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Operator: Good morning, everyone, and welcome to the Horizon Bancorp conference call to discuss the financial results for the first quarter of 2026. [Operator Instructions] Now, I will turn the call over to Mr. Todd Etzler, Executive Vice President, Corporate Secretary and General Counsel, for the opening introduction. Please go ahead. Todd Etzler: Good morning, and welcome to our conference call to review Horizon's first quarter results. Please remember that today's call may contain statements that are forward-looking in nature. These statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those discussed, including those factors noted in the slide presentation. Additional information about factors that could cause actual results to differ materially is contained in Horizon's most recent Form 10-K and its later filings with the Securities and Exchange Commission. In addition, management may refer to certain non-GAAP financial measures that are intended to help investors understand Horizon's business. Reconciliations for these measures are contained in the presentation. The company assumes no obligation to update any forward-looking statements made during the call. For anyone who does not already have a copy of the press release and supplemental presentation issued by Horizon yesterday, they may be accessed at the company's website, horizonbank.com. Representing Horizon today are Executive Vice President and Senior Operations Officer, Kathie DeRuiter; Executive Vice President and Chief Commercial Banking Officer, Lynn Kerber; Executive Vice President and Chief Legal and Risk Officer, Todd Etzler; Executive Vice President and Chief Financial Officer, John Stewart; and Chief Executive Officer and President, Thomas Prame. At this time, I will turn the call over to Thomas Prame. Thomas? Thomas Prame: Thank you, Todd. Good morning, and we appreciate you joining us. Horizon's first quarter results demonstrate the core strength of our community banking model and our commitment to shareholders to deliver a top-performing organization through durable peer-leading performance metrics and top quartile shareholder returns. We are very pleased with the quarter's results, displaying an annualized return on average assets above 1.60%, return on average tangible common equity above 19% and continued durability in our net interest margin at 4.29%. These results drove a meaningful increase in our CET1 by 40 basis points to 10.82% and improved total risk-based capital of 14.77% in the quarter. Specific highlights within the quarter were led by the team's excellent deposit gathering efforts with over $147 million in growth or 11% annualized. These results were further enhanced by approximately $61 million of growth within the noninterest-bearing segments of the consumer and commercial portfolios. Our commercial lending team had a solid performance with $34 million in growth within the quarter with elevated pipelines that we believe will continue to fuel solid balance sheet growth throughout 2026. The positive momentum in the commercial was counterbalanced by episodic mortgage refinance activity in early Q1, where management elected not to chase lower-yielding mortgages onto the balance sheet and remain steadfast on its disciplined pricing. We feel confident in this decision. We have seen loan balances quickly align with full year growth estimates in early Q2. This momentum, combined with our strong deposit balances, positions the organization well for solid organic growth on both sides of the balance sheet in 2026. Additionally, our fee income efforts continue to make solid progress with year-over-year growth in our core relationship banking segments of service charges, interchange fees and fiduciary services. Complementing these efforts, we continue to display excellent credit metrics with low charge-offs and nonperforming loans below historical norms. As I mentioned at the beginning of my comments, we're very pleased with the first quarter results for our shareholders. Additionally, we are confident in our full year outlook heading into Q2 with strong lending pipelines, positive deposit trends, fee income verticals gaining stride and expenses well managed. It was a good start to the year on many fronts. Let me transition the presentation over to Horizon's Executive Vice President and Chief Commercial Banking Officer, Lynn Kerber, who will share our lending highlights for the quarter and our continued excellent credit performance. Lynn? Lynn Kerber: Good morning. This quarter reflected steady disciplined commercial growth despite a competitive lending landscape and a dynamic rate environment. We continue to prioritize high-quality commercial lending, a well-balanced portfolio mix and continued pricing discipline. Our credit metrics remain stable, and we are exiting the first quarter with solid momentum. Total loans held for investment ended the quarter at $4.87 billion, driven by a $34.2 million increase in commercial loans. As Thomas mentioned previously, residential and consumer loans were down in the quarter by $32 million as the leadership team elected not to leverage the balance sheet for lower-yielding mortgages in the first quarter. Residential mortgage lending remains an important offering, and we expect growth in subsequent quarters as the rate environment stabilizes and yields are more attractive. Commercial loan growth was concentrated in the Grand Rapids, Indianapolis and Northwest Indiana market. We continue to diversify the portfolio with 37% of the net quarterly increase attributable to commercial and industrial loans compared to their 30% share of the overall commercial portfolio. This mix reinforced the strength of our commercial franchise. Credit performance remains satisfactory and within historical ranges. Substandard loans were $63.4 million, representing 1.3% of total loans, which is consistent with the 1.22% to 1.36% range over the past year and down from $66.7 million or 1.36% in Q1 of last year. Nonperforming loans are $37 million, representing 0.76% of total loans, consisting of $16.7 million in commercial loans, $10.6 million in residential real estate loans and $8.4 million in consumer loans. While nonperforming loans have increased modestly over recent quarters, levels remain manageable and consistent with a well-diversified portfolio. We anticipate improvement in the subsequent quarters of 2026 as we are forecasting several loans returning to performing status, payoff or completion of the collection efforts. These loans are well secured and/or appropriately reserved, and we do not expect an impact on losses. Net charge-offs were $626,000 or 5 basis points annualized, aligned with our historically low loss experience and favorable compared to the 15 basis points reported by our UBPR peer group for 2025. The allowance for credit losses remained stable at $51.3 million or 1.05% of loans held for investment. The $391,000 provision reflects replenishment of charge-offs and a reduction in reserve for unfunded commitments. Going forward, provision levels will continue to be influenced by loan growth, portfolio composition and economic conditions. Overall, we delivered a solid first quarter of commercial loan growth while maintaining our credit profile. We expect continued momentum in 2026, supported by positive trends in lending activity early in Q2, increased residential mortgage and consumer origination activity. We remain well positioned to serve high-quality clients across our markets, and our disciplined approach continues to support balanced sustainable growth and strong shareholder returns. I'll now turn the commentary back to Thomas for an overview of our positive deposit trends. Thomas Prame: Thank you, Lynn. Moving on to our deposit portfolio displayed on Slide 8. Horizon's deposit portfolio had a very positive first quarter in terms of growth, portfolio mix and cost. As mentioned previously, the portfolio growth of approximately $147 million comprised a good mix across both the consumer and commercial segments. The quarter was highlighted by $61 million in noninterest-bearing growth, reflective of the organization's continued efforts to expand sticky primary banking relationships within its attractive markets throughout Indiana and Michigan. Even with the excellent growth in balances, the team was successfully able to reduce overall interest-bearing costs by 7 basis points in the quarter through consistent portfolio reviews with local leadership and an agile approach to local market pricing. The franchise has found good rhythm in its deposit gathering efforts, and we believe our deposit portfolio continues to be well positioned to meet the growth and margin expectations of the organization with its granular composition and long-standing relationships in our local markets. Let me hand the presentation over to our Executive Vice President and Chief Financial Officer, John Stewart, who will walk through additional first quarter financial highlights and the continued positive momentum we see for the remainder of 2026. John? John Stewart: Thank you, Thomas. Turning to Slide 9. Consistent with our original outlook for the year, the net interest margin in Q1 was unchanged from the prior quarter at 4.29%. The objective all along was to build a balance sheet with a level of profitability that was durable and largely inoculated from changes in rates. Though one quarter does not necessarily make a trend, we feel good about the performance in Q1 and would note that our net interest margin and net interest income outlook is unchanged from our original guidance despite going from the assumption of 2 rate cuts previously to none today. Specific to the first quarter, I would note that average interest-earning cash balances did exceed our internal projections by about $60 million. You will recall the Q1 guidance called for average earning asset balances to decline from Q4 related to lower cash balances at year-end. This did not happen primarily because deposit growth was stronger than expected in the quarter, which we were pleased to see. However, these higher cash balances did negatively impact the margin percentage by about 4 basis points in Q1. Away from cash, underlying margin trends remain supportive. New loan production in the quarter exceeded 6.6% compared with average loan yields in the quarter of 6.28% and roll-off yields just below 6%. In the investment portfolio, we are anticipating another $75 million to $100 million of principal cash flows over