI agents. Across the industry, you are about to see a massive uptick in reliability as every code or configuration change can now have a tireless and uncorrelated set of eyes trained on every incident from the last ten years checking to avoid problems. At the same time, the impact on developer velocity is clear. We have never seen a quarter-to-quarter increase in new code generated, bugs squashed, and technical backlog burned down like we did last quarter. It has been wild. Beyond product and engineering, employees across functions from HR to marketing run thousands of agentic AI sessions each day to get their work done. Those agentic workflows rely on dozens of MCP servers to reach data in systems of record and use hundreds of centrally managed skill files, as well as many more that have been created and shared within individual teams. The harness that we have built, which we call Cloudflare OS, allows teams across the company to quickly get up and running. We have asked our team to think what the fundamental job to be done is and then reimagine how we can make the work to achieve it more efficient, reliable, and joyous. At Cloudflare, Inc., the way work is done has fundamentally changed. That means being intentional in how we architect our company for the agentic AI era in order to supercharge the value we deliver to our customers and honor our mission to help build a better Internet for everyone, everywhere. As a result, we announced significant actions this afternoon to further accelerate our evolution to an agentic AI-first operating model. That unfortunately means saying goodbye to teammates who have contributed to building Cloudflare, Inc. to where we are today, resulting in a reduction of the size of our team by more than 1,100 people. This decision is not a reflection of the individual work or talent of those leaving us. They were critical in getting us to where we are today. Instead, we are reimagining every internal process—from engineering to finance to sales—to run on an agentic AI backbone on our Workers platform. This is not a cost-cutting exercise or an assessment of the individuals’ performance. It is about defining how a world-class, high-growth company operates and creates value in the agentic AI era. Deciding to part ways with teammates is the hardest part of this decision, and it is a responsibility the entire senior leadership team at Cloudflare, Inc. takes personally. We believe that acting with empathy is not about avoiding hard decisions but rather about how you treat people when those decisions are made. If we are asking our team to be world-class, we have a reciprocal obligation to be world-class in how we treat them. By taking decisive action now, we provide immediate clarity to those departing and protect the stability of the team that remains. We are also pairing the directness of these measures with severance packages that lead the industry because we want to ensure that those who have invested their time and talents in Cloudflare, Inc.’s mission are taken care of as we move into the next phase. It is the right thing to do, it is the honest thing to do, and it reflects the values of the company we are continuing to build. On a personal note, this has been a hard day. A number of friends will no longer be colleagues. But I am confident they will land at other great places and bring with them a set of skills they learned building Cloudflare, Inc. to where we are today. The group leaving us will build many future great companies. And I am confident that our reshaped organization will be even more nimble and innovative as we continue to build the future. Not an easy day, but the right decision. With that, I will turn it over to Thomas to walk through the numbers. Thomas, take it away. Thomas Seifert: Thank you, Matthew, and thank you to everyone for joining us. Before I begin my customary remarks on our results for the first quarter, I would like to provide additional details on the actions we announced this afternoon to accelerate Cloudflare, Inc.’s evolution to an agentic AI-first operating model. Cloudflare, Inc.’s history proves our business model innovation is as important as our technical innovation. These two forces do not sit side by side at Cloudflare, Inc.; rather, they compound on each other in ways that provide us with meaningful competitive advantages and create significant value for both our customers and Cloudflare, Inc. AI is driving a fundamental replatforming of the Internet as well as a paradigm shift in how software is created and consumed, and it is shaping up to be the biggest tailwind for both our network and our Workers developer platform that we have ever seen in Cloudflare, Inc.’s history. From this position of strength, we are again applying the same winning formula of compounding technology innovation with business model innovation. By fully embracing an agentic AI-first organizational structure and operating model, as Cloudflare, Inc.’s revenue scales, our efficiency and productivity will scale even faster. Unfortunately, this decision means parting ways with colleagues who have helped build the strong foundation Cloudflare, Inc. stands on today, resulting in a reduction of the size of our team by approximately 20%. These reductions are across all functions and geographies and reflect how broadly AI is accelerating our operational velocity. Importantly, however, we continue to expect growth in the net capacity of our quota-carrying sales force to accelerate in 2026, with today’s actions compounding productivity to fuel our growth. These actions will result in severance and other restructuring charges of $140 million to $150 million for full-year 2026, approximately $40 million of which is noncash, with the majority concentrated in the second quarter. Our expectations for free cash flow for 2026, however, remain unchanged, with approximately 25% to 30% of full-year cash generation in the second and third quarters. By decoupling our ability to scale from the traditional dependencies of the past, Cloudflare, Inc. will be structurally faster, more innovative, more productive, and more efficient. Now turning to our results, the first quarter was a strong start to 2026, with momentum building across multiple areas of our business. We continue to see rapid growth from AI and agentic workloads across our network, strength in our largest customer cohorts, continuing returns from our go-to-market transformation, and rapid adoption of our Workers developer platform. Total revenue for the first quarter increased 34% year-over-year to $639.8 million. From a geographic perspective, the U.S. represented 49% of revenue and increased 34% year-over-year. EMEA represented 28% of revenue and increased 31% year-over-year. APAC represented 15% of revenue and increased 34% year-over-year. Turning to our customer metrics, we ended the quarter with roughly 4,400 large customers, representing an increase of 25% year-over-year. Revenue contribution from our largest customers was 72% of revenue during the quarter, up from 69% in the first quarter last year. We again saw significant strength in our largest customer cohorts, including those that spend over $5 million with Cloudflare, Inc. annually, which grew 50% year-over-year and added a record number of additions both quarter-over-quarter and year-over-year. Our dollar-based net retention was 118% during the first quarter, down 2% sequentially and up 7% year-over-year. As we have noted previously, there can be some variability in this metric quarter to quarter, with growth this quarter driven by a meaningful acceleration in business from new customers, which grew at the highest rate since 2023. Moving to gross margin, first-quarter gross margin was 72.8%, representing a decrease of 210 basis points sequentially and a decrease of 130 basis points year-over-year. Paid versus free traffic on our network continued to grow both year-over-year and quarter to quarter, again driving additional allocation of network costs from sales and marketing into cost of revenue. Our Workers developer platform products, which currently carry a lower gross margin than our corporate average, delivered another quarter of significant growth. In fact, developers on our platform increased to more than 5.5 million at the end of the first quarter—an increase of 1 million developers in a single quarter, as compared to an increase of 1.5 million in all of 2025. While our developer products are not yet as optimized on gross margin, they also have a lower cost to book, and we will continue to focus on driving further efficiency improvements as our developer products scale. While gross margin may continue to trend down in the near term from these dynamics, the scalability and efficiency of our network remain intact, and we expect our unit economic margin will continue to increase. Network CapEx represented 9% of revenue in the first quarter. As a reminder, there can be some variability in this metric quarter to quarter, and we expect network CapEx to be 14% to 15% of revenue for full-year 2026. Turning to operating expenses, first-quarter operating expenses as a percentage of revenue decreased 3 percentage points year-over-year to 62%. Our total headcount ended the quarter at approximately 5,500. The majority of new hires during the first quarter were in sales, with a particular focus on continuing to add quota-carrying account executives. Sales and marketing expenses were $227.5 million for the quarter. Sales and marketing as a percentage of revenue decreased to 36% from 38% in the same quarter last year. Research and development expenses were $101.5 million in the quarter. R&D as a percentage of revenue remained consistent at 16% compared to the same quarter last year. General and administrative expenses were $63.6 million for the quarter. G&A as a percentage of revenue decreased to 10% from 11% in the same quarter last year. Operating income was $73.1 million, an increase of 31% year-over-year compared to $56 million in the same period last year. First-quarter operating margin was 11.4%, a decrease of 30 basis points year-over-year. Turning to net income and the balance sheet, our net income in the quarter was $94 million, or diluted net income per share of $0.25. Free cash flow was $84.1 million in the quarter, or 13% of revenue, compared to $52.9 million, or 11% of revenue, in the same period last year. We ended the first quarter with $4.2 billion in cash, cash equivalents, and available-for-sale securities. Remaining performance obligations, or RPO, came in at $2.543 billion, representing an increase of 2% sequentially and 36% year-over-year. Current RPO was 64% of total RPO, increasing 34% year-over-year. Moving to guidance for the second quarter and full year 2026: for the second quarter, we expect revenue in the range of $664 million to $665 million, representing an increase of 30% year-over-year. We expect operating income in the range of $90 million to $91 million. We expect an effective tax rate of 21.5%. We expect diluted net income per share of $0.27, assuming approximately 377 million shares outstanding. For the full year 2026, we expect revenue in the range of $2.805 billion to $2.813 billion, representing an increase of 30% year-over-year at the midpoint. We expect operating income for the full year in the range of $418 million to $421 million. We expect an effective tax rate of 20.5%. We expect diluted net income per share over the period to be in the range of $1.19 to $1.20. We expect approximately 375 million shares outstanding. In closing, the first quarter set a strong tone for the year. Our strategic position heading into this paradigm shift of the agentic Internet has never been stronger, and the opportunity ahead of us is larger and more defined than at any point in our history. We remain committed to capturing it with disciplined execution, durable growth, and long-term focus. Before opening the floor for questions, I want to again acknowledge our colleagues who will be departing Cloudflare, Inc. as we move into our next chapter. They will always be part of the Cloudflare, Inc. story, and we are sincerely grateful for their service to our customers and their commitment to our mission. With that, operator, please poll for questions. Operator: Thank you. We will now open the call for questions. If you have dialed in and would like to ask a question, please press star then one on your telephone keypad. If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. And we do request for today's session that you please limit yourself to one question and one follow-up. One moment please for your first question. Your first question comes from the line of Matthew Hedberg of RBC Capital Markets. Your line is open. Matthew George Hedberg: Great, thanks for taking my questions, guys. Matthew, first, on your strong Q1 results, I find it interesting that some of your Act 1 competitors do not seem to be benefiting from monetizing agentic traffic the same way you are. Why are you seeing such strong tailwinds there? And then as a follow-up, regarding the announced restructuring, really in light of these strong Q1 results, it seems to be coming from a position of strength. Why now? How is it going to make Cloudflare, Inc. stronger? And, Thomas, have you embedded any conservatism in the guide for this action? Matthew Prince: Thanks, Matt. I will start with the second part. This was not an easy decision, but it is the right decision. We have seen that there are roles at Cloudflare, Inc. that are not the roles we need for the future. Just because you are fit does not mean you cannot get fitter. What we have seen, especially over the last six months, is incredible productivity gains from the people who are directly talking to customers and the people who are directly creating code. A lot of the support roles behind them are not going to be the roles that drive companies going forward. We have always lived a little bit in the future, and I think you are going to see companies across every industry start to realize the gains they can get from these tools, and in the process it will change companies pretty dramatically. We believe in people, and we will continue to hire and invest in them, because the people embracing these tools are so much more productive than we had ever seen before. I would guess that in 2027 we will have more employees than we did at any point in 2026, but the roles are changing dramatically, and you have to do something dramatic to make that shift. That is why this is the right time. We are the fittest we have ever been, but we are going to get even fitter to win the next chapter. On your first question about traffic, the key is something we have always understood: not all traffic is created equal. Traditional CDNs chased bandwidth-heavy use cases like video streaming. That was an okay but largely commodity business. We never saw ourselves that way. We wanted to get in front of the most essential traffic: APIs and applications. In this new world of agentic commerce and agentic transactions, our approach is showing its wisdom and durability. Today, we are seeing hundreds of billions of agentic requests per month, and that number is growing exponentially. They are interacting with us, and we are setting the rails and guardrails for that. That is driving our Act 1 business. On the other side, with our Workers platform, we have built a platform that allows you to build agents that are significantly more efficient than anyone has before. Across all parts of our business, including Zero Trust and SASE, it turns out that having more fine-grained controls about data is exactly what you need for these new agents. You want to make sure they only have access to what they should. We happened to build exactly the right set of tools for this moment, and that is what is separating us from some of the people we get compared to. Thomas Seifert: On guidance and how this action is reflected, we have been thoughtful. While this action affects all teams at Cloudflare, Inc., the only real exception is our AE and quota-carrying capacity sitting in front of customers—we hardly touched that. We have been careful to reflect whatever residual risk remains in the guidance for the remainder of the year. As usual, we have tried to be thoughtful and prudent in how we think about what is in front of us. Operator: Your next question comes from the line of Adam Borg of Stifel. Your line is open. Adam Charles Borg: Awesome, and thanks so much for taking the question. Matthew, one of the things we keep hearing about is how AI costs internally are really expensive, especially around R&D coding agents. How do you think about balancing AI coding adoption with the cost? What AI efficiencies are you looking to see across the organization, and how much of that is to offset some of those costs? And as my follow-up, Fortinet talked about the opportunity they are seeing in SOFRAN and SASE. Given Cloudflare, Inc.’s global network and data residency requirements globally, how do you think about data localization and sovereign opportunities not just in Act 2, but across the Acts? Matthew Prince: As usage has gone up—600% in the last quarter—we have seen costs go up, but not nearly as much as some others. The least important reason is that most of the big AI labs are our customers, so we have good relationships and access to the best pricing and models. More importantly, we can often run those models on our own infrastructure. We have a fleet of GPUs, and with Cloudflare Workers and Workers AI we can build and use those tools ourselves. Most of the use of AI coding tools is not even leaving our network; it is running on our infrastructure. We are very good at routing to wherever there is capacity, and we get high utilization across our GPU resources—significantly higher than hyperscalers and even AI labs. We paired Cloudflare OS with our AI Gateway product, which routes different requests based on the right model for the task. If a task is relatively simple, we route to a model running on our own infrastructure and deliver it at essentially no marginal cost. If it is more important, we may send it to a frontier model and pay more. I think you will see many companies doing this. As we demo Cloudflare OS to CIOs, the reaction is consistently, “We want that too.” We already have a stripped-down version with AI Gateway, and you might see us increasingly take internal tools and make them available to others. That is very normal for Cloudflare, Inc.—almost every successful product started as something we needed ourselves. On data localization and sovereign opportunities, we are uniquely positioned for increasing regulatory or practical requirements to keep data in particular jurisdictions. We are present in more than 120 countries worldwide and more than 350 cities. We are designing Cloudflare, Inc.’s systems so data can stay wherever your permissions require. If you are a customer that needs all data to stay in Germany, we can set that up so your data stays resident in Berlin, Frankfurt, Munich, and other data centers we have in Germany. We can do that with a level of granularity that no hyperscaler can match. Layer Zero Trust and SASE tooling on top, and we can ensure agents can only access the data they have permission for. That will be a bigger tailwind in that space. With people experimenting with things like OpenClaw, they need fine-grained data control, and we are basically the only game in town to deliver it. Operator: Your next question comes from the line of Saket Kalia of Barclays. Your line is open. Saket Kalia: Hey guys, thanks for taking my questions and nice start to the year. Thomas, growth in different Acts has different impacts on gross margin, and you spoke about proactive optimization. As we get through those changes by the end of Q3, how should we think about the net impact to OpEx, and how should we think about gross margins as those other Acts continue to grow? And Matthew, for my follow-up, on Act 4 and Cloudflare, Inc.’s ability to manage the relationship between AI tools and content owners, what milestones do you need to see for that business to inflect? Lighthouse accounts? Industry consortiums? It is uncharted territory. Thomas Seifert: The margin structure is different across the various Acts, with developer products being the weakest on gross margin. Despite that, all products are equal when we look beyond gross margin to unit economic value. We will get you ready on Investor Day for thinking about operating margin as a better measure of product competitiveness than gross margin. The biggest move in gross margin this last quarter was free traffic moving to paid traffic and costs moving into cost of revenue. While that decreases gross margin, it is literally a wash from an overall P&L perspective. You will see more movements like that, and it is up to us to give you the right insight. Across all products, with the opportunity in front of us, unit economic margin and value will increase over time. With the guidance in place, we are getting north of 46% from a Rule of 40 perspective, and we think we have visibility to reaching north of 50% next year. That shows the potential; we just need to provide better insight into how the parts come together. Matthew Prince: To put a finer point on one part Thomas mentioned: since our founding, Cloudflare, Inc. has had a free version of our service, which provided benefits like data to build security models. We have not historically worked that hard to convert free customers into paying customers, so traffic associated with free customers went into marketing costs. What is fascinating is that a large pool of free customers turned out to be developers. As we have built compelling developer tools—most of which are not free—you are seeing a lot of that free traffic turn into paid traffic. Customer acquisition costs for those high-growth developer platform products are really fueled by what we built over the years in Act 1. While this shows up oddly in gross margin, it signals more adoption of paid products, including developer platform products, which is a part of our business I am very excited about. On Act 4, we think the business model of the Internet—historically advertising—is about to change dramatically over the next five years. It may not change to one thing but several. Because of how much of the Internet sits behind Cloudflare, Inc., we have a seat at the table in defining that. One thing we are watching is microtransactions for requests that agents make—fractions of pennies. Cloudflare, Inc. handles roughly hundreds of billions of requests, and with nonhuman traffic projected to surpass human traffic around 2027, we need something else to build. The challenge is that nobody can handle the transaction volumes we anticipate, so we are looking for partners. Another point: not everyone wants to block AI or to get paid. For example, Cloudflare, Inc. wants our developer documents in every LLM, so we make it easy to crawl those. On the other hand, ad-supported businesses see crawling as a threat. We are providing tools on both sides. For those who want to block or control, the first milestone is we went from relatively low penetration in media to dominating that space. Media execs tell us they are signing better deals with AI companies because we give them tools to control their content. The lighthouse signal is there. The next question is how we take that to the long tail—so that not only the Condé Nasts or Dotdash Merediths of the world can strike deals, but everyone on the Internet. That likely involves lighthouse deals with foundational model companies. When we listed our top six priorities for 2026, one was to make real progress and see the first revenue that we can pass back to the long tail to help create a healthy ecosystem for content creators. I am confident we will make that goal. Operator: Your next question comes from the line of James Fish of Piper Sandler. Your line is open. James Edward Fish: Hey guys. Thomas, you mentioned Rule of 50 there potentially. Given demand behind inferencing, what is the team’s willingness to go after more of this opportunity and drive more megawatts behind the network to host more of those inference use cases, like what you are seeing from some edge peers? And a follow-up on security: you have been aggressive about displacing legacy hardware across firewall, VPN, and so forth. Are you seeing any compression in enterprise sales cycles for large-scale Zero Trust deployments, or are approvals still elongated? Are supply chain and component issues causing more enterprises to evaluate more of the cloud for protection? Thomas Seifert: You see us leaning into this opportunity with all the force we have. That is why developer count went up by 1 million in the first quarter alone. We continue to optimize margin for these products, but we are not restricting growth—just the opposite. There is no restriction on leaning into this opportunity. Matthew Prince: At the risk of sounding critical, people often do not understand the difference in our business model versus hyperscalers. The hyperscalers’ business is to buy a server and lease it back multiple times. If they do not have servers to lease, they cannot grow revenue, so their CapEx must invest ahead of demand. We focus on different things. For us, when you see a blog post about getting more utilization across our GPU fleet or faster model loading, that is real IP we are inventing. Think back to the evolution from physical servers to VMs to containers for CPUs. With GPUs, most of the industry is still at the physical-server stage. Across hyperscalers, GPU utilization is often in the single digits. We are getting our GPU utilization to approach our CPU utilization—up in the 70% to 80% range. As we do that, we can keep servicing requests with the fleet we have and invest behind demand, rather than ahead of demand. Our model lets us keep up with inference demand while capturing developer mindshare—very different from a model built on leasing physical servers. On security cycles and hardware displacement, the hardware companies seem to have nine lives. As you see vulnerabilities in hardware and supply chain shortages—especially around memory—I do think more people are evaluating having the cloud as part of their infrastructure. I have been impressed by how long hardware players have continued to operate and hold out, so I am not calling a complete change now. But these are tailwinds behind our business and other cloud-native businesses. Operator: Your next question comes from the line of Gabriela Borges of Goldman Sachs. Your line is open. Gabriela Borges: Good afternoon. Matthew and Thomas, I wanted to get your thoughts on how the fleet mix may be changing between GPUs and CPUs. Specifically, Matthew, you talked about GPU utilization approaching CPU utilization. Are you also finding there are AI inference workloads you can route to CPUs? And, Thomas, I imagine that has implications on unit economics as you serve the AI inference market. Also, there was a datapoint this quarter on Anthropic announcing managed agents. How do you think that type of infrastructure intersecting with LLMs creates opportunity and/or risk for the Cloudflare, Inc. business model? Matthew Prince: For customers, we want to abstract the underlying silicon and deliver the most optimal resource behind the scenes. For some models, CPUs work great; for others, GPUs are necessary. When we deploy a server now, it has a CPU, a GPU, memory, storage, and network capacity—these are all pooled resources we constantly balance. We are not renting “an H100.” We will have H100s across our network, but we match workloads to the silicon that makes the most sense and to what the customer is paying for. If you pay more, you get a faster, better experience. Cloudflare, Inc. at some level has always been a giant scheduler—dispatching jobs across the network and prioritizing based on importance. That also keeps our internal AI costs lower because we can route tasks to wherever we have excess capacity. Regarding Anthropic’s managed agents and similar moves from AI labs, we see that as positive for our infrastructure opportunity. The major AI labs partner with us and see our infrastructure as critical. We launched Dynamic Workers, which allow you to stand up execution environments that are significantly more efficient than containers—containers are too slow and heavy for ultra-fast agentic workloads. One large AI studio, in just the last 15 days, went from essentially zero Dynamic Workers to over 1 million Dynamic Workers running across our platform. We see strong excitement for the underlying tools and technologies we build, and we believe we can deliver significantly better performance and lower cost than others playing in this space. As agents do more, they generate significantly more traffic—if a human might visit five sites, an agent might visit 5,000. That drives usage, the biggest driver of our Act 1 revenue. Unlike pure-play CDNs, agents are not going to watch reruns of the Super Bowl; they are going to drive real traffic to real e-commerce sites, where Cloudflare, Inc. is especially valuable. In Act 2, being able to narrowly define what data an agent can access is increasingly important, especially in self-service, where there is not another SASE/Zero Trust self-serve competitor at scale. As hobbyists adopt technology, they bring it to work, and we are seeing that as we win more enterprise accounts. Gabriela Borges: Thomas, on the pool of funds and your serving year three in earnest of having this motion mature, any comments or observations as early pool-of-funds adopters come up for renewal? What trends are you seeing on renewal and expansion? Thomas Seifert: We are now in our sixth quarter of pool of funds, and it has become a standard tool in our go-to-market motion. Teams are familiar with how and when to deploy it. From a renewal perspective, we had our highest-ever renewal rate last quarter, and that includes all pool-of-funds deals up for renewal. Our hypothesis—that it allows us to work expansion well and is a sticky customer engagement tool—has proven true. Operator: Your last question comes from the line of Shaul Eyal of TD Cowen. Your line is open. Shaul Eyal: Thank you, good afternoon, and thank you for squeezing me in. Thomas, you mentioned quota-carrying sales capacity continues to accelerate. Could you provide more color on expectations to continue to grow capacity relative to productivity? And for my follow-up, partners increased to 30% of revenue this quarter. What is driving this increase, and how much more channel mix would you expect going forward? Thomas Seifert: When I said we are not touching quota-carrying AE sales capacity, what goes along with that is we see significant productivity gains in the support ratios for these AEs. The ratios are going to change significantly, which frees up dollars. Within the same spend envelope, you can deploy more quota-carrying AE capacity toward our market opportunity. This allows us to continue to drive productivity from a go-to-market perspective. Matthew Prince: This really started with Mark Anderson laying out two years ago that we were going to have a motion that fully includes partners and enables them to deliver. It has been an incredibly successful way for us to sell, especially our Act 2 products, which require more consultative selling and careful integration. That will continue. The big question is which partners can leverage the new world of agentic AI to drive additional value, scale, and velocity. We expect a lot of change in that space, but partners will remain an extremely important part of our strategy. The partners delivering the most value—those best at selling and driving success with our tools—are embracing new ways of selling, servicing, and ensuring customer success. Operator: Thank you. That concludes our Q&A session. I will now turn the conference back over to Matthew Prince for closing remarks. Matthew Prince: This has been a hard day. We have never done something like this in Cloudflare, Inc.’s history, and we take it extremely seriously. We know how much it has affected people who have been friends and colleagues. I am confident those leaving us will take what they learned at Cloudflare, Inc. and help build many more great companies. We are going to make sure we take care of those people, and we also want to make sure we are hiring for the right roles. This is not about downsizing or saving costs. It is about having the right people in the right roles to build the future. Our mission is to help build a better Internet. That mission has never been more important as the Internet goes through transitions with AI and agents, and Cloudflare, Inc. is going to lead the way. I am proud of everything we are doing. I am sorry we had to take the action we did today, but I believe it is going to make Cloudflare, Inc. better for the future. Thank you. We will see you back here next quarter. Operator: This concludes today’s conference call. You may now disconnect.