the balance of the year at about 4.7%. Reinvestment rates in Q1 approximated 4.8%. These earning asset trends should largely be supportive of the net interest margin, even with the expectation that our interest-bearing deposit costs may be flat to up over the balance of the year with no further rate cuts. As you can see on Slide 10, noninterest income got off to a nice start in Q1. Excluding the $7 million warehouse gain and modest securities losses in the first quarter a year ago, fees were up about 13% year-over-year. This result was driven by strong year-over-year gains in service charges and fiduciary activities. While mortgage gain on sale was flat year-over-year, the team is off to a nice start in the second quarter, such that we would still anticipate full year results to reflect solid progress in this business. On Slide 11, expenses came in at $40.7 million, in line with expectations, particularly considering the seasonal headwinds in benefits and occupancy expense. These areas were partially offset by lower levels of spend on outside business services and the timing of marketing spend. Looking ahead, we would anticipate a modest increase in quarterly expense run rate in Q2 related to the full impact of annual merit increases and planned marketing spend for specific growth initiatives. That said, there is no change to our outlook for full year expenses in the mid-$160 million range. Turning to capital on Slide 12. Once again, capital ratios improved quite strongly in the quarter with CET1 up 40 basis points to 10.82%. This result was driven by strong profitability levels and a modest sequential decline in risk-weighted assets as we continue to proactively manage the deployment of risk capital across the balance sheet. As we have previously communicated, we are very comfortable with the company's capital position, particularly in light of the derisked balance sheet we now have and as our 2026 outlook suggests the expectation that we will continue to accrete capital quickly, which you will see over the course of the year. Turning to Slide 13. Our guidance for 2026 has not changed. Period-end loan and deposit balances are still expected to grow mid-single digits, which continues to infer deposit growth modestly more than loan growth in dollars. As we have consistently noted, ultimately, balance sheet growth will be driven by deposit growth going forward, and this strategy has not changed. Non-FTE net interest income is still expected to grow in the low teens year-over-year with the FTE net interest margin in the range of 4.25% to 4.35%. Average earning asset balances are still expected to modestly exceed $6 billion for the full year. This outlook previously included the assumption for two 25 basis point rate cuts in April and October, which have now been removed. This change in assumption did not impact the outlook. Fee income is still expected to be in the mid-$40 million range for the year with results generally consistent quarter-to-quarter. Expenses in the mid-$160 million range is also unchanged. As noted in my prior remarks, for the reasons noted, we would anticipate a modest uptick in the quarterly run rate from the level seen in Q1. The effective tax rate is still anticipated to land in the range of 18% to 20%. Overall, we are pleased with the start to the year in 2026. And as the guidance suggests, it should be a strong year for Horizon, steady growth with durable peer-leading returns on assets, returns on tangible common equity and top quartile internal capital generation. With that, I will turn the call back over to Thomas. Thomas Prame: Thank you, John, and I appreciate the summary of the quarter and the updated outlook for 2026. As we look ahead, our thesis will remain consistent with management focused on creating sustainable long-term value for our shareholders through our disciplined operating model, consistent profitable growth and peer-leading capital generation. As you can see from our financial results, we continue to build significant shareholder value and optionality with a durable top-tier financial earnings profile, excellent capital generation and a premier community banking franchise located in some of the best markets in the Midwest. We're confident in what we believe will be a positive outlook for our shareholders in 2026, and we look forward to sharing our second quarter results in July. At this time, I'd like to turn the presentation back over to our moderator to open up the line for questions for the management team. Thank you. Operator: [Operator Instructions] And our first question for today will come from Brendan Nosal with the Hovde Group. Brendan Nosal: Maybe just starting off here on kind of deposit growth and the margin. Obviously, exceptional deposit growth this quarter, but there's a bit of a drag on the net interest margin just given that elevated cash position. As you look towards loan pipelines, how quickly do you think you can deploy that excess cash and then tie that into how you see the margin trending in the near term? John Stewart: Having extra cash from good strong deposit growth in the quarter is not a bad thing, didn't impact net interest income, but had a modest impact on the net interest margin, as you noted. Looking forward, in the second quarter, we would anticipate being a modest net user of cash, so possibly see loan growth slightly exceed deposit growth for the second quarter. But as you look over the balance of the year, as the guidance would infer cash was 3-ish percent of earning assets in the first quarter. If it's between 2% and 3% over the balance of the year, that's within the realm of our expectations. So not really worried about having to deploy it quickly here. We'll continue with our strategic objectives on the liability side of the balance sheet, most notably. Brendan Nosal: Okay. All right. Maybe one more for me, just kind of at a broader top level, relatively nice in-line quarter from a PPNR perspective. Reiterated the guide for 2026 kind of up and down the expectations set, but the environment does continue to evolve here. So I'm curious if there are any areas in the outlook where you feel incrementally better or worse versus 3 months ago? Or is it as simple as progress according to plan? Thomas Prame: Thanks for the call. This is Thomas. Appreciate the question. No, I go with your second part of your response there about as expected, the outlook looks very similar, very strong first quarter and look forward to the next subsequent quarters. Operator: The next question will come from Brandon Rud with Stephens. Brandon Rud: Maybe the first question to kind of continue on the deposit growth topic. Are you seeing these client wins coming from M&A disruption in your markets? Or is this coming from more similar sized peers? Thomas Prame: And thanks for the question. For us, this deposit strategy started last year around how we organize weekly, daily as a team and just the expectations we're putting out across all positions, client-facing positions about growing both sides of the balance sheet. And so it's not a strategy targeted at one specific institution and/or geography area. I'd say it's an elevated lift across the entire portfolio. As we talked about in some of our comments, the growth we saw was both in consumer and commercial, equally distributed and also is distributed across both sides of the franchise in Indiana and Michigan. So for us, we really see this more of just a true step-up in our organic efforts and really not a specific target of a disruption in the marketplace and/or a specific institution. Brandon Rud: Got it. Okay. And then maybe on the loan growth side, how much did payoff activity affect the commercial balances last quarter? There's a -- growth slowed a little bit. I'm just curious, I think for the full year, correct me if I'm wrong, but I think the mid-single-digit guide kind of implies maybe a bit above that for commercial loan growth. So I'm just curious if 1Q is maybe outsized payoffs. Lynn Kerber: This is Lynn, and thank you for your question. Payoff activity actually was very consistent with our long-term averages. I would attribute it your question really more to just a little bit of seasonality in the first quarter, also being selective in where we're lending. So I don't really see payoffs as contributing to that in the first quarter, really just kind of looking at seasonality as the organic run rate. Operator: The next question will come from Damon DelMonte with KBW. Pardon me. It seems that Mr. DelMonte is back in the queue. We will move on to our next question with Mr. Nathan Race with Piper Sandler. Nathan Race: Thomas, I was wondering or maybe, Lynn, if you could update us just on the equipment leasing team build-out, what you're seeing from a production standpoint. And I believe in the past, you've talked about the leasing build-out could be a benefit to fee income going forward. So we're just curious if you could touch on that unit in particular. Lynn Kerber: Sure. When we first launched the Equipment Finance division, our business plan had certain assumptions to it. And we're in effectively year 2 of that plan, and the team has been running volume-wise, income-wise, a little bit between our year 2 and year 3 of the plan. So it's been going really well. The team has been built out. We have capacity there. So it's going as expected. Nathan Race: Okay. Great. And then maybe for Thomas or John, just going back to the earlier question. When you think about the outlook and the guidance that you laid out, I mean, as you look at the macro landscape, and I appreciate the margin is pretty neutral to rate changes along the curve, but we just kind of think about what would it take to drive upside to that outlook? Would it just be greater certainty from a macro perspective, some additional commercial hires? Or just kind of any thoughts on kind of what could be some sources to drive some outperformance to those expectations? Thomas Prame: I think it would be right down the line of what you just spoke to. As we talked about before, a bit of our governance around our balance sheet around deposit growth and core deposit growth. We have a very strong lending team that also has shown some incredible discipline, not just on credit, but also on spreads. So accelerating our deposits and keeping that pace would give us some capacity to continue to grow the balance sheet. From a perspective of talent, let's see -- I think we'd like to see some more talent adds in some of our key markets in Grand Rapids, Lansing, Detroit