Operator: Hello, everyone. Thank you for joining us, and welcome to the Alpha and Omega Semiconductor Fiscal Q3 2026 Earnings Call.? [Operator Instructions] I will now hand the call over to Steven Pelayo, Investor Relations. Please go ahead. Steven C. Pelayo: Good afternoon, everyone, and welcome to Alpha Omega Semiconductor's conference call to discuss fiscal 2026 third quarter financial results. I'm Steven Pelayo, Investor Relations representative for AOS. With me today are Stephen Chang, our CEO, and Yifan Liang, our CFO.? This call is being recorded and broadcast live over the web. A replay will be available for 7 days following the call via the link in the Investor Relations section of our website. Our call will proceed as follows today. Stephen will begin business updates, including strategic highlights and a detailed segment report. After that, Yifan will review the financial results and provide guidance for the June quarter. Finally, we will have a Q&A session.? The earnings release was distributed over the wire today, May 6, 2026, after the market closed. The release is also posted on the company's website. Our earnings release and this presentation include non-GAAP financial measures. We use non-GAAP measures because we believe they provide useful information about our operating performance that should be considered by investors in conjunction with GAAP measures. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in the earnings release.? We remind you that during this conference call, we will make certain forward-looking statements, including discussions of the business outlook and financial projections. These forward-looking statements are based on management's current expectations and involve risks and uncertainties that could cause our actual results to differ materially. For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC. We assume no obligations to update the information provided in today's call. Now I'll turn the call over to our CEO, Stephen Chang. Stephen? Stephen Chang: Thank you, Steven. Welcome to Alpha and Omega's fiscal 2026 Q3 Earnings Call. I will begin with a high-level overview of our results and then jump into segment details. We delivered fiscal Q3 revenue results slightly above the midpoint of our guidance, primarily reflecting strength in advanced computing, including AI, servers, and graphics cards, offset by softness in PC markets resulting from seasonality and memory shortage headwinds.? Tablets also showed strong sequential growth. And the Communications segment was also better than expected, driven by year-over-year growth from our Tier 1 U.S. smartphone customers, offset by weaker demand in China.? Overall, total March quarter revenue was $163.8 million, down 0.5% year-over-year and up 0.9% sequentially. Non-GAAP gross margin was 21.7%. Non-GAAP EPS was a loss of $0.28 per share. Our strategy remains consistent, and we are executing well. As we have said, we believe the December and March quarters represent a bottom for both revenue and gross margin, reflecting the impact of near-term market conditions and supporting a more constructive outlook going forward.? March marks the third anniversary of my journey as CEO of AOS.?When I stepped into this role in 2023, my goal was to steer our organization from a component-level supplier towards becoming a provider of application-specific total solutions, a move designed to push us past a $1 billion milestone towards a multibillion-dollar future. At that time, we were just scratching the surface of potential opportunities in front of us. Today, those opportunities have moved to the center of our business.? Over the past 3 years, we have successfully pivoted to higher-performance applications where we can expand BOM content and build durable competitive advantages. This strategy is translating into tangible results, particularly in advanced computing, where demand is broadening across AI data center applications. Specifically, we are gaining traction in high-performance medium-voltage MOSFETs used in hot swap applications and intermediate bus converters with increasing customer engagement and design activity expected to accelerate and contribute more meaningfully as we progress through calendar 2026.? We are actively expanding our medium voltage capacity to support this growth, and our backlog provides us with good visibility. At the same time, we are seeing a broadening of both our solution set and customer base, extending beyond traditional GPU-centric platforms into a wider range of cloud and infrastructure deployments. This reinforces our confidence that advanced computing is becoming a more durable and increasingly important growth driver for the company.? As is broadly reported, memory supply constraints and price pressures represent growing headwinds for the second half of calendar 2026. Against this backdrop, we are using 3 primary levers to protect our growth: steady margin expansion through improved product mix, and further increases in BOM content, where our total solutions approach is enabling us to capture more value as seen in transitions to next-generation PC platforms such as Intel's Panther Lake and higher charging current requirements in smartphones.? Continued disciplined investment to support the opportunities ahead. We have stepped up our targeted R&D investments in areas where we are already seeing success, including power ICs, high-performance MOSFETs for AI and data center applications, and advanced solutions for smartphones. These investments are highly focused and aligned with clear customer road maps and design wins.? While calendar 2026 may reflect some near-term variability, we are confident that the combination of expanding advanced computing opportunities, increased BOM content across key end markets, and our continued execution will position us well for stronger growth as we exit 2026 and accelerate into 2027 and beyond.? With that, let me now cover our segment results and provide some guidance by segment for the next quarter.? Starting with Computing. March quarter revenue was up 2.1% year-over-year and down 0.1% sequentially and represented 49.1% of total revenue. The segment results were slightly better than our original guidance of a low single-digit sequential decline. As I mentioned earlier, seasonal declines in PC markets were likely exacerbated by earlier pull-ins in calendar 2025 and potential demand impacts from rising memory pricing.? Strength in advanced computing, including AI servers and graphics cards, more than offset such decline and combined more than doubled sequentially and increased more than 40% year-over-year. The strong growth resulted in advanced computing representing 25% of the computing segment in the March quarter.? As mentioned before, we are seeing solid demand for our medium-voltage MOSFETs across an expanding list of applications and a customer base that includes power supply providers, module makers, cloud service providers, and major hyperscalers. We are shipping our high-performance MOSFET products into applications, including intermediate bus converters that are now moving into the build phase at some leading ODMs for major hyperscale customers.? Looking ahead to the June quarter, we expect computing segment revenue to increase by low to mid-single digits sequentially, driven by strong AI and server demand in advanced computing. While PC-related revenue is largely stable, tablets declined mostly due to seasonality as well as increased capacity allocation to opportunities in smartphones. We acknowledge that industry forecasts for the PC market continue to be revised lower, and we generally agree with that view, expecting some decline in calendar 2026. That said, we believe our performance should outpace the broader market, supported by continued increases in BOM content driven by our total solution strategy.? Near-term PC demand appears stable for the June quarter, but visibility into the second half of the calendar year remains limited given ongoing macro and component-related uncertainties. In advanced computing, we continue to see strong momentum with demand increasingly centered on our medium voltage solutions supporting server and AI infrastructure.? Importantly, we are seeing a broadening of both our customer base and application footprint with growing engagement across multiple platforms. These solutions are being deployed across both GPU and CPU-based architectures and are benefiting from the ongoing shift towards inference workloads, which are driving higher and more distributed power requirements.? While we continue to view 48-volt to 12-volt intermediate bus architectures as a near-term standard that we are benefiting from today, we see this as a stepping stone towards higher voltage systems, including 800-volt architectures expected to begin emerging around 2027.? In graphics, we expect a more muted environment in calendar 2026, given the current product cycle and allocation priorities, with the next major refresh opportunity tied to future platform transitions. Overall, we expect another quarter of strong sequential growth for advanced computing.? Turning to the Consumer segment. March quarter revenue was down 9.8% year-over-year and up 0.8% sequentially and represented 11.8% of total revenue. The results were below expectations for mid-single-digit sequential growth as recovery in gaming following a sharp inventory correction in the December quarter was offset by softness in home appliances.? On a year-on-year basis, wearables continued to see strong year-on-year growth, driven by market share gains, new customer engagements, rising BOM content, and a broader mix of end applications.? For the June quarter, we expect the Consumer segment revenue to remain relatively flat sequentially. In gaming, demand is tracking in line with our expectations as the current console cycle matures. While near-term production levels reflect seasonality as well, we remain closely engaged with our leading customer on their next-generation platform. We believe our established relationship and strength in high-performance power solutions position us well to participate more meaningfully as that platform ramps, with a greater impact expected beginning in 2028. Home appliance demand remains relatively soft and continues to reflect a cautious consumer demand environment with limited signs of near-term recovery. That said, we continue to see ongoing design activity that supports longer-term opportunities, particularly in emerging markets. Wearables are progressing through their typical seasonal patterns following recent strength, and we continue to benefit from solid customer engagement and a broadening mix of applications. Next, let's discuss the Communications segment. March quarter revenue was up 18.7% year-over-year and up 1.9% sequentially, and represented 20.6% of total revenue. The results were ahead of our expectations for a mid-single-digit decline, driven by strong year-over-year growth from our Tier 1 smartphone customer and BOM content expansion, offset by softness in China due to a weaker market and our prioritization towards premium models in the U.S. Looking ahead to the June quarter, we expect the Communications segment to decline slightly sequentially, but sustain the high year-over-year growth experienced in the March quarter as demand from our Tier 1 U.S. smartphone customers remains robust. As mentioned, we are prioritizing capacity for our Tier 1 U.S. smartphone customers in order to prepare for upcoming product cycles. We continue to benefit from strong positioning in premium models where our differentiated silicon and packaging technologies for battery protection are enabling higher BOM content. In particular, increasing charging currents across new smartphone platforms are driving incremental content opportunities, reinforcing our ability to capture greater value per device. At the same time, we remain mindful that rising memory pricing could impact overall smartphone demand, particularly in more price-sensitive segments and regions. However, we believe premium-tier demand will be more resilient, and our strategic focus on higher-end platforms positions us well to navigate this environment. As a result, we expect continued growth in calendar 2026, driven by both content expansion and continued engagement with leading global smartphone customers. Now let's talk about our last segment, Power Supply and Industrial, which accounted for 17.4% of total revenue and was down 13.1% year-over-year and up 5.3% sequentially. Overall, the results were in line with expectations for mid-single-digit sequential growth as sequential growth in quick chargers and DC fans more than offset continued sluggishness, both sequentially and year-on-year, in solar, power tools, and e-mobility. Looking ahead to the June quarter, we expect Power Supply and Industrial revenue to increase mid-single digits on a sequential basis, primarily driven by momentum in e-mobility, particularly in the Indian market, where we have built a solid backlog heading into the quarter. DC fans also remain an area of strength, benefiting from continued demand tied to data center and AI infrastructure build-outs. Lastly, power tools are also forecast to increase modestly in the June quarter. However, overall tool demand remains subdued. In closing, as we move into the June quarter, we expect a return to sequential growth, along with margin expansion, supported by improving product mix and a greater contribution from higher-value applications, particularly within advanced computing. We are seeing encouraging signs of traction in areas such as AI infrastructure, where demand is broadening across a wider set of applications and customers, and where our solutions are gaining adoption in both GPU and CPU-based platforms. This momentum, combined with increasing BOM content across key end markets, positions us well as we enter the second half of the year, even as overall visibility remains somewhat limited. At the same time, we are executing consistently against the strategy we have outlined. Our focus on becoming a provider of application-specific total solutions is enabling us to expand both our product portfolio and our customer reach. We are seeing tangible progress in advanced computing, where our medium voltage and power IC solutions are addressing a growing range of use cases and where our customer base continues to broaden across hyperscalers, cloud service providers, and platform partners. In parallel, we continue to benefit from structural drivers such as rising power requirements and increasing charging currents, which are driving higher BOM content in both computing and smartphone applications. Looking across calendar 2026, we expect a dynamic environment with some uncertainty in consumer-related demand, particularly given the impact of memory pricing on end markets such as PCs and smartphones. However, we believe these pressures will be partially offset by our increasing exposure to higher performance, less price-sensitive segments, and our ability to capture greater value per system through our total solutions approach. Importantly, we are investing with discipline to support these opportunities with targeted R&D focused on areas where we have clear differentiation, strong customer alignment, and a path to sustainable margin expansion. As we look beyond 2026 and into 2027, we expect the benefits of these investments and design wins to become more pronounced as new programs ramp into production. The combination of expanding participation in advanced computing, increasing BOM content, and a broader and more diversified customer base is expected to drive stronger growth and improved profitability over time. With that, I will now turn the call over to Yifan for a discussion of our fiscal third-quarter financial results and our outlook for the next quarter. Yifan? Yifan Liang: Thank you, Stephen. Good afternoon, everyone, and thank you for joining us. Revenue for the March quarter was $163.8 million, up 0.9% sequentially and down 0.5% year-over-year. In terms of product mix, DMOS revenue was $115.1 million, up 13.9% sequentially and up 7.7% over last year. Power IC revenue was $46.9 million, down 20.3% from the prior quarter and down 14.1% from a year ago. Assembly service and other revenue were $1.8 million as compared to $2.5 million last quarter and $0.4 million for the same quarter last year. Non-GAAP gross margin was 21.7% compared to 22.2% last quarter and 22.5% a year ago. The quarter-over-quarter decrease was mainly impacted by lower utilization and higher operational costs. Non-GAAP operating expenses were $44.3 million compared to $41.3 million for the prior quarter and $39.7 million last year. The quarter-over-quarter increase was mainly due to higher R&D expenses. Non-GAAP quarterly EPS was a loss of $0.28 compared to a loss of $0.16 per share last quarter and a loss of $0.10 per share a year ago. Moving on to cash flow. Operating cash flow was negative $8.3 million compared to negative $8.1 million in the prior quarter and positive $7.4 million last year. In the March quarter, working capital fluctuated by $14 million. EBITDA, excluding equity method investment income and loss, was $5.9 million for the quarter compared to $9.7 million last quarter and $14.7 million for the same quarter a year ago. Now, let me turn to our balance sheet. We completed the March quarter with a cash balance of $190.3 million compared to $196.3 million at the end of last quarter. In the March quarter, we repurchased 214,000 shares for $4.2 million under our share buyback program. We also repurchased 292,000 shares of employee restricted stock units vested during the quarter for $6.2 million. Net trade receivables increased by $9.3 million sequentially. Days' sales outstanding were 20 days for the quarter compared to 25 days for the prior quarter. Net inventory decreased by $1.1 million quarter-over-quarter. Average days in inventory were 139 days for the quarter compared to 140 days for the prior quarter. CapEx for the quarter was $12.1 million compared to $15 million for the prior quarter. We expect CapEx for the June quarter to range from $15 million to $17 million. With that, now I would like to discuss the June quarter guidance. We expect revenue to be approximately $168 million, plus or minus $10 million. GAAP gross margin to be 22.3%, plus or minus 1%. We anticipate non-GAAP gross margin to be 23%, plus or minus 1%. GAAP operating expenses to be $52 million, plus or minus $1 million. Non-GAAP operating expenses are expected to be $45.5 million, plus or minus $1 million. Interest income is expected to be $1 million higher than interest expense, and income tax expense to be in the range of $1 million to $1.2 million. With that, we will now open the call for questions. Operator, please start the Q&A session. Operator: [Operator Instructions] Your first question comes from the line of David Williams with Needham. David Williams: Congrats on the really solid progress there in the advanced computing side. Maybe first, just thinking about the gross margin. We bottomed here in this quarter, it seems like maybe record computing or advanced computing revenue. And my suspicion would be that you would have maybe a little more IC and maybe higher value products going into that segment. So how do you kind of square where the gross margin sits and how we should think about maybe that gross margin in terms of the data center or these AI opportunities for you? Stephen Chang: Thanks, David, for the question. Yes, we are driving margin improvement through our advanced solutions. And those advanced solutions can come in the form of both MOSFETs and ICs. Right now, we are seeing some of our medium-voltage MOSFETs actually gaining traction. And this is going into applications such as hot swap, as well as intermediate bus conversion that go into various data center types and server-type applications. And the margin here actually is quite decent, and many of these medium voltage MOSFETs can actually be higher than some of our power IC products, too. So we are happy to see the