down in Indianapolis, which could give us some accelerated growth. But overall, I think we have a great franchise to drive 2026 and any type of additional adds just being added to that. Nathan Race: Okay. Got it. That's helpful. And just one last one on capital management priorities going forward. To the earlier point, you guys are building capital at really strong clips and absent a buyback or an increase in dividend or some acquisitions, it seems like you guys are going to be operating with some significant excess capital levels. So we're just curious to maybe hear some updated thoughts on how you're thinking about managing that excess capital inflow just to kind of optimize the return on tangible as well. Thomas Prame: I appreciate the question. And also thanks for the acknowledgment around the capital generation of the new profile of the balance sheet. It's exactly what we wanted to do for our shareholder value proposition heading in 2026 and beyond. As we have discussed before, our positive level of capital generation really does give optionality for our shareholder value proposition and whether that's going to be deploying it in accretive profitability, expanding our existing business model, buyback of shares or reinvesting some of the expanding some of our teams. These are all tools that are in our toolkit right now as we look forward into '26. As you mentioned, we are very comfortable right now with our current capital levels and also the additional growth in capital. It's really not going to burn a hole in our pocket. We'll be continuing very disciplined in the approach on that and making sure we make sound decisions going forward around shareholder value. But again, very pleased with what the balance sheet is producing and also the outlook for our levels going forward. Operator: The next question will come from Damon DelMonte with KBW. Damon Del Monte: Hopefully, you can hear me this time. Just had a question about the commercial loan outlook. Thomas, could you just kind of -- or maybe, Lynn, just give us a little bit of color as to what areas of the footprint and segments are driving the optimism? Lynn Kerber: As you can see from our historical performance, we've been pretty balanced in our overall portfolio mix and our originations. I don't anticipate that to change. As I noted in my comments, we are looking to add some additional C&I and just diversify the overall portfolio, and we've been seeing the results of that over the last several quarters. So I don't expect our business model to change substantially. We're just balancing the right mix in the portfolio, pricing discipline and credit quality, of course. So no substantial changes. As far as the outlook, I think it remains really unchanged at this point. We had communicated single-digit loan growth or mid-single-digit loan growth for the year. I think we're on track for that. So we're just really sticking to our knitting at this point in time. Damon Del Monte: Great. And then kind of with regards to market disruption, particularly in Michigan, are you seeing any opportunities to maybe add lending teams or target any potential additional hires? Lynn Kerber: We added to our team substantially over the last few years, and we feel like we have capacity with our existing team, very talented group of bankers, a lot of experience. So I feel good about that. That being said, we always have an eye for talent, and we'll look at that opportunist. Operator: [Operator Instructions] our next question will come from Brian Martin with Brean Capital. Brian Martin: I wanted to just see if you could talk about just the -- it sounds like the pickup on the roll-off of the securities is maybe 10 basis points at this point. Can you talk about where the pickup is on the loan portfolio? And then just in particular, what yields you're getting on the new commercial product? And then also just in terms of growth, whether it be Lynn or somebody else, just obviously, the residential and consumer were down this quarter. I guess, can you talk about where is the appetite on the consumer and residential side? And just remind us what your growth outlook is for those components over the balance of the year? John Stewart: Brian, it's John. I'll take the first part of that question and then pass it off to my teammates here on the loan growth discussion there. So yes, we had some comments in the prepared remarks around the roll-on, roll-off dynamics in the loan portfolio. So new production coupon rate production in the quarter was just above 6.6%. The roll-off was just under 6% as you kind of roll that forward for the balance of the year, about $150 million a quarter in amortization and payoff activity, absent any prepayment activity. That's coming off at about 6.1%. So there is still some favorability between new production yields and what is coming off the balance sheet on the loan side. be true, maybe to a lesser extent, as you noted, on the securities portfolio. So as we look forward there for the balance of the year, it's a pretty consistent profile from what we saw in the first quarter in terms of anticipated cash flows. And then if the environment were to look like it does, plus or minus today, we would still be kind of in line to roll-off yields or maybe slightly favorable. I wouldn't anticipate there being a lot of changes there. I'll pass the call to Thomas or Lynn on the loan side. Lynn Kerber: I know in the past, there's been some questions about our maturities. As far as 2026, we've got about $380 million in our commercial portfolio that's going to roll off. It's about 12%. Those have a weighted average rate of about 6% right now. And then '27, it's about $318 million, about 10% of the portfolio that has a weighted average rate of just under 6%. So with origination rates on average in 7 plus, we've got 100 to 150 basis point pickup opportunity based on the current rate environment. Brian Martin: Got you. That's helpful. And then just in terms of the appetite on the consumer side and the residential, given they were down this quarter and with kind of a commentary about rates not being appropriate. Thomas Prame: Yes. Thank you for the question. We still have appetite for both those products. We feel it's core in our overall community banking model. There is just some episodic pricing that happened at the end of 2025 and early 2026, specifically with the 10-year dipping down near 4% in our marketplace. There is some pricing sub-6% on some longer duration fixed assets that we elected not to play and a small refinance buying there. Again, we don't see this as a long-term issue. We've already seen in April, the overall loan portfolio is performing extremely well on its growth aspects, aligning with John's earlier comments for the full year. So we believe the consumer side was more of just an episodic piece on the mortgage. We don't expect mortgage consumer to have a hockey stick growth this year to be relatively flat, maybe mildly up, mildly down, but again, relatively consistent overall performance. Brian Martin: Got you. Okay. And just to be clear, I think John said maybe a 660 was kind of -- I thought that was new production yield and from Lynn, it sounded though it was 7. Is that just commercial for Lynn and maybe 660 for the aggregate loan book? Is that what you... Lynn Kerber: Yes. John was looking at a blend, and I was looking at specific coupon rates for the first quarter. Yes. Brian Martin: Got you. Okay. I want to make sure that. And then just last one for me was just on the capital priorities. Can you talk about -- I think when you -- through the balance sheet restructuring, I think you talked about maybe waiting a couple of quarters, proving yourself out. It seems like that's kind of -- that's working well here. Just in terms of the opportunities on the M&A side, can you remind us, is M&A something you guys are considering at this point? Or is it still a ways off? And then just remind us of what your parameters are on potential M&A in terms of size or pricing or just anything that you can offer there, what the intent would be? Thomas Prame: I appreciate the question. As we talked about earlier, for us with our capital deployment, it's all tools in the toolbox for us, whether that's M&A, whether that's doing buybacks or perhaps even expanding and up to also including just lending capital continue to grow. When you look at our capital levels, I wouldn't say we screen higher than peers. I would say we're right in the range. As John mentioned earlier, we have a bit of a derisked balance sheet, which allows us some flexibility on how much capital we need to hold. But overall, we're just -- we're very pleased with our capital generation. We do not have a specific plan right now of going out and saying that we're going out the M&A environment. Again, we'll continue to look at all options going forward for our shareholders and evaluate them with a long-term view to make sure that we're making right decisions and a very consistent and prudent decisions on capital deployment. Brian Martin: Okay. And then in the payback period, I guess, in terms of where it needs to be on an M&A deal or even on share repurchases, I guess, is that kind of sub 3 years? Is that kind of what you're thinking about in terms of where that payback is? John Stewart: Brian, I think the market has made their own determination as to kind of where payback periods need to be, and if it's plus or minus 3 years. I wouldn't say we feel terribly differently about that. If you're willing to accept that on an acquisition, which comes with a certain level of risk, execution risk, integration risk and so on and so forth. I think it would probably be our view that we would be willing to accept something longer than that for a risk-free transaction like stock repurchases, but we don't have any specific targets out there for that matter. Operator: This will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Thomas Prame for any closing remarks. Please go ahead. Thomas Prame: Again, thank you for joining us today on our earnings call. We appreciate your time and your interest in Horizon. And also, we look forward to sharing our second quarter results in July. Thank you very much, and hope you have a fantastic week. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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 Univest Financial Corporation First Quarter 2026 Earnings Call [Operator Instructions] I will now turn the call over to Jeff Schweitzer, Chairman, President and CEO of Univest Financial Corporation. Please go ahead. Jeff Schweitzer: Thank you, Rebecca, and good morning, and thank you to all of our listeners for joining us. Joining me on the call this morning is Mike Keim, our Chief Operating Officer and President of Univest Bank and Trust; and Brian Richardson, our Chief Financial Officer. Before we begin, I would like to remind everyone of the forward-looking statements disclaimer. Please be advised that during the course of this conference call, management may make forward-looking statements that express management's intentions, beliefs or expectations within the meaning of the federal securities laws. Univest's actual results may differ materially from those contemplated by these forward-looking statements. I will refer you to the forward-looking cautionary statements in our earnings release and in our SEC filings. Hopefully, everyone had a chance to review our earnings release from yesterday. If not, it can be found on our website at univest.net under the Investor Relations tab. We had a strong start to the year as we reported net income for the first quarter of $27.1 million or $0.96 per share, which was a 24.7% increase compared to earnings per share in Q1 of 2025. Results were solid across our lines of business, resulting in our ROAA improving to 1.33% for the quarter. Additionally, we continue to execute on our initiatives to lower our loan-to-deposit ratio, which on average was 280 basis points lower than Q1 of 2025 and our efficiency ratio, which declined 190 basis points from Q1 of 2025, showing improved operating leverage as we continue to see results from our investments in technology over the past few years. Our strong results for the quarter also resulted in our rewarding our shareholders by increasing our quarterly dividend 4.5% to $0.23 per share and buying back 351,138 shares of our stock during the quarter. Before I pass it over to Brian, I would like to thank the entire Univest family for the great work they do every day and for their continued efforts serving our customers, communities and each other. I'll now turn it over to Brian for further discussion on our results. Brian Richardson: Thank you, Jeff, and thank you to everyone for joining us this morning. I would like to start by touching on 4 items from the earnings release. First, we saw a solid NIM expansion during the quarter with reported NIM increasing 23 basis points to 3.33%. Additionally, core NIM, which excludes excess liquidity of 3.44% increased 7 basis points compared to the fourth quarter. Second, during the quarter, credit quality remained strong, and we recorded a provision for credit losses of $1.3 million. At March 31, nonperforming loans and leases represented approximately 0.25% of total loans, and our allowance for credit losses remained steady at 1.28% of loans held for investments. Net charge-offs for the quarter totaled $1.3 million or 7 basis points annualized. Third, noninterest income increased $1.7 million or 7.5% compared to the first quarter of 2025. When excluding BOLI death benefits, noninterest income increased $2.3 million or 11% compared to the first quarter of 2025. This growth was driven by continued strength in investment advisory, insurance and servicing-related fee income as well as increased risk participation and swap-related fee income. Mortgage banking revenue increased modestly from the prior period, reflecting higher saleable volume during the quarter. Fourth, noninterest expense increased $3.3 million or 6.8% compared to the first quarter of 2025. This included $427,000 of restructuring charges and an increase of $753,000 or 48.8% in medical claims expense. The corporation maintains a self-funded or self-insured medical plan and is responsible for claim costs up to the stop-loss limit. This results in expense volatility based on the timing and magnitude of claims. Excluding the restructuring charges and increased medical costs, expenses increased $2.2 million or 4.4% compared to the first quarter of 2025, which is in line with the guidance that I had provided on January's call. Turning briefly to our outlook for the remainder of 2026. Based on the first quarter performance and current assumptions, we are maintaining our outlook for loan growth of approximately 2% to 3%, provisioning of $11 million to $13 million, noninterest expense growth of approximately 6% to 8%, excluding BOLI debt benefits and noninterest expense growth of 3% to 5%. We are updating our full year net interest income growth outlook to the range of 5% to 7%, reflecting the strength of the first quarter results continued with margin momentum. Our effective tax rate is expected to remain in the 20% to 21% range. That concludes my prepared remarks. Rebecca, would you please begin the question-and-answer session? Operator: [Operator Instructions] Your first question comes from the line of Jacob Morton with Stephens. Jacob Morton: This is Jacob Morton on for Matt Breese. First, I want to start out with deposit cost reductions from this quarter. I'm curious about the spot rate at the end of the quarter. And can you also talk about how much more room you see to lower deposit costs? Brian Richardson: So we're starting to get to a little bit of a point of equilibrium. Don't expect there to be too much based on the stable interest rate environment, don't expect there to be too much movement in the cost of funds in the near term. If we look at spot overall, the book, we were down 10 basis points on a spot basis compared to 12/31 to 3/31. We do have inherently churning of CDs that are coming off tend to put replacement dollars on at a little bit lower cost. But as we're looking to grow deposits and decrease our loan-to-deposit ratio, that inherently puts a little bit of pressure on cost of funds. So that's why we don't see potentially more upside, but looking for relative stability there in the near term. Jacob Morton: Got it. I appreciate the color there. And moving on, so cash balances came down quite a bit this quarter. Do you feel liquidity is where you want it or more to deploy? And if so, how do you intend to do so over time? And what is the time frame for that deployment? Brian Richardson: Yes. So the decrease we saw in cash and excess liquidity during the quarter was consistent with what we normally see from a seasonality perspective with the runoff of public funds and then you inherently have the deployment into loans we'd expect that runoff of public fund dollars to continue at a similar rate here into the second quarter. And we normally hit the trough at the end of the second quarter based on the tax collection cycles in Pennsylvania. And then we would look for that to continue to build. Again, that's just the normal seasonality of public funds outside of any of our deposit initiatives and other things we're looking to do to grow core deposits. Jacob Morton: Got it. Great. And last one for me. Can you talk about the loan pipeline, expectations for growth over the next few quarters and competitive conditions? And then last, what are incremental yields? Mike Keim: So it's Mike Keim. In terms of pipeline, pipeline is solid for the second quarter. And the biggest thing that we're starting to see is somewhat of a normalization of our prepayment activity. That's actually what saw some of our commercial growth. We actually did a lower number of commitments in the first quarter than we did prior year, but still did an additional $23 million worth of net growth on the commercial side. So pipelines are solid. From a competitive perspective, and I would also mention that typically and historically, our quarters, the second quarter and the fourth quarter have been our best quarters from a loan growth perspective. And I don't see anything in the current picture that would change that. From a competitive perspective, it continues -- actually has gotten more competitive, especially on the CRE side. The good news with that from our perspective is we are playing more on the construction side, which margins are still strong there. But on the permit takeout side and obviously, on the strong C&I credits, you are starting to see this get even more competitive than it was. So we're still able to play in the niches that we want to and still see strong pricing with where we're originating and funding loans at. Brian can give you the specifics with regard to pricing. Brian Richardson: Yes. We tend to be in the -- it's really consistent with the fourth quarter, what we saw in the first quarter in that kind of mid-6 range is where we were on new commercial loan rates. Operator: Your next question comes from the line of Emily Lee with KBW. Emily Noelle Lee: This is Emily Lee stepping in for Tim Switzer. Congrats on a great quarter. Yes, no problem. So my first question is, how many Fed rate cuts are baked into your expectations? And if we have a flat rate environment, where do you anticipate the NIM shaking out? And then what would the impact of 125 bps Fed rate cut have on the NIM? Brian Richardson: So when we came into the year in my initial guidance and our initial guidance was based on 2 rate cuts in the year. But as I had indicated at that time, the first couple of rate cuts really is not impactful to our over -- exclusive of short-term timing within any given quarter and just the timing of how things reprice, not overly impactful to our NII or NIM in the near term. So therefore, with the fact that now if there's an expectation of lower or reduced rate cuts, not really expecting that to have an impact on our guidance. So call it, whether there's 2 cuts or no cuts, we're kind of in the same range as the guidance that I provided. Emily Noelle Lee: Great. And then kind of switching to capital. On capital deployment, you continue to be active on the buyback front with about $12 million of repurchases this quarter. So how should we think about the buyback story going forward given your current capital position? And do you kind of anticipate you sticking around the $10 million plus range quarterly? Or would you guys pull back at all? Jeff Schweitzer: Emily, this is Jeff. No, I don't anticipate us pulling back on buybacks. It's a balance between loan growth, timing of loan growth where you might see a slight increase in our ratios compared to what we're targeting. But overall, we don't anticipate pulling back on buybacks in any time in the near future. Brian Richardson: Yes. And this is Brian. Just to elaborate a little bit further. As we have indicated in the past, we really do not -- the metric we most closely monitor is CET1. We do not