contribution of these high-performance MOSFETs contributing as part of the margin improvement. David Williams: And then, as you kind of think about the growth opportunity within that segment specifically, you said it's about 25% of computing revenues today. Where do you think that could grow to? And what would be a good mix that you would be targeting, perhaps, in that segment? And potentially, when could you split that out and call it its own segment? Stephen Chang: Yes, it's a good question. It is becoming a sizable portion of our computing segment. It is something that, when we look at advanced computing, just as a reminder, it includes AI, it includes servers, as well as graphics. The reason we group those together is that the solution set for those ends up being quite similar. There's quite a bit of synergy when it comes to the products and the technology, as well as the end markets and applications that we serve. So yes, we're happy to see it jump to becoming 25% of computing. This was faster than our original expectations for this because, again, of the traction that we're seeing with our medium voltage devices. We do expect that this will continue to grow in the June quarter and in the coming quarters. This is something that we have been investing in as a company. Some of the R&D that we've been investing in, as we talked about in the previous quarter, is going into these markets. So it's for all types of high-performance solutions for AI, including these medium voltage devices. David Williams: And maybe one more, if I may. Just thinking about the capacity, you talked about expanding that for the medium voltage side. Can you talk, maybe about where you're putting that capacity in? Is that in your domestic facility? Or is that in your third party you're building out there on that capacity? Stephen Chang: It's a little bit of both. We do use a mix of both internal and external. So we are investing internally, and for some of the packages that are being done internally, as well as working on expanding on other options for diversifying our supply chain. So it's both. Operator: Your next question comes from the line of Tore Svanberg with Stifel. Tore Svanberg: This is on for Tore Svanberg. So, regarding the memory supply constraint you previously cited, are you seeing Tier 1 customers in PC and smartphone segments trimming a bit of the build forecast for the second half of the year in anticipation of these rising costs? Or is the headwind primarily a risk to end consumer price sensitivity? And just any color on how you see this memory situation play out throughout the year, and any strategies on offsetting the situation would be great. Stephen Chang: Sure. For us, at least, when we say the consumer-facing, we're talking about mainly PCs and smartphones. Those are the biggest impacts for us. And the PC side, yes, over there, they are seeing the impact of memory shortages. And for now, we're seeing some of our customers trying to build out sooner just in order to get products out. But from market reports as well as speaking to our customers, there's a lot of uncertainty about the second half about where the PC forecast will go. So we've also had similar views on this, and that's reflected in our outlook, too. And our story on the PC side is this is something that the industry will have to work to resolve, but our path here is still focused on how to grow share as well as to grow our BOM content in that application. On the smartphone side, our business tends to be more on the premium phone side. And at the end of the spectrum of smartphones, we are anticipating that it will be a little more resilient to memory shortages. We are prioritizing, again, towards the makers of those premium phones. So we actually still expect to grow our business in the smartphone side, mainly because it's not only because of the premium phones, but more specifically because those phone designs are increasing the charging currents. So we are seeing BOM content increasing because we are introducing new products to serve those sockets with higher ASP that can help to make up for any challenges on maybe the lower end of the market for smartphones. Tore Svanberg: As a follow-up, for next quarter, you're guiding a bit of a sequential gross margin recovery in the June quarter. And given that March utilization was a tiny bit of a headwind, how much of this sequential improvement is driven by maybe an uptick in loading versus an improvement in product mix, perhaps from higher performance applications? Stephen Chang: Sure. Yes, we guided the June quarter margin quarter-over-quarter, like a 130 basis point improvement. I would say half of it is anticipated to be utilization improvement, and the other half is from our improved product mix. Operator: [Operator Instructions] Your next question comes from the line of David Williams with Needham. David Williams: Just want to ask, maybe on the pricing side. I know a few of your peers or competitors are certainly pressing pricing, it seems, on the MOSFETs and resetting those prices. Just wondering what you're seeing in the marketplace and what your opportunity set is in order to reprice? And are you getting the benefit of maybe some more positive, favorable tailwinds there? Stephen Chang: Sure. In the March quarter, we saw a slower ASP erosion than in the December quarter. It looks like the pricing environment is improving. So that's definitely a plus. However, we count more on the product mix improvement and also our new product development to capture more high-performance and high-value sockets that Steven just talked about. So that will probably contribute more to our margin improvement. David Williams: And maybe just the last one for me. Stephen, if you think about the progress you've made, you've clearly made a lot of progress in this total solutions approach and even in driving these higher value, higher-margin products. Where do you think you are along that road map? And are you where you thought you would be? Are you maybe better or maybe not as far along? And if we look back in a year from now, how do you think we'll see that success having played out? Stephen Chang: Sure. It can never be fast enough. I'm always anxious to celebrate this. And this is, again, why we are investing to accelerate that. But there is a clear difference in the types of products that we are shipping now compared to a few years ago. And that's also reflected in our customer base, the type of applications that we go after, the Tier 1 customers that we are serving.? The reason why we can build better traction with these customers is because of the higher performance, and that has to come through differentiation. So application-specific is working. We are investing to accelerate that. This is going to be our path, part of our reason for how we get to our $1 billion milestone, and that's definitely worth investing in to see the results. Operator: [Operator Instructions]? Your next question comes from Craig Ellis from B. Riley Securities. Craig Ellis: I did miss the prepared remarks, so excuse me if you covered this, but I wanted to understand some of the strength that you saw in the compute segment. It seemed like there was acceleration in the compute supply chain quarter-to-date, similar to the smartphone supply chain about where we were last year in 1Q and early 2Q. To what extent was that at play in the results? And what do you think it means for the year's linearity, first half versus second half calendar? Stephen Chang: If we're talking about computing, I think we should talk about maybe the subcomponents of that. The PC portion, I think overall, was a little bit of -- we really saw the correction in this quarter from the last quarter, mainly because of memory challenges. But the growth area that we see is particularly in what we call the advanced computing, and that's comprised of AI, server, as well as graphics.? And in particular, we're seeing our solutions, particularly our medium voltage solutions for AI that's going into like hot swap applications, intermediary bus conversion. Those are products that are really starting to take off and have started to ramp in the March quarter. And as we commented in the prepared remarks, the demand for computing represents about 25% of total computing, which is really exciting for us.? We are expecting that this momentum will continue further going into the coming quarters as we continue to ramp our business. We talked a little bit about it. We are also expanding some of our capacity to support this growth as well. Craig Ellis: Congratulations on the mix shift, Stephen, but that also would imply that there must have been a pretty steep falloff in either the traditional compute business or the gaming card business in the quarter if mid-voltage surged. So, can you speak to what happened elsewhere in the segment and how it all netted out, given the significant rise in mid-voltage, hot swap, and other things? Stephen Chang: Sure. As we mentioned, the standard PC industry is undergoing challenges due to memory shortages. And it's also a low season and seasonally regular for the March quarter, but we do just see some correction due to that. And that was already anticipated from the previous quarter. The graphics card has also actually grown a little bit from the last quarter.? But overall, that segment is not as robust as it was maybe a year ago when those graphics cards were first launched. We're expecting that graphics cards are also going to have some challenges in procuring both memory and GPUs that can limit total industry shipments for cards. But overall, our share still remains strong, and it's still a good core part of our business. So this is why we see that and are excited that the advanced computing portion of the business can offset drops and challenges on the PC side, and a little bit of slowdown on the graphics side. Craig Ellis: And just to understand the dynamics in the advanced computing side, can you speak to the OEM diversity that you have within that business? To what extent is it more GPU-related systems, versus maybe x86 systems, that are seeing a resurgence as we see rising agentic workloads? Stephen Chang: Sure. And we're happy that our solutions are going into, as you mentioned, a more diversified customer base. This is going into data center server makers as well as cloud service providers. The solution right now is generally serving the 48-volt to 12-volt conversion. And this architecture is pretty common in many servers, just general server applications. So our solutions there can be generally used in many of those applications. Craig Ellis: So traditional server applications.?Got it. And then just moving on to gross margin dynamics. One of the things we're starting to hear from companies' guys is that rising input costs are putting pressure on packaging and chip costs. As we think through the course of the year, and this is more of a question for you, Yifan, but how do we think about the give and takes between what could be rising chip costs and potentially your ability to either offset those or pass those through, and then the potential for volume to benefit overhead absorption? Yifan Liang: Sure. The March quarter ASP erosion was a little bit better compared to the December quarter. So, since the pricing environment is improving. So we definitely welcome that. So we're monitoring the market and managing our own pricing and product mix. And yes, we count more on those new products and getting into those high-performance, high-value sockets. So we want to grow that part of the business, which can definitely help us to improve gross margin. Craig Ellis: So, Yifan, it's not clear to me if you're seeing rising input costs and to what extent or not? Can you just speak to that point specifically and the degree to which that is something that you're able to mitigate with cost pass-throughs, or if that's something we should be aware of as we think about COGS impacts later this year? Yifan Liang: Yes. We are seeing some increases in input costs. Yes, definitely, I mean, some material costs and then some foundry subcontractors' prices. Yes. So managing the product mix and then digesting some, and then managing our pricing environment. So Yes. Those increases in input costs and the pricing environment are already reflected in our guidance for the June quarter. Operator: There are no further questions at this time. I will now hand the call over to Steven Pelayo for closing remarks. Stephen? Steven C. Pelayo: Thank you. Before we conclude, I'd like to highlight a few upcoming investor events. The management team will be participating in the B. Riley Securities 27th Annual Institutional Investor Conference on May 20 in Marina Del Rey, California; the Stifel 2026 Boston Cross Sector One-on-one Conference on June 3 in Boston, Massachusetts; and the Jefferies Semiconductor IT Hardware and Communications Technology Conference on August 26 in Chicago. If you wish to request a meeting, please contact the institutional sales representative at the sponsoring bank.? With that, this concludes our earnings call today. Thank you for your interest in AOS, and we look forward to speaking with you again next quarter. Operator: This concludes today's call. You may now disconnect.
Operator: Ladies and gentlemen, welcome to Sera Prognostics' First Quarter 2026 Financial Results Conference Call. [Operator Instructions] Please be advised that this call is being recorded today, Wednesday, May 6, 2026. I will now turn the call over to our first speaker today, Jennifer Zibuda, Investor Relations. Please go ahead. Jennifer Zibuda: Thank you, operator. Welcome to Sera Prognostics' First Quarter Fiscal Year 2026 Earnings Conference Call. At the close of market today, Sera Prognostics released its financial results for the quarter ended March 31, 2026. Presenting for the company today will be Zhenya Lindgardt, President and CEO; and Austin Aerts, our CFO. During the call, we will review the financial results we released today, after which we will host a question-and-answer session. If you've not had a chance to review our quarterly earnings release, it can be found on our website at sera.com. This call can be heard live via webcast at sera.com, and a recording will be archived in the Investors section of our website. Please note that some of the information presented today may contain projections or other forward-looking statements about events and circumstances that have not yet occurred, including plans and projections for our business, future financial results and market trends and opportunities. These statements are based on management's current expectations, and the actual events or results may differ materially and adversely from those expectations for a variety of reasons. We refer you to the documents the company files from time to time with the Securities and Exchange Commission, specifically the company's annual report on Form 10-K, its quarterly reports on Form 10-Q and its current reports on Form 8-K. These documents identify important risk factors that could cause the actual results to differ materially from those contained in our projections and other forward-looking statements. I will now turn the call over to Zhenya. Evguenia Lindgardt: Thank you, Jennifer, and thank you, everyone, for joining us today. Given that we reported full year results just over 6 weeks ago, I'll focus my remarks on several key developments that continue to advance our commercial strategy and expand access to PreTRM. Following the publication of the full PRIME study results in January, our primary focus in the first quarter was building awareness with both clinicians and broader stakeholders. Our education and outreach efforts were designed to broaden understanding of preterm birth risk and prevention, including among audiences that are difficult to reach through traditional health care channels. From a provider engagement standpoint, we maintained a strong presence across key clinical forums, including the SMSM Annual Meeting in February, and more recently, the ACOG Annual Clinical and Scientific Meeting. At SMSM, we highlighted key clinical evidence and engaged directly with maternal fetal medicine specialists on PreTRM's role in risk stratification and early intervention. We also engaged with SMSM leadership to discuss PRIME study outcomes. At ACOG, we built on that momentum with a targeted product theater that showcased both the PRIME data and practical implementation strategies, underscoring how PreTRM can be seamlessly integrated into routine clinical care. We have been featured in several targeted podcasts this year, which complements our presence at medical meetings and extends our reach. In March, the SHE MD podcast featured an interview with Hailey Bieber discussing her pregnancy and the PreTRM test, which she received under the care of Dr. Aliabadi, SHE MD co-host and Sera's customer. This generated a high level of awareness of PreTRM, given Hailey's global visibility and social following along with a subsequent People magazine exclusive interview. The episode surpassed 0.5 million views and continues to drive awareness. Following that, we engaged the SHE MD to record a new podcast episode releasing May 14 to coincide with National Women's Health Week. This interview will feature a conversation on the science behind Sera, the clinical evidence from PRIME and how the PreTRM test needs broad awareness and should be considered as future standard of care. The episode discusses Dr. Aliabadi's experience with PreTRM tests over the last few years and the value of prevention and evidence-based risk identification. We hope you will all tune in next week. As we look ahead, we will also be featured