look for that to materially grow or really grow at all. During the quarter, that didn't -- we came into the year at 11.22%. We finished the first quarter here at 11.32%. We do not look for that to continue, and we actually look to ratchet that back down to that 11.22% or lower range here. So we would be ramping up buybacks accordingly to target that. Emily Noelle Lee: Understood. And then outside of buybacks, you increased the dividend this quarter. Are there any -- are you exploring any other capital priorities? And I guess, has your update for M&A changed at all? Or is it mainly buybacks? Jeff Schweitzer: So right now, I mean, we want to -- we've always wanted to keep some dry powder out there in case there are opportunities on the M&A front, whether it be in bank M&A, wealth M&A, insurance M&A. Right now, the best use of our capital appears to be on buying back shares. Obviously, there's no real execution risk there. Our earn-back period is still pretty short. So we're going to continue to be somewhat aggressive on the buyback front, but be opportunistic if something of interest were out there. We are open to looking at M&A opportunities that may arise more so than we probably were the last few years. given that we've done a lot of things internally that we've gotten projects behind us that we think we're probably in a lot better place to be able to look at M&A opportunities. So we're looking at them. We -- we'd be open to an opportunistic strategic opportunity. But in the meantime, we will continue to be heavier in the buyback arena. Emily Noelle Lee: Definitely makes sense. And then I guess just on the credit front, credit remained stable. I guess, is there anything you've been kind of looking out for from borrowers that you're kind of keeping an eye on? Jeff Schweitzer: First, there's no trends that we're seeing in our portfolio that are concerning. And I think that what we would look at is similar to what everybody else is looking at in terms of what is the impact of higher fuel costs and energy costs. And then we have a large ag book. So what is the impact of shortfalls and then obviously, increases in fertilizer costs. At the present time, those customers that are in either the shipping/distribution business are putting surcharges in. So they're not impacted it and are in discussion with our kind of ag clients, most of them have bought and gotten their fertilizer in advance. So it will be a next year consideration and one we'll have to evaluate in terms of how long the conflict remains and what the impact is on fertilizer prices as we move forward here. Emily Noelle Lee: Got it. And then just lastly for me. Can you just remind us what portion of the loan book is floating rate? Brian Richardson: About 1/3 of the book is purely floating, about 30% is fixed, and then we have the remainder, which is adjustable with a little bit longer reset dates. Operator: [Operator Instructions] And at this time, there are no -- my apologies. And at this time, we have a question from the line of Chris Reynolds with Neuberger Berman. Chris Reynolds: Yes, that was just a terrific quarter. My questions have been answered, but I just wanted to provide an observation that Neuberger became investors in your company back in 2009 when you raised cash, selling shares around $17. And Jeff, you and your management team have just done a superb job. Taking a look at where your earnings are right now, you may be approximating a $4 per share normalized earnings rate. And in that '08, '09 period, you were in the $1.60, $1.75 range. So there's been a tremendous increase in the earnings production and your market cap during that period has gone from about $270 million to $950 million. And so there's been a tremendous performance. And I think your stock does look undervalued, and I support the comments that you made about stock repurchase because if you look back during that period that I just referenced, your stock has topped out around $30 a share, 4x despite this increase in the earnings power of the company. So my thought is it looks like your stock is broken out and likely continue to move higher and the stock repurchase program really makes a lot of sense. So I just wanted to provide those comments and congratulate you on the performance. Jeff Schweitzer: Thanks, Chris. We really appreciate it. It's good to hear your voice. I know it's been a little bit of a while, but I appreciate you as a shareholder and all of our shareholders. We're excited about the first quarter. We're excited about the year. Obviously, there's a lot of uncertainty in the world, but I think we're in a good spot, and we're looking forward to having a really successful 2026. Operator: I will now turn the call back over to Jeff Schweitzer for closing remarks. Jeff Schweitzer: Thank you, Rebecca, and thank you, everyone, for joining us today. We have our shareholders' meeting this afternoon at 11:30 later this morning. So if anybody participates in that, we look forward to talking to you again at that point. Otherwise, just really appreciate everybody's support. And as I said a few seconds ago, we're really excited about the first quarter results and the year ahead of us and look forward to continue to perform at a high level. Have a great day. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Thank you for standing by. At this time, I would like to welcome everyone to the West Bancorporation, Inc. First Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Jane Funk, Chief Financial Officer. Please go ahead. Jane Funk: Thank you. Good afternoon, everyone. I'm Jane Funk, the CFO of West Bancorporation, Inc. and I'd like to welcome the participants on our call today, and thank you for joining us. With me today are Dave Nelson, our CEO; Harlee Olafson, Chief Risk Officer; Brad Winterbottom, Bank President; and Brad Peters, our Minnesota Group President. I'll start out by reading our fair disclosure statement. During today's conference call, we may make projections or other forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding future events or the future financial performance of the company. We caution that such statements are predictions and that actual results may differ materially. Please see the forward-looking statement disclosure in our 2026 first quarter earnings release for more information about risks and uncertainties, which may affect us. The information we provide today is accurate as of March 31, 2026, and we undertake no duty to update the information. And with that, I'll turn it over to Dave Nelson. David Nelson: Thank you, Jane. Welcome, everyone, and thank you for joining us this afternoon. I have a few general comments and then others will provide additional detail. We had a very strong quarter and look forward to continued earnings growth. As the COVID era 5-year duration assets reprice, our margin is expected to continue to improve. Our loan balances have been flat, but we have had growth in our deposits. When loan demand increases, we will definitely find it. We have several attractive credit opportunities in our pipeline. Once again, at quarter end, March 31 of this year, our credit quality remains pristine, and we did not have a single loan past due 30 days. West Bank continues to make investments in technology to better serve our customers and to create efficiencies in our operations. Our Board of Directors declared a $0.25 quarterly dividend with a May 20 payment date to shareholders of record as of May 6. Those are the extent of my prepared remarks, and I would now turn the call over to our Chief Risk Officer, Mr. Harlee Olafson. Harlee Olafson: Thank you, Dave. For the quarter end March 31, '26, credit quality is very strong. As Dave mentioned, we had no past dues over 30 days, no OREO, no nonaccruals, no substandard loans. Our watch list is down 20% from year-end and is at a very low 1.4% of total loans. 90% of our watch list is related to the trucking industry. The trucking industry continues to suffer through low freight, excess capacity and high price of diesel. The industry has a history of going through cyclical times. Our portfolio is well secured, and we believe the businesses in our portfolio are making good decisions to remain viable. We expect resolution of a large credit within that group before the end of the second quarter. Our commercial real estate portfolio continues to perform very well. We are diversified in both the type of commercial real estate we have and by location. Our stress test continues to show lower loan to values and good strong cash flow on a majority of the credit. Our commitment to strong underwriting is the foundation of our credit quality. Customer relationships with multiple sources of repayment and liquidity are sought after. Our credit pipeline consists of numerous strong relationships and the total pipeline volume has increased substantially in the last 2 months. Our portfolio is strong because we have chosen good customers that have the financial characteristics that align with our underwriting. After all prepared remarks, I'm available for questions. I now turn it over to Brad Winterbottom, our Bank President. Brad Winterbottom: Thanks, Harlee. For the quarter ended, our loan portfolio was flat compared to the year-end 12/31/25. At the end of the first quarter, we were at $3 billion in outstandings. We continue to experience notable loan payoffs as a result of secondary market refinancings and asset sales. The change in loan mix primarily due to reclassifications resulting from completed construction projects moving to permanent financing and commercial loan restructuring adding real estate as collateral. As we enter the second quarter, this trend will continue. However, we continue to backfill these payoffs with new opportunities at better interest rates. And we are not losing customers. Rather, they are restructuring their asset portfolios with longer-term interest rates through the secondary markets. We still believe the new activity is mild due to economic and political issues we face, but we are still finding new and good opportunities due to our calling activities. Deposit gathering sales efforts continue to be an emphasis in the markets we serve, a very competitive market today. We remain selective in obtaining new loan opportunities, looking for relationships versus transactional or participation opportunities. We remain confident in our ability to create and maintain positive relationships with our customers and prospects that we are pursuing in this highly competitive markets we