on Medscape Hear From Her, the Women in Healthcare Leadership podcast, engaging in conversation with the podcast host, Jelena Spyropoulos and Dr. Mollie McDonald, Maternal & Fetal Medicine Specialist at St. David's Women's Center in Austin, Texas. The episode dives into the realities of preterm birth, the need for proper intervention and what can be done to help patients. Together, these media efforts continue to drive awareness across patients and providers, policymakers and payers who play an important role in improving pregnancy outcomes. Turning to our commercial progress. Our efforts during the quarter remained focused on building sustainable access points and referral pathways that we expect to support our long-term volume and revenue. Adding to our 2 live programs, we launched our third partnership program during the quarter, further expanding education and access to PreTRM. This program is expected to reach over 350 providers across 3 states, expanding our clinical footprint and advancing earlier identification and intervention for at-risk pregnancies. Beyond these established programs, we are contracting with additional partners and expect to provide more detail as these initiatives transition from contracting into live implementation. In parallel, we are now engaged in active discussions with 13 payers across 15 states, reflecting our strategy to deepen relationships with a focused set of target markets. We believe this concentrated approach is more effective in driving meaningful implementation and adoption than pursuing broader but less integrated engagement. Across all of these efforts, our priorities remain execution, reimbursement, physician awareness, clinical integration and provider adoption. We view these steps as foundational to broader coverage and scale over time. In addition to reimbursement, we are making steady progress in our efforts to drive guideline inclusion while continuing to expand the evidence-based supporting PreTRM. As discussed in our year-end call, European expert commentary on the PRIME trial was published in the Journal of Maternal Fetal and Neonatal Medicine in March. The authors emphasized that current preterm birth prevention strategies failed to identify the majority of women who ultimately deliver preterm and highlighted the alignment of the PreTRM approach with existing European health care systems. Also in March, results from the PREPARE survey were accepted for publication in the Journal of Women's Health. This survey examined preterm birth awareness and risk perception among women across 5 European countries and identified a meaningful gap between perceived awareness and actionable understanding, reinforcing the need for earlier and more standardized risk communication. We look forward to the formal publication expected in May. Together, these publications support our stakeholder engagement efforts in Europe and underscore the global relevance of risk-based preterm birth prevention as health care systems increasingly emphasize prevention, education and cost-effective maternal care. Looking ahead, we remain on track to publish several additional PRIME sub-analyses in 2026, including a highly anticipated health economic study, Medicaid population outcomes of the PRIME study and a focused analysis of first-time moms, further strengthening the clinical and economic foundation for adoption. During the quarter, we also continued to advance our advocacy strategy. Preterm birth is not only a clinical challenge but a public health and policy issue. We're engaging with stakeholders across multiple states to monitor and, where appropriate, support legislative initiatives and policy discussions focused on earlier identification and prevention, particularly in Medicaid and value-based care settings. We also recently launched a targeted letter writing campaign designed to encourage physicians and patients to engage with state Medicaid programs on reimbursement for the PreTRM test. The initiative is intended to amplify at the local level, the existing clinical voice calling for access for its risk populations. To date, we've seen encouraging participation with multiple letters submitted across several states, reflecting growing physician advocacy and awareness. We believe these grassroots efforts will play an important role in advancing broader coverage discussions over time. Through these efforts, we continue to build awareness and alignment well in advance of formal coverage decisions and to help policymakers understand both the clinical and the economic burden of preterm birth. We view advocacy as an important complement to our commercial and scientific strategies. In Europe, we continue to make progress towards commercialization readiness. We remain on track for a midyear submission of our CE Marking dossier and have had constructive discussions with regulators and clinical stakeholders. Engagement with our European advisory group continues to reinforce alignment around clinical utility, evidence requirements and implementation considerations. On capital deployment, we have completed the next phase of our evolution from a clinical-stage company to a commercial organization driven to secure reimbursement and revenue. Following a comprehensive business review, we realigned resources, identified significant operational efficiencies and streamlined R&D and G&A functions. We are prioritizing investments in payer engagement, market access and clinical adoption of PR. As part of this realignment, we are intentionally shifting capital away from R&D and clinical operations towards commercial and medical activities that directly support access and adoption. Over time, this results in a meaningfully higher proportion of our operating spend focused on commercialization and medical engagement with R&D becoming a smaller share of our overall expense base as we move into 2027 and beyond. These actions are expected to reduce our base operating expenses by nearly $10 million annually while enhancing our ability to focus capital on commercialization efforts. At this new operating level, we expect that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements through 2029. By extending our runway by an additional year, we have positioned the company to capitalize on meaningful growth expected over the next 12 months and to achieve key access and commercialization milestones in the years to come. To wrap up, the first quarter was characterized by awareness building and intentional positioning, expanding access points, strengthening referral pathways, advancing advocacy efforts and continuing to build the scientific foundation necessary for long-term adoption. Everything we've discussed today reflects a consistent strategy focused on establishing the prerequisites for durable, scalable adoption. And while these adoption cycles take time, we remain encouraged by the level of engagement we are seeing and confident that the foundation we are laying will support meaningful long-term pull-through. With that, I'll turn the call over to Austin. Austin Aerts: Thanks, Zhenya, and good afternoon, everyone. Revenue for the quarter was $14,000 compared to $38,000 in the first quarter of 2025. As expected, revenue in the quarter remained modest, reflecting the timing and nature of our geographically targeted commercialization strategy and our ongoing effort to build advocacy and awareness following the PRIME publication. Operating expenses for the quarter were $9.4 million, up slightly from $9.3 million in the prior year period, consistent with our expectations and reflecting disciplined cost management alongside continued investment in evidence generation, regulatory preparation and advocacy activities. As discussed, following our business review, we expect to reduce our operating expense base by nearly $10 million on an annualized basis. The benefit in 2026 will be limited due to the phasing of activities and related charges with the majority of the savings expected to be realized in 2027 and beyond. Research and development expenses were $3.0 million compared to $3.3 million in 2025. With the PRIME study now published, R&D expenses will continue to decrease as we focus resources on activities that more directly drive commercialization and awareness building. Selling, general and administrative expenses were $6.3 million versus $5.9 million in the prior year, reflecting our transition from clinical stage investments toward targeted commercial initiatives and strategic headcount. Net loss for the quarter was $8.4 million compared to a net loss of $8.2 million in the first quarter of 2025. We ended March 31, 2026, with $86.8 million in cash, cash equivalents and available-for-sale securities. Based on our measured commercialization strategy and a more sustainable cost base resulting from the activities discussed earlier, we believe our capital resources will be sufficient to fund the company across significant adoption and commercial milestones through 2029. As Zhenya outlined, our strategy prioritizes building durable prerequisites for adoption. From a financial perspective, that means revenue in 2026 could remain modest and uneven as we continue pushing reimbursement, awareness and advocacy campaigns and as programs move from setup to implementation with increasing pull-through anticipated later in the year and into 2027. In summary, the first quarter reflects continued financial discipline alongside steady progress in laying the groundwork for broader adoption. We remain focused on execution as these initiatives mature. With that, let's open the line for questions. Operator? Operator: [Operator Instructions] Your question comes from Tycho Peterson from Jefferies. Unknown Analyst: This is [ Lauren ] on for Tycho. A few from me. First on the partner program. So could we get maybe a little bit of color on the kind of profile of the third partner and kind of how it compares to the first 2? And then in terms of kind of the required cadence throughout the rest of the year to hit the goal of 5 to 7 partner programs and what that's going to look like for the next couple of quarters? And then second, for the new reps, I think you've talked about before how it could take a couple of quarters to kind of see density of adoption and increased productivity. Are you measuring anything in terms of test per rep per month or other KPIs that you're targeting for the second half of the year for these reps? Evguenia Lindgardt: Lauren, thank you so much for the questions. On the programs, indeed, very exciting. The way we planned our pipeline of the potential programs is to launch roughly one a quarter to make sure that we swarm the organization and stand them up well. Each program typically is a combination of a payer and provider groups to ensure that the pull-through can happen on the ground in the offices quickly. We've learned over the last couple of years that it takes a few months to iron out how the patients who test for higher risk of preterm birth get cared for by the physician offices with the intervention bundle. So we make it as seamlessly integrated into the workflow of those offices as possible. So for us, each of these programs, that's why one a quarter roughly, and we're right on track with that with another launch this quarter. We first select how will the test get paid for, engage on reimbursement, then with the payers, figure out what is the set of providers that are going to partner with us to adopt the test and get them ready for seamless integration to their workflow and delivery of the intervention bundle. So that is critical for fast recruitment and delivery of the test to the participant, which, of course, in turn, gives the results to both payers and providers faster. So it's in all of the partners' interest in these programs to prepare well to get to -- for us to revenue, for them to impact faster. For many programs, we are engaged deeply with the state as well. So on a quarterly basis, we report out the progress of the programs to the state Medicaid agencies, and these are usually public quorums where other payers are present. And another reason why one a quarter is because there's a fair bit of follow-up with other payers in the state that have the Medicaid plans who are starting to also reach out and want to participate. So we're excited to report that our pipeline of payers that we're engaged with is growing steadily from 10 payers in 13 states, which we reported last quarter, to 13 payers in 15 states. We're still sticking to our target states. But what we're seeing happen is the payers that we're running the program with now for 6 to 9 months are introducing us to other parts of their organization that cover plans in other states, which is exactly what we were hoping for and expanding with these payers into other regions. So that's why we're pacing it one a quarter roughly, and you can certainly anticipate us announcing one per quarter. Of course, we'll go faster if we can go faster, but I described the activities so that you get a feel for what an undertaking it is to stand up these pretty substantial provider institutions who partner with us, obviously, of course, because we, with the payers, select large volume institutions so that we could get the density of test ordering after we get reimbursement to go faster and the pull-through to be clear for about once a quarter to give us 3 months to execute on the launch of the program. Does that answer the first part of your question? Unknown Analyst: Yes, that's helpful color. Evguenia Lindgardt: Perfect. And then the second question, of course, rep productivity is critical. Actually, our Chief Commercial Officer and our Head of Sales, that's exactly how they engage with Austin and me on our forecasting on the number of reps and the number of tests per month per rep that is anticipated so that we can go the reps and drive towards steady progress. And of course, we're cautiously optimistic, but we want to watch it for another few quarters. We are seeing these metrics move. Your -- the question behind the question probably is when are you guys going to report on some of these metrics? Let us see the steady progress on them internally first. And as soon as we see the steady up and up, we will start reporting on them. Operator: Your next question comes from Dan Brennan from TD Cowen. Daniel Brennan: Maybe first one, just on -- you both talked about the shift to a more direct commercial effort, maybe pulling back some resources on the R&D side, extend the cash runway. Just I guess, what prompted the shift? It kind of makes sense logically, but I'm just wondering kind of is there any feedback in the market about timing, how long it's going to take. Or was this in discussion with the Board? Just maybe a little color behind that. Evguenia Lindgardt: Dan, thank you for the question. That's a very logical one. There's actually 2 root causes that drove that happening now. First, of course, as you know, the R&D and clinical operations efforts, both of these groups were incredibly focused on PRIME. And that was a 7-year effort, if you can believe it, with very, very heavy resourcing devoted to that. As we're shifting towards now publishing as much as possible with a couple of dozen publications in the pipeline from our data, we realized that we need less capacity specifically for our PreTRM birth product, R&D and ClinOps capacity. Of course, we have a pipeline of other products that we're working on, but we had inbound interest from partners to collaborate on R&D and clinical operations efforts in developing new tests. So what you're really seeing as the first impetus is the less demand on R&D and ClinOps capacity internally and the second one is the demand externally. to continue developing the tests. And as soon as we lock in these partnerships, of course, we'll communicate all of those to you. And you can imagine our R&D proteomics platform is a great asset with a biobank of thousands and perhaps a couple of tens of thousands of samples, which will allow us to support other diagnostic and screening tests in pregnancy, perhaps also support therapeutics of screening in for eligibility for drug interventions in pregnancy. You can imagine it's a strategic move as well as just simply less demand internally for now until we pick up in this collaborative model on other assets. So that's the answer on the R&D side. Does that help? Daniel Brennan: Yes. Yes, that helps. Very logical. Maybe just a couple of other quick ones. Just on the -- I think previously, you talked about low single-digit thousand volumes this year. Is that still on track? Or just maybe kind of how should we think about that? Evguenia Lindgardt: Dan, I didn't hear you quite well. Low single-digit thousand... Daniel Brennan: Was talking about volumes for '26. Evguenia Lindgardt: I got you. That's not unreasonable. As you know, we don't report the volume of orders, but it's certainly not an unreasonable number to be thinking about. And given your question, Dan, and our conversations, of course, we'll -- as soon as we see steadiness, we'll start reporting on it. But yes, that assumption is not unreasonable. Daniel Brennan: Got it. And then maybe just on the first Medicaid program that began, I think, a little over a year ago, when can you see that program potentially turn into a positive coverage decision, do you think? Evguenia Lindgardt: Great question. And I think when we announced it, we -- I believe I even talked through the time line for that particular program. We believe it will take us -- it took us about 6 months to stand it up with EMR integration and all of the provider setup to provide care management for the patients. And actually, the set of collaborators are now piloting a digital tool with us that allows the providers to deliver care management a lot more efficiently with weekly symptom check tooling. And we're looking forward to reporting on how that goes because that is something that will remove a significant barrier in terms of taking the OB/GYN nursing capacity from the office for that care management. So it took us 6 months to do that. It will take us about 9 to 12 months to fully recruit the program; about 4 to 5 months for the patients to deliver, obviously, on a rolling basis; then a couple of months to collect data on the outcomes, NICU admissions, health of the baby, weight of the baby, all of the other outcomes we typically would monitor in these implementation studies. And then, of course, take it to the state. I will tell you the state is not waiting for it. The state already engaged with us on -- for that particular program on what would coverage mean, why is it needed. We are mobilizing our clinical advocates in that state, and that's what I meant when I said our letter writing campaign. We're asking every provider to write to the state Medicaid and advocate why this test needs to be paid for in the state for all of the pregnant moms there. So the tactical time line I laid out nets out to be about 2 years to decision time line for the state. I think that probably has plus or minus a quarter or 2 on each side of that 2-year estimate. It could go faster. It could go a little bit slower if data is messy, for example, because in some states, they assign the baby into a different Medicaid plan at birth. Don't ask me why that's done, but that's the case. And it requires us to do some data chasing to combine the mom and baby outcomes. So for that program, we expect probably beginning of 2027 to bring the decision and the results of the program to us. And of course, we'll report on that. Does that help? Daniel Brennan: Yes, that helps a lot. Operator: There are no further questions at this time. I will now turn the call over to Zhenya Lindgardt, President and CEO. Please continue. Evguenia Lindgardt: Thank you so much, operator. In summary, we're building the medical reimbursement and advocacy foundations necessary for commercialization and guideline inclusion efforts, and the engagement we're seeing across stakeholders reinforces our confidence in the opportunity ahead. Thank you so much, everyone, for your time today, and we look forward to continuing to share our progress steadily each quarter. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participation. You may now disconnect.
Operator: Good afternoon, and welcome to Verastem Oncology's First Quarter 2026 Earnings Conference Call. My name is Daniel, and I will be your call operator today. Please note, this event is being recorded. [Operator Instructions]. I will now turn the call over to Julissa Viana, Vice President of Corporate Communications, Investor Relations and Patient Advocacy for Verastem Oncology. Please go ahead. Julissa Viana: Thank you, operator. Welcome, everyone, and thank you for joining us today to discuss Verastem's first quarter 2026 financial results and recent business updates. This afternoon, we issued a press release detailing these results, along with a slide presentation that will be referenced during our call today. Both are available on the Investor Relations section of our website. Before we begin, let me point out that we'll be making forward-looking statements that are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and actual results may differ materially. We encourage you to consult the risk factors discussed in our SEC filings for additional detail. Additionally, today, we will be discussing certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are provided in the press release we issued today. Joining me on today's call to deliver prepared remarks and take your questions are Dan Paterson, President and CEO; Dr. Michael Kauffman, President of Development; and Dan Calkins, Chief Financial Officer. I will now turn the call over to Dan. Daniel Paterson: Thank you, Julissa. Good afternoon, and thank you for joining our call today. Tomorrow marks 1 year since the accelerated approval of AVMAPKI FAKZYNJA CO-PACK, a practice-changing medicine approved for patients with KRAS-mutated recurrent low-grade serous ovarian cancer. Since our launch in May 2025, we've seen steady growth quarter-over-quarter, achieving $18.7 million in net product revenue in Q1 with nearly $50 million in total net product revenue to date. While we're pleased with the growth we've seen, we believe there's meaningful opportunity to build on the foundation we've established. New patient starts remain consistent month-over-month. Our prescriber base continues to grow and the reimbursement environment is favorable. As part of our ongoing commitment to optimize our launch, we conducted a focused review of our launch performance and execution and implemented targeted changes to our commercial organization and leadership. I'll walk through these details in a few minutes. I want to underscore that our confidence in the underlying demand and overall opportunity for the CO-PACK remains unchanged. Moving to R&D. We've made significant progress with our clinical trials for VS-7375, our potential best-in-class oral and selective KRAS G12D ON/OFF inhibitor, now branded as the VS-7375 Target-D clinical trial program. The Target-D-101 Phase I/II dose escalation and expansion trial is already underway, and we continue to enroll patients and evaluate higher dose levels. In addition, we've also initiated our Phase II registration-directed clinical trials in second-line pancreatic cancer, second and third-line non-small cell lung cancer and second-line plus metastatic colorectal cancer. Michael will share more about our progress and strategies with these trials. We continue to closely manage our expenses and remain on track for the LGSOC franchise to be self-sustaining in the second half of the year, meaning CO-PACK revenues will support both commercial operations and any ongoing clinical trials for avutometinib plus defactinib. As we look to the balance sheet, our focus remains on identifying value-creating nondilutive opportunities as we advance our pipeline and deliver for patients and shareholders. With that, let me turn to our commercial update. With almost a year into the launch, we're continually monitoring our progress. As with any launch, there's a natural evolution as we learn more about the market dynamics. We took a comprehensive look at our commercial execution and have taken decisive actions to strengthen it and position the business for the next phase of growth. Most notably, we've appointed a new Chief Commercial Officer, Dan Lyons, who has deep and relevant experience in oncology and rare diseases. He has a strong track record of leading global commercialization strategies across solid tumor cancers, including 2 successful rare disease and oncology launches at SpringWorks. Dan's leadership will be instrumental as we evolve our launch and bring AVMAPKI FAKZYNJA CO-PACK to all patients who could benefit from this important treatment. While Dan will not be joining us on the call today, he's already actively engaged with the team driving new and existing initiatives forward. Turning to the first quarter results. We were impacted by the seasonal headwinds many companies experienced, namely insurance turnover and reverifications as well as more severe weather, which affected patient access. This impacted both new patient starts and refills. On closer examination, we also observed a specific dynamic where some patients prescribed the therapy by early adopters were much further along in their disease and treatment journey than we would have anticipated and therefore, discontinued the treatment earlier than expected. This is not surprising as in many cases, these patients likely had no other alternative therapeutic options with proven clinical benefit. Since January, we've seen a rebound with a strong number of new patients through the end of the first quarter. There also continues to be strong physician conviction with the majority of physicians surveyed at our most recent ATU indicating that the CO-PACK would be their first choice at their patient's next recurrence. Now on to the numbers. Active prescribers continue to expand and through April, there have been more than 400 unique prescribers to date. And consistent with previous quarters, we continue to see prescriptions split between GynOncs and MedOncs at a 60-40 percentage. Separately, our active patient pool has grown over recent months, indicating patients are staying on therapy longer, but it's too early to provide duration of therapy as it continues to evolve. It's also too early to give an average number of refills, but the trend we are seeing is consistent with what we would expect at this point in the launch. Approximately 65% of commercially eligible patients are using our Verastem Cares Co-Pay Program. The remaining patients did not require co-pay assistance and the average co-pay for commercially insured patients is less than $30. Time to fill initial prescriptions continues to be in the range of 12 to 14 days due to rapid prior authorization approval and our payer mix remains consistent with previous quarters at about half commercial and half Medicare. As we look ahead and consider our recent learnings, we focused on 3 key drivers in our business to help patients realize the full benefit of the CO-PACK. The first key driver is to maintain the consistent level of demand of new patient starts. This starts with identifying the right patient for treatment. Without an ICD-10 code specific to LGSOC, we've identified other proxy measures within EHRs, including mutational status, AI or MEK use that may indicate an appropriate patient for the CO-PACK. Our team is actively working with prescribers when these proxy measures are identified in a patient file. Additionally, we've now added incremental personnel to continue to drive demand and support patient adoption. The second key driver is to drive earlier use at first recurrence. Over the course of the launch, we've observed discontinuations that in part reflect use outside of the attended approved patient population and in LGSOC patients who are much sicker than the patient population in RAMP-201 that was the basis for FDA approval. In fact, in some cases, patients were heading into hospice. As multiple physicians have noted, disease progression and complications can make it harder for patients to tolerate and absorb oral therapies, underscoring the importance of using the CO-PACK early at first or next recurrence when patients have the best opportunity to realize its full benefits. Our recently launched Reimagine Recurrent LGSOC direct-to-physician and patient campaign is focused squarely on this shift. The third key driver is to help patients stay on therapy. Recent long-term data from the RAMP-201 trial presented at the Society of Gynecologic Oncology showed that after 2 years of follow-up, patients on the CO-PACK achieved durable benefit with discontinuation rates consistent with the package insert, findings that physicians view as clinically meaningful. Our recent exposure response analysis also demonstrated that early side effects can be effectively managed with dose interruptions after which patients resume at the approved dose and schedule. Setting expectations with both patients and physicians around the AE profile and how to manage through it is a key initiative for the remainder of 2026. We continue to see a substantial market opportunity for the CO-PACK with growth potential coming from multiple directions, expanding reach among prescribers who ever prescribed the CO-PACK, deepening experience among current prescribers by identifying additional patients in their practices and shifting entrenched prescriber behaviors to starting CO-PACK on their first occurrence when appropriate. LGSOC is a relatively slow growing but unrelenting cancer where patients stay on their first treatment for several years. Therefore, achieving peak share at first occurrence will take time. But we believe the earlier use of the CO-PACK drives deeper adoption, produces real-world outcomes that mirror our trial experience and establishes the CO-PACK as the new standard of care at first reoccurrence. We remain focused on our core product launch priorities and sustaining steady growth throughout the year. I'll now turn the call over to Michael. Michael Glen Kauffman: Thank you, Dan. We continue to make good progress across our pipeline programs, and I'll spend the next several minutes with an overview of our VS-7375 oral KRAS G12D inhibitor program. As Dan mentioned, we've named our VS-7375 trials Target-D. Target-D 101 is our ongoing Phase I/II dose escalation, dose expansion and combination evaluation trial. In the dose escalation portion, we are now evaluating the 1,200-milligram daily dose to fully characterize the dose range available. We will complete enrollment across the various expansion cohorts shortly as well as the current cohorts evaluating combinations with chemotherapies. And importantly, we are moving to enroll patients into each of our Phase II trials, which I'll describe in more detail. As we mentioned last quarter, the FDA requested that we develop separate Phase II protocols for any trials where we are seeking marketing authorization. Thus, we have developed 3 Phase II registration-directed trials in pancreatic cancer or PDAC, non-small cell lung cancer, or NSCLC, and colorectal cancer or CRC. I'll now provide some detail on each of these. Target-D 201 is our second-line PDAC study. This Phase II open-label study is designed to evaluate VS-7375 at the 900-milligram daily dose, both as monotherapy and in combination with cetuximab. Based on strong preclinical rationale showing EGFR pathway activation in pancreatic cancer and its role as a potential resistance mechanism to RAS inhibition, we are studying the combination of VS-7375 and anti-EGFR antibodies to potentially deepen and prolong responses. We're also taking the opportunity to evaluate VS-7375 and anti-EGFR antibodies in first-line pancreatic cancer where we believe we can generate compelling data. It is worth noting that because VS-7375 has not been associated with skin rash to date, combination with EGFR inhibitors is expected to be clinically feasible and growing tolerability data to date support this. In addition, we are currently studying the combination of VS-7375 and gemcitabine nab-paclitaxel or GNP in patients with PDAC looking towards a frontline treatment regimen. Target-D 202 is our advanced non-small cell lung cancer study. This Phase II open-label study is designed to evaluate VS-7375 at the 900-milligram daily dose in patients who have received 1 or 2 prior lines of therapy, including a platinum-based chemotherapy and a PD-1 or PD-L1 blocker. We are currently evaluating VS-7375 at 600 milligrams daily in non-small cell lung cancer in our 101 trial, and this will provide information at this lower dose. But as in PDAC, we anticipate that the 900-milligram daily dose will be our go-forward monotherapy dose in previously treated non-small cell lung cancer as we look towards potential marketing authorization. We are also evaluating VS-7375 monotherapy in patients with non-small cell lung cancer and asymptomatic brain metastases where there remains a significant unmet medical need and an opportunity to improve outcomes. And as previously noted, we are evaluating the combination of VS-7375 plus pembrolizumab without or with platinum pemetrexed chemotherapy in the 101 study looking towards a frontline treatment regimen. Lastly, we have our Target-D 203 metastatic colorectal cancer study. This Phase II open-label study is designed to evaluate VS-7375 at the 900-milligram daily dose as both monotherapy and in combination with EGFR inhibitors, including cetuximab or panitumumab in patients with previously treated colorectal cancer. While we do not expect to see meaningful responses for VS-7375 as a single agent, this will be critical to showing the contribution of PARs for potential combination therapy regulatory submission. We're also going to evaluate VS-7375 in combination with anti-EGFR antibodies and the modified FOLFOX6 regimen in the first-line setting, again, to expand the opportunity and help us improve outcomes in patients with colorectal cancer with the goal to develop a frontline combination regimen. Importantly, across all 3 Phase II trials, the primary endpoint is overall response rate by blinded independent central radiological review or BICR, with BICR determined duration of response or DOR as the key secondary endpoint, supporting potential accelerated approvals in each of these 3 indications. The protocols have been sent to clinical trial sites, and we anticipate the first patient in each of these studies to occur mid-year, if not sooner. We continue to enroll patients and evaluate the 1,200-milligram dose, which is the highest practical dose that we can administer to define the upper end of the dosing range. We now have updated PK data that show that the 900-milligram dose delivers serum levels of VS-7375 at or above our target level and provides clear separation from the 600-milligram dose. While we are seeing good responses at 600 milligrams, these data, along with good tolerability, support our enthusiasm for advancing the 900-milligram dose in our Phase II trials. As additional data emerge, we expect to finalize the go-forward dose across tumor types and combination settings. As we shared last quarter, our goal is to generate meaningful data sets in these tumor types, both as single agent as well as in combination with