serve. That ends my comments. I would now like to turn it over to Brad Peters. David Nelson: Thanks, Brad. Good afternoon, everyone. I'm going to provide you a brief update on our Minnesota banks. Our expansion into Minnesota began with our full-service bank in Rochester opening in 2016. We added the St. Cloud, Mankato and Owatonna markets early in 2019 with our final building being completed last year in Owatonna. Although it has been over 7 years since our expansion, we are still relatively new to the marketplace and continue to introduce West Bank to our communities. Our relationship-based model with a business banking focus has allowed us to efficiently grow while maintaining a small number of employees. We also have strategically invested in unique facilities, offering our teams the opportunity to entertain and engage in quality conversations with our clients and prospects. The disruption in our markets due to the recent M&A activity has provided ample targets to pursue. Our disciplined calling approach has driven results. Our business banking focus and our seasoned group of bankers set us apart from the competition. We are also capturing the personal business of our business owners and key executives, along with high-value retail deposit opportunities in our communities. We expect to see continued core deposit and loan growth and are well positioned to grow our business banking market share as the economy improves. Those are the end of my comments. I will now turn the call back over to Jane. Jane Funk: Thanks, Brad. Just a couple of comments about the financial performance, and then we'll open it up for questions. Our net income for the quarter was $10.6 million compared to $7.8 million in the first quarter of 2025, representing a 35% increase in net income. Net interest income continues to improve through improvement in our net interest margin. Net interest income increased $3.5 million or 17% compared to first quarter of last year. Our margin has increased 12 basis points compared to the previous quarter and 31 basis points compared to the first quarter of last year. Cost of deposits has declined 14 basis points compared to the previous quarter and 40 basis points compared to the first quarter of last year. As described earlier, credit quality remains pristine, and there was no provision for credit losses recorded this quarter. Noninterest expenses remained well controlled with a 3% increase from first quarter of last year and no unusual items to identify in this quarter. Our core deposit balances were down a little bit this quarter compared to year-end, primarily as a result of just normal fluctuations that we experienced through our customers' normal cash flow fluctuations. So a little bit of seasonality there. So that's the primary driver of the deposit fluctuations. And we've talked about the loan portfolio already. So those are the completion of our comments, and we would open it up for questions. Operator: [Operator Instructions] And your first question comes from the line of Brendan Nosal with Hovde Group. Brendan Nosal: Just starting off here on funding, specifically that municipal depositor from last year that put $243 million of bond proceeds on your balance sheet. Just kind of curious where those outstanding balances sit today. Jane Funk: Yes. There's probably 75% remaining, I think, in our deposits on the balance sheet, somewhere around 75% of that. So still a fair amount that's still sitting there. Brendan Nosal: Okay. Okay. That's helpful. Maybe pivoting to loan growth. I appreciate all the comments that you all made in the prepared remarks. Just kind of curious, what do you think takes it to get loan demand in your markets higher and then translate that into your own near-term loan growth expectations? Brad Winterbottom: Well, I would say that we've had a very active new business opportunity, but we've had a lot of customers, and it's going to continue into the second quarter that we have some loan payoffs, and they are coming because they're moving them to the secondary market. We still have in those customers. So we're backfilling those, and we have a very nice -- we have a very large prospect list that we're chasing with opportunities. And so that's the balance. It's pretty hard to tell you when we think that that's going to stop and we're going to grow the portfolio. But we've been adding new assets to our loan portfolio. Harlee Olafson: I think just a little bit of additional color to that is that when rates were relatively high, like over 1% higher than they are right now, new construction projects for different types of property came close to a standstill. So what has happened during that period of time is that new construction projects haven't ramped up and provided new dollars on to the loan balances, while other projects got completed and then stabilized and then the investor borrower is able to take it to nonrecourse financing or sell. So there is a little bit of a gap area there that I think is starting to see some signs of borrowers and developers starting to fill in that gap again with new projects. Brendan Nosal: Okay. All right. I appreciate the color on that topic. Maybe sticking with the theme of the balance sheet. Just on capital ratio saw a nice bump this quarter as the balance sheet contracted a little bit. Just kind of curious for your updated thoughts on how you think about capital needs versus deployment opportunities over the course of the year. Jane Funk: Yes. I think capital is kind of something that you're always talking about and always planning for. I think our earnings improvement in 2025 and the continuation of that earnings improvement will help us with our capital as we have a little bit of lag in loan growth. So we're just trying to manage what our expectations are for loan growth with our income and our retention of earnings. So nothing different than the way you would manage it over a normal course of business. Brad Winterbottom: And I'd just add, when business picks up, our bankers are out busy. They are out busy talking to folks. And so when the new opportunities come, we're going to be in the front row. Brendan Nosal: Perfect. I'm going to try and sneak one more in here before I step back. Just turning to the net interest margin, a lot of nice margin expansion this quarter. Can you just update us on the outlook for the NIM if the Fed is on hold here for the rest of the year? Jane Funk: Yes. If the Fed rates don't change, we've still got a pretty fair amount of cash flow coming off the fixed rate portfolio that will mature in 2026 and 2027 that are at rates that are still in the 4s, some in the 3s. So we've got a fair amount of opportunity with asset repricing. We'll have about -- I think it's projected about $38 million rolling off of the investment portfolio over the next 12 months, and that's 2% or sub-2% rate that that's rolling off of. So we believe if rates are steady and deposit and funding costs are steady, we've got plenty of opportunity on the asset side in repricing to improve margin. Operator: [Operator Instructions] And your next question comes from the line of Nathan Race with Piper Sandler. Nathan Race: Just going back to the margin discussion, Jane, I wonder if you could maybe help just kind of triangulate kind of where maybe the margin could shake out over the next few quarters, assuming the Fed on pause and just based on that repricing -- I'm sorry, the fixed rate loan repricing that you mentioned. I mean, are we talking something in like the 270 range? Or do you think that's too aggressive at this point? Jane Funk: Well, I would say that over -- over the next 12 months, we've probably got between loans and investments that will be repricing, there's probably $250 million, somewhere around there that will be repricing. And again, those are at a blended rate, maybe below 4%. So that's where we're getting our confidence in the net interest margin improving, but I have -- we don't have a specific number or target. Nathan Race: Got you. Okay. And then just going back to some of the balance sheet dynamics. I appreciate the cash flow coming off the bond book in terms of kind of what the yield pickup could be there. But just curious, as you're thinking about kind of hopefully some stronger loan growth coming through later this year as payoffs hopefully moderate. Is the expectation that you'll have some excess liquidity that you can fund that loan growth? Or do you think kind of deposit growth can keep up with kind of the pace of loan growth that you will -- that will hopefully develop as 2026 progresses? Jane Funk: Yes. We'll certainly allocate investment cash flows to the loan portfolio as needed. We haven't been purchasing securities the last few years. And so a lot of the liquidity that we're building as the short-term liquidity is really for that anticipation of loan activity. Nathan Race: Got you. Okay. Great. And then one last one. Expenses were really well managed in the quarter as they typically are with you guys. Just curious if you're still kind of budgeting for kind of similar expense growth than what we saw last year in that kind of 4% to 5% range or if there's any initiatives or any kind of de novo plans or opportunities to add some additional commercial bankers, particularly in Minnesota in light of the M&A-related disruption there that could cause some expenses to be front-loaded as you may be investing for growth? Jane Funk: Our expectation at this time is expense management will be kind of ordinary course of business, and we're not expecting any anomalies or additional items. David Nelson: Yes. Nate, I would always -- I mean, we're always on the lookout for opportunities in the marketplace. And we know the individuals that we would like to potentially bring on board and those conversations are ongoing, but the timing of that is not, I would say, has not been established. Nathan Race: Got you. And Brad, if I could just sneak one more in for you. Just curious as you're on the ground there in those markets where there's that disruption going on, I mean, any sense or how long of a tail some of these opportunities could present in terms of bringing over clients or potentially some relationship managers? Is this like a 1-year process? Or do you think it's going to unfold over the next maybe 2 or 3 years? David Nelson: I think it's several years. I mean just looking at sales cycles, all of this takes time. I think our focus now is to work to get in second place and position ourselves to win the business, and that's kind of what we've been doing all along. So I see that continuing. And I think the ramp-up, I mean, it's over a course of years. Operator: There are no further questions at this time. I will now turn the call back over to Jane Funk for closing remarks. Jane Funk: All right. Thank you. We appreciate everyone's interest in our company today. Thank you for joining us, and have a good day. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good morning, and welcome to the KKR Real Estate Finance Trust, Inc. First Quarter 2026 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jack Switala. Please go ahead. Jack Switala: Great. Thanks, operator, and welcome to the KKR Real Estate Finance Trust earnings call for the first quarter of 2026. As the operator mentioned, this is Jack Switala. This morning, I'm joined on the call by our CEO, Matt Salem; our President and COO, Patrick Mattson; and our CFO, Kendra Decious. I'd like to remind everyone that we will refer to certain non-GAAP financial measures on the call, which are reconciled to GAAP figures in our earnings release and in the supplementary presentation, both of which are available on the Investor Relations portion of our website. This call will also contain certain forward-looking statements, which do not guarantee future events or performance. Please refer to our most recently filed 10-Q for cautionary factors related to these statements. Before I turn the call over to Matt, I will go through our results. For the first quarter of 2026, we reported a GAAP net loss of $62 million or negative $0.96 per share. Book value as of March 31, 2026, is $11.87 per share. We reported a distributable loss of $4 million or negative $0.06 per share. Distributable earnings before realized losses was $13 million or $0.20 per share. Finally, we paid a $0.25 cash dividend in April with respect to the first quarter. With that, I'd now like to turn the call over to Matt. Matthew Salem: Thanks, Jack. Good morning, everyone, and thank you for joining us. As we outlined last quarter, 2026 represents a transition year for the company. With the goal of narrowing the gap between share price and book value per share, our focus is on 2 key priorities: first, executing an aggressive resolution strategy across our watch list assets and certain legacy office exposures; and second, positioning a portion of our REO portfolio for liquidity. We have significant liquidity sitting at $653 million today and extensive capabilities across KKR to execute both our asset management and REO strategies. Today, I want to provide additional detail on our progress against those objectives and what you should expect over the course of the year. This quarter, book value declined by 9% as we position our watch list loans for resolution. Our action plan is designed to reposition the portfolio to optimize medium- and long-term performance. However, as we execute, we may choose to incur book value declines as we seek liquidity on legacy assets to create a higher quality portfolio. As we complete this transition, we see a clear path to redeploy capital in newer vintage, higher quality investments, which we believe will support a return to book value per share stability and over time, drive earnings and book value accretion. Overall, our specific goals for 2026, as outlined on Page 8 of the supplemental, are to reduce our watch list and legacy office exposure, rotate the portfolio into newer vintage, higher-quality assets and reduce our REO footprint. With that, I want to walk through our action plan for 2026 in further detail. First, reduce legacy office exposure from 21% to under 10%. We expect over half of this reduction to come from par repayments with the remaining driven by resolution of our watch list loans. We have already begun to action both prongs. Our largest office loan and $225 million loan in Bellevue was refinanced in the first quarter at par with the CMBS single asset, single borrower transaction. And the property securing our largest watch list office loan is currently being marketed for sale. Second, we plan to resolve all of our current watch list loans by year-end by positioning these assets for sale or modification and accelerating their resolution. Third, address our life science exposure. Our goal is to have 100% of this exposure modified. We already have made progress here, having modified 19% and when including our Cambridge asset this quarter, we have modified 30% of our life science exposure. We also took a material increase in reserves for our Seaport loan in anticipation of a potential modification. Finally, we are continuing to originate new investments as we reposition the portfolio. As a result of this activity, loans originated between 2024 and 2026 are expected to represent approximately 50% of the portfolio by year-end. This highlights the significant turnover into newer vintage assets, which we believe will have improved earnings potential. Let me turn to liquidity and capital allocation, which is another priority for us as a management team for 2026. We announced a dividend reduction to $0.10 per share per quarter payable on July 15. This decision is not driven by liquidity constraints. In fact, as we look ahead through the year, we expect to have over $500 million of capital to invest, largely driven by over $2 billion of expected repayments in 2026. Rather, the dividend decision reflects a disciplined approach to capital allocation. At this stage, we see more attractive opportunities, including repurchasing our stock and funding new originations. While we have ample liquidity to pay dividends at the current level, the new dividend level has the added benefit of being aligned with our expectations for distributable earnings per share before realized losses as we work through repositioning our portfolio. While we expect $0.40 per year of dividends to be covered by earnings, excluding losses, quarterly results may vary in the near term with earnings expected to trough in the second half of 2026 into the first half of 2027. Once we get through this period, we expect distributable earnings per share to increase. Regarding capital allocation, given our current trading levels relative to book value, we believe share repurchases represent an attractive opportunity to drive accretion to book value per share while also providing greater strategic flexibility. We were largely inactive with respect to share buybacks this past quarter due to trading restrictions while we were actively evaluating our dividend policy. With that process now complete and our dividend framework established, those constraints have been lifted. On April 14, our Board authorized a new $75 million share repurchase program, providing us with meaningful flexibility to deploy capital. As a management team, together with our Board of Directors, we have not taken this dividend decision lightly. But given where the stock is trading, we believe the dividend cut and meaningful share buybacks are in the best interest of shareholder value creation. With that, I will turn the call over to Patrick. W. Mattson: Thanks, Matt. Good morning, everyone. Let me start with a few changes to the watch list. This quarter, we downgraded our Philadelphia office assets with 2 smaller Texas multifamily loans from risk rated 3 to 4. As previously previewed on last quarter's earnings call, we also downgraded our Boston Life Science asset from risk rated 3 to 5. We upgraded our Cambridge Life Science from risk rated 5 to 3 following the loan restructuring that includes new sponsor equity commitment and a loan paydown. As a result, we recorded CECL provisions of $74 million, bringing our total allowance to $260 million. These actions are part of our broader action plan to proactively reposition the portfolio. Turning next to our REO portfolio. We are actively managing these assets with a clear focus on monetization and value realization. To help frame it, we grouped these assets into near, medium and longer-term monetization buckets. Starting with the near-term bucket, West Hollywood, condos, where units are currently listed and actively being marketed with proceeds returning equity as closings occur. Raleigh, North Carolina, multifamily, where we're completing targeted upgrades to common areas and expect to list the asset for sale by year-end. Philadelphia office, where our business plan is largely complete, the asset is now approximately 85% leased, and we plan to sell the property this year. In the medium-term bucket, we have Mountain View, California office, where our platform, market positioning and patience have driven meaningful value creation. As we announced in March, we signed a long-term full property lease with OpenAI. We expect to bring this asset to market within the next 12 to 16 months as we complete the remaining work and the tenant takes occupancy. Portland redevelopment, where we've executed on our plan and are near final entitlement on over 4 million square feet of mixed-use space and expect to begin our monetization strategy over the course of the year. And finally, in the longer-term bucket, Seattle, life science, where our focus is on leasing and stabilizing the asset, and we expect to hold it longer given current market conditions. Boston Life Science, currently a risk-rated 5 loan, which we expect to transition to REO in the second quarter. This is expected to result in a realized loss of approximately $37 million, though we are adequately reserved as of the first quarter. Similar to Seattle, we plan to stabilize the asset and hold the property until market conditions improve. As we monetize these assets and redeploy the capital into new investments, we estimate the potential to generate more than $0.15 per share of incremental quarterly earnings over time, nearly half of that being driven by our Mountain View REO asset. This reinforces our focus to convert these assets into liquidity and redeploy that capital into higher earning opportunities. Turning to financing and liquidity. At quarter end, we had $653 million of liquidity, including $135 million of cash on hand and $500 million of undrawn capacity on our corporate revolver. Additionally, we had over $500 million of unencumbered assets on the balance sheet. Total financing availability was $7.2 billion, including $2.6 billion of undrawn capacity. Originations totaled $184 million for the first quarter, while repayments were $415 million, with approximately 75% of the repayments driven by legacy office. Looking ahead, in the first 3 weeks of the second quarter, we've