other treatments with the goal of potential accelerated approvals in previously treated cancer as well as developing combination strategies to position our regimens in the frontline setting across all 3 tumor types. Now let me briefly set expectations for our first half update from the Target-D 101 trial. In terms of patient numbers, the safety data set will include a broad set of patients across Target-D 101. However, the number of patients evaluable for efficacy will still be relatively small. Recall that response evaluations require a minimum of 2 baseline scans, which are typically 6 to 8 weeks apart and not all responses occur at the first scan. And of course, duration of response requires follow-up for months after the initial response determination. We note again that meaningful response duration is typically about 6 months. As we've discussed previously, we believe that administering the highest well-tolerated dose of VS-7375 will maximize the chances for each patient to have a meaningful antitumor effect. And because the 900-milligram dose has been well tolerated to date in over 20 patients in the U.S., our results of this dose will require several additional months over what was originally projected for the 600-milligram dose. At this time, we can also add that the 400 and 600-milligram doses of VS-7375 in combination with cetuximab are well tolerated and that we are currently evaluating the 900-milligram dose in this combination. To reiterate, we will only be able to provide a preliminary view on activity overall because we've been able to utilize higher doses in our patients in the United States. That said, we see this first half update as an early checkpoint and believe the data set will be meaningful in terms of demonstrating our progress in enrollment, along with a more mature safety update and more PK data. We do plan to include some patient cases across tumor types and combinations in the update. Later this year, we expect to provide a more comprehensive data set, including tumor-specific breakdowns and more mature efficacy data as we enroll in our Phase II trials for potential marketing applications. Finally, switching gears for a minute to our avutometinib plus defactinib program. We remain on track to report an update on our RAMP-205 study in first-line PDAC before the end of the second quarter of this year. Now I'll turn the call over to Dan Calkins. Daniel Calkins: Thank you, Michael. Our full financial results were included in our press release, so I'll focus on the highlights here. For the first quarter of 2026, we recorded $18.7 million in net product revenue and $2.8 million in product cost of sales. Cost of sales increased in the first quarter in line with the percent increase in net product revenue for the quarter. Research and development expenses were $38.2 million for the first quarter of 2026. R&D expenses continue to be driven by both the ongoing global confirmatory Phase III RAMP-301 clinical trial with the CO-PACK and the ongoing VS-7375 Target-D 101 Phase I/II clinical trial in the U.S. as well as higher costs associated with clinical supply and drug production activities related to our expanded VS-7375 program. SG&A expenses were $22.3 million for the first quarter of 2026. The expenses were driven by commercial activities and operations, including personnel-related costs to support the ongoing CO-PACK launch. I can reiterate that we expect SG&A expenses to remain roughly the same on a quarterly basis throughout 2026 as we remain disciplined in our expense management, making the right investments at the right time to support the ongoing commercial launch efforts. For the first quarter of 2026, non-GAAP adjusted net loss was $42.7 million or $0.43 per share diluted compared to non-GAAP adjusted net loss of $42.9 million or $0.79 per share diluted for the first quarter of 2025. Please see our press release for a full reconciliation of GAAP to non-GAAP measures. Moving to the balance sheet. We ended the first quarter with 2026 with cash, cash equivalents and investments of $181.7 million. We believe our current cash, combined with the future revenues from the AVMAPKI FAKZYNJA CO-PACK sales will provide cash runway into the first half of 2027. We remain encouraged by the initial launch and look forward to building on the CO-PACK's growth in 2026. Given our current trajectory, I'm pleased to reiterate that we believe the LGSOC franchise will be self-sustaining in the second half of the year with CO-PACK revenues funding both the commercial operations and our avutometinib plus defactinib clinical trials. With that, let me turn the call back over to Dan. Daniel Paterson: Thanks, Dan. Before we open the call to Q&A, our focus for the remainder of 2026 is very clear, and that's to drive strong execution across our commercial launch, move our 3 Phase II trials expeditiously towards potential registrations, determine appropriate VS-7375 combinations for frontline strategies and maintain disciplined capital management while identifying nondilutive financial opportunities to deliver for patients and our shareholders. Overall, we believe we're well positioned to deliver on our key milestones this year and continue building a leading oncology franchise in RAS/MAPK-driven cancers. With that, we'll open up the call for questions. Operator? Operator: [Operator Instructions] Our first question comes from Eric Schmidt with Cantor. Eric Schmidt: Maybe one on each of the 2 programs. On 7375, what do you think potential partners need to see from either your Phase I or early Phase II data sets in order to be very interested in the asset? And then 2 for Dan in terms of the self-sustainability of the CO-PACK franchise. Can you be a little bit more granular in terms of the revenue that gets you to that sustainability? Daniel Paterson: Sure. Eric, thanks for the question. Just to comment on potential partners, we have had a fair amount of interest. And what typically happens in situations like this, it tends to come down to the competitiveness. I think if there's one party interested, it can go on forever. I do think the fact that we've got significant data out of China that aligns well with the preclinical profile, it's really seeing enough data from the U.S. where we show that we can give it in a tolerable way in a way that can be combined and that we start to recapitulate efficacy that puts us in the ballpark of still being potentially best-in-class. And Michael, I don't know if there's anything more you want to add there, but why don't you comment and then we can have Dan C talk about the expenses second half of the year and kind of what we're talking about being covered. Eric Schmidt: I think you covered it real well, Dan. We need U.S. data, and we need a lot of detail on the patients and their prior therapy, and we're quite optimistic that we'll be able to deliver on that. Daniel Calkins: Yes. Eric, this is Dan C. So yes, just in terms of the self-sustaining question, obviously, we haven't given guidance in terms of the revenue for the remainder of the year. But just in terms of the expenses, if you look at SG&A expenses from -- on a quarterly basis from when we were pre-commercial to where we are now, that increase has typically been around $10 million to $15 million per quarter. And then from an R&D perspective, if you look specifically at the A+ related programs, that spend has typically been about $10 million to $15 million per quarter as well. And the majority of that spend is really coming from the RAMP-301 trial, which we announced reached full accrual back in December of 2025. So that's now at full accrual. So I don't expect that, that will increase more likely be coming down. So that would give you a good sense of what it would take to be self-sustaining within that program. Operator: Our next question comes from the line of Michael Schmidt with Guggenheim. Michael Schmidt: I had a couple on 7375. Maybe one for Michael first. You talked about the Phase I update in the first half of this year. And maybe if you could just comment a little bit more about how the patients perhaps in the U.S. study compared to the GenFleet Phase I study that we saw last year. And also, you mentioned different follow-up with -- depending on which dose was used. And so how comparable will the U.S. update be perhaps to the GenFleet data from last year? Daniel Paterson: Michael, do you want to take that? Michael Kauffman: Sure. Yes. Sure, Dan. So PDAC is generally treated the same way across the world. And frankly, these days, lung cancer, I mean, KEYTRUDA may or may not be the immunotherapy, but it's generally treated with a platinum agent, typically carbo and since these are adenocarcinomas of pemetrexed. And again, colorectal cancer, it's pretty standard, whether they're getting FOLFOX or FOLFIRI and some people are getting FOLFIRINOX, it's all pretty similar. The patients are fairly similar. I think the most important difference and the reason we want to continue to study our drug is because the tolerability in the U.S. has been substantially better than what was reported in China. We are not seeing any significant level at all of liver dysfunction. We haven't seen any significant hematologic issues at all. And we continue to see that even with patients now who are on for many months. Some who are on for more than 6 months. We're just not seeing that. We're also not seeing cumulative toxicities, which is really great for a drug that can be given chronically. We have really not seen anything major with this drug to date, and it's -- the numbers are starting to climb. So the 600-milligram dose has been studied for a little bit of a while now, but across a whole bunch of different cancers. It was an open study. We'll have a little bit more specifics on it. But I think the points I made in the call were that it takes a while to get responses here. I mean you can't even assess the first response until 6 to 8 weeks after initiation of dosing. And remember, when we open a trial, we don't accrue everybody at the beginning. So this is a staggered accrual, of course, with staggered dosing. We all wish this could happen immediately. But the first scan is 6 to 8 weeks and then a confirmatory scan is another 6 to 8 weeks. And then if like in PDAC when many of your responses are going to occur in the second scan after the first scan because these are tough tumors and they have a lot of scar tissue. It's going to take a while, and that's okay, and that's very good. We absolutely have responses in the first scans after dosing starts, and we've seen responses at second, and we've seen patients who've done really well, have shrinkage of tumors and cross the important 30% threshold for a PR in scan 3 or 4. I don't want to go into any detail, but we're quite pleased with what we're seeing, and we believe that 900 milligrams will be the go-forward dose. So that won't be -- the 900-milligram details will not come until the second half of the year, as we said. And we'll be able to give a little bit of data on the 600 milligram. But we would far prefer to give you guys substantial data sets in the 20 to 30 patient range with reasonable durability so that we can make some -- you and we can make some intelligent decisions on how this drug is stacking up against others. All of that said, we remain very, very excited about the potential for this to be a best-in-class agent. And I would lastly point out that this drug does not carry rash with it at all nor does it carry stomatitis. And these are really important considerations for patients who could spend a year or more on these drugs. Michael Schmidt: Okay. Understood. And maybe a question on your Phase II program. Specifically the 201 study on Slide 12 is schematic and just wanted to ask, so you have Part A and Part B. And I'm just curious what the decision process is for either selecting 1 of the 2 cohorts, monotherapy or combination and then whether the Part A and B patients will be pooled at the respectively selected cohort. Will this be a 100-patient type -- actually 80 patient type registration cohort? Or how should we think about the decision path as you have sort of multiple steps in these Phase II studies? Daniel Paterson: Right. Well, beautiful way to put it, and you correctly figured out what we're really doing here, which is to expect that based on what's going on right now at the 900-milligram dose currently in our Phase I, we do think 900 milligrams will be good as both a monotherapy and in combination. We think both of these cohorts are going to be important. And we do intend to pull Parts A and B. This is sort of a 2-step. It's almost sort of a baby and 2-step trial, but we're just putting it in here this way so that we can review this in case there's some unexpected findings here, which frankly, would be different from what we're finding already in the 101 study. We don't believe that's going to happen, but this was -- we discussed it with our statisticians, and we thought this was the most appropriate way to do this. It doesn't really affect our time lines at all because we think both cohorts are going to go through, and we'll have both a monotherapy and a combination. I'll just add one more thing, and that is that these are important cohorts, assuming cetuximab can add efficacy, but it also remember, cetuximab brings about an 80% burden of it. It's a different kind of a rash than you see with some of the pan-RAS inhibitors. The cetuximab rash is so-called acneiform, and it's actually really well controlled with, frankly, standard acne medicines plus steroids. So a lot of the patients will go on prophylactic minocycline or doxycycline, and that can really mitigate these rashes. But it still comes with a rash. And there are patients even with pancreatic cancer who don't want that. So we think both of these options will be important, and we think we can deliver very significant response rates, which will be correlated with durability with this kind of a drug because it doesn't have cumulative toxicities for both of these cohorts, and we'll have 2 different options for patients. Michael Schmidt: Okay. And then cetuximab is clearly an interesting choice, I think, in PDAC, but any plans to potentially evaluate combination of 7375 with an investigational pan-RAS inhibitor? Daniel Paterson: We're absolutely considering that, and we're in discussions with folks. We have generated and continue to generate some interesting data in that regard. So we're absolutely looking into that. That said, frankly, there's a lot of different pathways that deserve study in now that we seem to have made a dent in pancreatic cancer, and we're considering multiple other options as well. Operator: Our next question comes from Faisal Khurshid with Jefferies. Faisal Khurshid: I wanted to ask about the GenFleet partnership. So when you guys did the partnership, I think you had 3 RAS programs that you were eligible to in-license. And if you look at the GenFleet pipeline, they have the G12D, the G12C and the multi-RAS. Can you confirm if you guys are able to license the multi-RAS and what the considerations around that could be? Daniel Paterson: Yes. This is Dan. So those 3 molecules were not -- well, except for the G12D, which we developed together with them and chose the lead. The other 2 programs were not officially part of the original collaboration. We continue to have discussions for us to jump into the pan-RAS space right now. We'd have to be convinced that it was a differentiated molecule and that, frankly, that combining G12D and pan-RAS is actually the preferred path we might want to go down. And we think we have so many other options. We're still considering it, but there are a lot of other options to look at for combination. Faisal Khurshid: Got it. But you do have 2 more molecules that you can get from GenFleet under the current deal? Daniel Paterson: We do, and we've not disclosed those targets yet. Operator: Our next question comes from Leonid Timashev with RBC. Leonid Timashev: I wanted to pivot maybe to the commercial side of A+F. Really appreciate the color on sort of how you see the commercial strategy evolving. But I guess I'm curious if you could provide more details on how you'll actually affect those changes. I mean is there a different way the sales force is going to message? Are the promotional materials going to be different? Are the regions going to shift? I guess how do you actually drive towards those goals that you laid out? Daniel Paterson: No, that's a great question. And the short answer is I'll accept the last one. So we did add 2 additional sales positions, and that was really driven by the fact that 2 of the regions were just too big. And so we said all along we were going to rightsize the launch. We were in the process of doing a deep dive. We're about 6 months in when we got to the end of the year. We had that seasonal issue, which frankly, impacted refills more than initial scripts, and it was reauthorizations and things like that, that would push things from January into February We actually had some patients we had to put on free drug for a month until things got sorted out. And so when I -- when we talk about the focus for 2026, some of it was just additional training. Some of it is making sure that we're putting the right amount of effort into the visits after the first prescription and not putting all our effort into getting a prescription. And then implemented a number of different steps with information flow between the specialty pharmacy and really our integrated force, which is both the sales team and the med affairs team to make sure that when there's a delay, and we increased the number of calls to patients so that we are in touch with what's going on with the patient. But also a very deliberate link where if there's a dose delay, somebody is calling on the practice, whether it's med affairs or the sales rep to both find out what's going on and then reinforce the messaging that came out of the SGO meeting recently. We had 2 big events at the SGO meeting, which that and IGCS tend to be our 2 big meetings of the year. We had the long-term update to RAMP-201, which showed durability and no increase in side effects with cumulative use over a long period of time. But also, we had a poster on the importance of dose intensity. And one of the things that you're able to do in a clinical trial when you're interacting in a very regular basis is make sure you're reinforcing the protocol rules, which is if there's a side effect, you delay the dose and you restart at full dose. That works really well with this drug. I think we were finding with MedOncs in particular, who are used to the dynamics for chemotherapy are a little different where you may get a response earlier and side effects are cumulative, where with this treatment, you tend to get early side effects, and they tend to be predictable things and things that the patient knows they're coming can be dealt with and then the response becomes later. And so really reinforcing the messaging and really the sharing of data on how important it is to get the patient through that first 3 months or so, so they get the benefit of the treatment. And then we talked about the new campaign that we rolled out. That's something that had been in the works for a little over 6 months. When you launch with accelerated approval, you're limited in what you can talk about in the early days. And so this was really our next wave of the promotional campaign that had been planned from the beginning and really reinforces the importance of getting on this treatment early. I think there's another dynamic going on is also at SGO, there was an early report of a frontline LGSOC study that compared platinum-containing chemotherapy followed by as part of the same regimen, an AI versus an AI only. And the combination won out. And I think you're going to start seeing patients as standard of care based on the data that just came out that will get the platinum-based chemotherapy followed by AI as frontline therapy. And I think that really sets us up very nicely to be the next therapy that patients get after that. Operator: Our next question comes from Graig Suvannavejh with Mizuho. Samuel Lee: This is Sam on for Graig. Congrats on the quarter. Maybe one on 7375. So how should we be thinking about the cadence in terms of the timing of readouts? Is there a specific program or indication that you see as, I guess, the most likely path for successful registration-enabled readout and data? Daniel Paterson: Sam, thanks for the question. I'll start, and then I'll turn it over to Julissa to give more specifics on what we'll have when. We believe all 3 of those indications are important for patients and places where our drug, we believe, will work quite well based on preclinical data. So they're all moving forward in parallel. Our goal is to have those Phase II studies largely accrued by the end of this year and then move forward as quickly as possible. Obviously, there's a lot of movement in PDAC. We're going to have to monitor. We are in an enviable position as a company of our size that we have multiple programs in PDAC, and we're going to have to see how both of those develop to make some decisions on how best to prioritize things while staying right on top of what's going on in the competitive space because obviously, there's a lot going on in PDAC. And then for CRC and lung cancer, again, the preclinical data is really exciting. If you look at the GenFleet data in second-line lung cancer, 50 -- or 69% response rate we're seeing unprecedented response rates as a single agent. We're starting to see that we can combine nicely with other agents. And so we've got a lot of choices to make around the frontline path in a very short period of time. But while we do that, and we will be doing frontline Phase III studies, we will continue to push forward very aggressively on those potential accelerated approval paths. Julissa Viana: I'll just add just with that. Yes. I think just to reiterate what we said on the call about the timing, again, the update in the first half will show progress on enrollment. We'll share some more mature safety profile data since the one that we provided back in March. And we'll provide some patient cases so that you can get a sense of the efficacy that we're seeing. And then in the latter half of the year, again, the goal is more comprehensive data set, double-digit patient numbers across the tumor types, ideally at the go-forward dose, looking both at mono and combo data sets. So we can make some decisions at that point, looking at all of the variables that were just mentioned. Daniel Paterson: Yes. In the first half data release, we'll have much -- we'll have more data on PK. And as Michael mentioned during his prepared remarks, this is the first time we've disclosed that in the U.S., we are seeing better PK at 900 than 600. And that's both AUC, which is kind of, I guess, the standard measure folks would normally use. But because of the residence time or time on target, being about 24 hours, we actually think Cmax matters a lot. So it can come out of the blood and still be actively blocking the target, and Jon Pachter presented some really elegant work at AACR last meeting recently. And so we think by seeing that PK going up with the dose, we think it just further strengthens the case for pushing that 900-milligram dose, especially since we are seeing that it's tolerable. Operator: Our next question comes from Andres Maldonado with H.C. Wainwright. Andres Maldonado: Congrats on the progress. Two for me for 7375. First, so in the non-small cell lung cancer, you're including an asymptomatic untreated brain metastases cohort. So curious there, is the goal mainly to show systemic activity in a difficult subgroup? Or is there potential to -- do you guys think you have enough CNS exposure to support a differentiated intracranial profile that extends beyond that tissue type? And then second question, kind of a macro question. So earlier this quarter, we saw a pan-RAS program report a Grade 5 pneumonitis given the historical trends also seen with approved G12C, how should we be thinking about these events through the lens of an on-off G12D or other strategies targeting G12D? Daniel Paterson: Michael, do you want to take those? Michael Kauffman: Sure. So first on the question of the brain mets. The systemic activity of the drug will be in lung cancer generally is being evaluated now at 600 in the ongoing Phase I, and we will be doing the 900 in the Phase II, as you see, as you saw from the deck that we had along with the prepared remarks. There is a separate cohort because, obviously, when you're trying to ascertain the value of the drug, systemically, you tend not to pick patients with metastatic brain disease. That said, lung cancer frequently goes to the brain, unlike colorectal and unlike pancreatic cancer. And so in lung, it's especially important to try to see if there's substantial brain activity. The drug does penetrate the brain. I believe GenFleet reported that 2 out of the 5 patients that they had who had asymptomatic brain mets had systemic responses to the drug. We haven't been able to ascertain exactly how much the brain mets may have shrunk, but the brain mets clearly did not progress because they wouldn't have been responsive if they had. So this cohort of about 25 patients will be treated at 900, which is a higher dose than GenFleet is able to obtain to see if we can control the brain mets. And you all know about avutometinib and some of the other amazing therapies that also cross the blood-brain barrier and really can help these patients do very well over time by preventing or treating brain mets. So that's a starting point for potential for this drug that may differentiate it from others. And to reemphasize what Dan said, the fact that we're able to deliver such good systemic levels that are very tolerable so far with the 900 gives us a good shot at being able to drive enough of the drug into the brain and do something about this. As far as pneumonitis is concerned, we have not seen any cases of pneumonitis that were believed to be caused by the drug. I believe that they -- that we may have a treatment unrelated pneumonitis case in a patient who already received radiation and it was thought to be a radiation associated, but it was grade 1, and it had 0 impact at all on anything we've seen. We've certainly not seen any kind of pulmonary symptoms with our drug that give us any pause. That said, we'll be treating a large number of patients with previously treated lung cancer, many of whom have received chest field radiation, many of whom have had one or more infections, all of which predispose you to downstream lung events. We're obviously hopeful we're not going to see that. And lastly, we do not believe, based on our tox studies, there's any drug-related risk of pneumonitis, but that remains to be seen, but nothing important so far. Daniel Paterson: And just to amplify Michael's comments about pneumonitis, we do have access to the entire PV database at GenFleet. And when we heard these events with some of the other drugs, we did a deep dive. And so his comments are informed by that work that's been done. Operator: Our next question comes from Yuan Zhi with B. Riley. Yuan Zhi: Maybe one question on the combination of 7375 plus EGFR inhibitors in the PDAC indication. So with this incremental addition of EGFR inhibitor, which normally patients cannot get because of baseline KRAS mutation, what kind of incremental efficacy you guys are looking to justify the addition of this agent considering the safety liability with this EGFR inhibitor? Daniel Paterson: Michael, do you want to take that one? Michael Kauffman: Sure. There's 2 components to this. One is the overall response rate, of course. And the second very important one is durability. It is -- we do believe, and we have some early data that could support that hypothesis that we could deliver a higher response rate. We -- it's too early yet to say whether we would have an increased durability of response. That said, the mechanism of action of cetuximab is to block -- specifically block not only a growth pathway. It's an accessory growth pathway for sure, for RAS-driven cancers. It's not the primary one. But when you block RAS in these cancers, including pancreatic and colorectal and probably some of the other gastrointestinal tumors, the EGFR pathway becomes much more important and blockade of that can be helpful, again, upfront, but also to prevent the development of resistance and running growth pathways through the EGFR pathway. So this could have impact on both sides of this. We will know fairly soon what kind of incremental we'll have. I can't give you a real number. I think what we'd like to do is say that if there are probably patients who would benefit from cetuximab from the get-go. We don't know who they are. And there'll be other patients who might benefit from down the road after, say, 8 or 9 or 12 months on our drug, if they started to develop resistance, one could imagine adding cetuximab. We think that this development plan that we expect could support accelerated approvals could lead to availability of this combination regimen, maybe not upfront in everybody, but certainly as an option for patients if they start to see progression of their tumor as well as for some patients upfront. So I think this provides a lot of flexibility. This is not an option for most of the pan-RAS inhibitors because the strong concerns about added rash here. And I think for the 40% of patients who have PDAC that's G12D and the 20% of patients that have colorectal cancer that's G12D that this could be a really important addition either upfront or down the road. Operator: Our next question comes from Jeet Mukherjee from BTIG. Jeet Mukherjee: Two for me. You certainly mentioned that 900 mg is looking like a very suitable go-forward dose. But I was just wondering if you could elaborate a bit further on why this hits the sweet spot. It looks like 1,200 mg is certainly still under evaluation. Was there some limiting factor with that dose perhaps? And then the second question was just related to the target studies. I think you've definitely mentioned that these are designed to be supportive of approval. Have you reached some degree of alignment with the agency on what the bar for approval is? It looks like ORR is a primary endpoint across several of the studies. Is there some threshold you need to exceed? Any details there would be helpful. Daniel Paterson: Michael, do you want to take those? Michael Kauffman: Sure. So just to be really -- it's a simple answer for 1,200. The capsules that we have right now -- I'm sorry, the pills that we have right now are 100-milligram pills. Asking patients to take 9 of these to give you 900 mg is the upper limit of what they can really handle in one swallow, if you will, or one session, if you will. For the 1,200, we're going to a split session of 6 and 6 split by about 30 minutes because we ask people to take it with food and plenty of water and so on to make sure it gets down there and everything. So it's just impractical to go much above 1,200 with the current pill size. That said, we are certainly in the midst of constructing larger pills, which we'll update you guys on when we have that to a point where we think it's real. And hopefully, we won't be -- we don't expect to be marketing this as 100-milligram pills. We expect to be marketing it with higher pill sizes so that we don't have to give people that much. So it's pretty simple and straightforward. Once we have the larger pills, depending on what we see with 1,200, we may consider going higher. But right now, 1,200 is it. As far as FDA's threshold, I mean, we have not had any discussions with them specifically about what this is. But thankfully, and I think the oncology division of the FDA has been superb about this, particularly for molecularly defined subsets of cancers. They have routinely approved drugs as low as 25%. Typically, the 25% to 30% ORR range is what's approvable as a single-arm study, provided there is sufficient durability. If you go to ASCO, most experts will tell you they want to see at least 6 months duration of response. You all keep in mind that, that's 6 months plus the 1.5 months minimum, it takes to get to a response. So you're talking 7.5 to 8 months at least on the drug, which for these kinds of tumors is pretty impressive, particularly in heavily pretreated patients. I think those are kind of the thresholds you should be thinking about 30% on the ORR number and 6 months durability, but those are general numbers, and it's always a review issue with the FDA. Operator: And our final question comes from James Molloy with Alliance Global Partners. Matthew Venezia: This is Matt on for Jim today. Just 2 from us. In terms of the launch for A&F, the reimbursement for KRAS undefined and KRAS wild type, is that continuing at similar rates from previous quarters? Daniel Paterson: Yes, we've seen no change. Matthew Venezia: Okay. Excellent. And then do you guys have any anecdotes from treating doctors whose patients have been on treatment for over 8 or 9 months at this point? And if you could share, that would be very helpful. Daniel Paterson: Sure. I mean it's anecdotal at this point, given the fact we've only been out for just a year now. But there are patients that have done quite well that are both wild-type and mutant. And we also continue to interact with the sites on RAMP-201. And I recently spent some time with a patient that's been -- never achieved a PR with stable disease, but had a really transformational change in her ability to do things. She went from not being able to vacuum or living room to running a 5k and has been on our drug for, I believe, 3 to almost 4 years now. And so we do have a lot of anecdotal information, even going back to the FRAME study, we had a number of patients staying on for a long time. So we do think when it's the right patient that we'll recapitulate what we saw in the clinical trial. As you may recall, in RAMP-201, we had patients from anywhere from 1 prior therapy to 10 prior therapies. And it tends to be less, I think -- of course, the more prior therapies you have, the more challenged the patient has. But I think the big difference in the real world versus the clinical trial will be performance status. In most clinical trials, you're limited to performance status 01. And obviously, in the commercial setting, you take anybody who wants to come on the drug. And even though we did hear instances of patients going on cycle and coming off and then you can say, well, they probably shouldn't have gone on the therapy. We've also heard anecdotal stories of patients that were pulled out of hospice put on the drug and did well for a number of months and got a number of months with good quality of life they wouldn't otherwise wouldn't have had. And so those are great stories to hear, and we continue to monitor those. And we're very excited about the franchise. I think we've uncovered some things from seasonality, plus you learn as you go through the launch, and I think we've made some course corrections that it may take a couple of months to see the full benefit of. But I will say with confidence, we already are sure that we will see an increase from Q1 to Q2 that was bigger than the Q4 to Q1. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.