already closed or circled over $400 million of new loans. We continue to benefit from our connectivity with KKR Capital Markets and 77% of our financing remains non-mark-to-market, providing stability across market environments. We believe we remain well capitalized and positioned to manage the portfolio. Importantly, we have no final facility maturities until 2027 and no corporate debt due until 2030. Our debt-to-equity ratio was 2.2x, and our total leverage was 4x, consistent with our target range. As we move through this transition year, we believe we are well positioned. Our focus remains on executing our resolution strategy and redeploying capital into high-quality opportunities, including share repurchases. With a clear path to improving and rebuilding earnings power. We believe the actions we're taking today position the company for long-term value creation. With that, we're happy to take your questions. Operator: [Operator Instructions] First question is from Tom Catherwood, BTIG. William Catherwood: Maybe starting with the portfolio target of 50% newer vintage loans by year-end. By our math, that implies something in the neighborhood of $1 billion to $1.2 billion of origination activity over the coming quarters. Are we in the ballpark with that? Matthew Salem: Tom, thanks for the question. It's Matt. I can take that, and thanks for joining the call. That's certainly in the ballpark of what we're looking at. Obviously, certainly it will depend a little bit on the share buyback amount, but that's a good projection for now. William Catherwood: Perfect. Perfect. And actually, you did fair point on the share buyback, and it's kind of the use of liquidity is something we're thinking of with leverage ticking up to kind of the top end of the range in Q1, will those originations and the $75 million allocation for buybacks, will those be tied to REO asset sales? Or are you comfortable using liquidity on your balance sheet and then just kind of back funding that as you sell assets? Matthew Salem: Yes, I can start. It's Matt again. Let me start off a little bit. I think most of that liquidity, as we commented on the prepared remarks, is really coming from just natural loan repayments. So over the course of the year, we think we're going to have $2 billion of repayments. We got about $400 million or so in the first quarter. Second quarter -- and to be clear, it's always a little bit hard to predict these things quarter-to-quarter. But we look at the second quarter right now and from what we can see, it could be close to half of that total repayment for the year could come through the second quarter. So I'd say most of this liquidity that we're looking at, which translates into like $500 million of investable capital, if you will. And then we can talk about the sources to your point, is really going to come from that -- from the just loan repayments and natural velocity within the loan portfolio. William Catherwood: Okay. So you don't need to line up the timing of REO sales in order to achieve that 50% new loan target? Matthew Salem: No. William Catherwood: Got it. Perfect. And then last one for me on the watch list, roughly 6 assets on there when you account for the Boston life science loan in 2Q or that it's going to go REO. You obviously mentioned Minneapolis office is on the market. For the remaining 6, what are your expectations as far as the amount that are repaid versus those you expect to modify or bring on balance sheet? Matthew Salem: Yes. Let me jump in again. Maybe just looking on Page 12 here, the goal is to try to monetize the vast majority of these. I think on the life science piece of it, we mentioned we will be taking title to one of those over the course of time here. But outside of that, I think a lot of this will be some combination of modifications, note sales as well. But I think the goal really is to clear all this up by the end of the year. And things like the multifamily component here, I'm sure we'll get questions on this later, so I could just address it now. These are just coming up on maturity, and these are in the process of getting sold. So sponsors are out selling these assets. We downgraded these just because the sales price is going to be close to the debt, and we may take small losses or not on those loans. We want to make sure we identify those. We don't think that's really indicative of the rest of multifamily. We've always been on these calls saying there can be noise in multifamily, but we don't think there's like material losses in that -- in the loan portfolio on the multifamily side. And this is probably a good example of what we're looking at of like there's going to be a little bit of noise here. We do take small losses as they sell these assets into the market and it trades right around the debt. But some of these will just be sales from sponsors, if you will. Operator: Next question is from Chris Muller, Citizens Capital Markets. Christopher Muller: So I just wanted to start with the dividend and just make sure I heard you guys right. So the new $0.10 dividend is well below the $0.20 ex loss that you guys put up in the quarter. I also heard the comments on both the new buybacks and also near-term pressure as you guys get more aggressive on resolutions. So I guess the question is, do you guys expect earnings ex losses to be around that $0.10 level? Or does that just give you some optionality? I think I just missed that what you guys said in the prepared remarks. Matthew Salem: Yes, it's Matt. Let me jump in. We think earnings are going to trough towards back half of this year into next year. And a lot of that, we start to come out of it as we think about liquidating more of the REO portfolio, especially as you think about Mountain View, where we've obviously signed the lease there and that will be positioned for liquidity over the next, call it, 12 to 18 months. So that's -- when you think about the light at the end of the tunnel, that's a little bit of a timing as if we can build back up earnings. When we mentioned the $0.10 here, part of this is just capital allocation, right? Like look at -- think about where the stock trades today, we've got pretty good uses of capital right now in terms of just share repurchases. So obviously, it ties into some just overall capital allocation discussions. But when we think about it just versus earnings, we expect to cover that on kind of an annualized intermediate basis, but there certainly could be a little bit of noise in certain quarters where we're not fully covering that as we continue to push through and reposition the portfolio. Christopher Muller: Got it. And then I guess on the $42 million CMBS investment, was that a more attractive investment than deploying into bridge loans? Or was it more just a place to park some cash until it can be redeployed? And should we expect to see more of this going forward? Matthew Salem: Yes. So we've been -- that number sounds fine. Let me double check the amount for the quarter. We've been evaluating different options for portfolio diversification, whether that's expanding into Europe and leveraging the platform that KKR has built in that market or just duration as well and just access to like different investing markets like CMBS. So from a relative value perspective, we thought that was a particularly unique opportunity for us. And I think you're right in terms of the $42 million. I just want to double check that. But yes, I mean, we're evaluating everything on a relative value basis. The CMBS is providing a little bit duration. I think in this case, it was a little bit more single asset, single borrower, so solving more of the relative value component of it. Operator: Next question is from Jade Rahmani, KBW. Jade Rahmani: Yes. Have you seen any green shoots in leasing in life science? Matthew Salem: Jade, thank you for joining today. We are. I think it's a little bit market dependent. They're all in a little bit different stages of recovery. I think in South San Francisco, you're seeing 2 things happening. One, you're seeing a revitalization of office, particularly as it relates to AI tenants and growth, which is creating tension in the overall market. And as you well know, some of these assets, including some that we have, can be leased as office. So there's some pretty tight pockets of office there. And then we're also starting to see life science companies turn back on as well. When we think about our other exposure, our larger exposures in Boston, and I'd say there, it's probably a little bit behind what we're seeing in South San Francisco, but we are seeing tenants in the market. Most of the assets that we have there are oriented to big pharma, and there are tenants in the market today like actively engaged trying to lease space, including one of the assets that we have. So we are seeing tenants starting to come back, but it still feels early and -- but at least you're having some sense of recovery starting. Jade Rahmani: And in terms of your REO expectations, from your standpoint today, is it your view that there will be just one additional life science REO? Matthew Salem: That's the current expectation, yes. Jade Rahmani: And then can you discuss some of your approach to credit risk management because I have seen migration from risk-free loans to 5 as maturity approaches. And usually, what we see is a risk 3 to a risk 4 then to a risk 5. So the skipping ahead makes me a little worried about the risk 3 loans in the portfolio. I know it's multifamily and you don't expect material losses there. But just generally speaking, how are you thinking about that? Matthew Salem: Yes. That's a great question. I would say the normal progression for us and obviously, the peers as well is you go 3, 4, 5. And I'd say the vast majority of cases, that's what's happened. And by the way, we do analysis every quarter evaluating, okay, what's happened with our 4 loans. And that's obviously a dynamic number. But up to this point, roughly half have gone to 5 and half have gone to 3, which is I think what a 4 is supposed to be, right? It's not just an indicator that it goes to 5. Obviously, depending on the property type, it may be more heavily weighted to that over time. But in terms of -- I think we've had a couple go from 3 to 5. The only one we had this quarter was really the life science deal, which we flagged last quarter as going to get downgraded depending on what these modification discussions look like. It would be a 4 or 5. We weren't exactly sure at the time, and we had moved over to a 5. So I'd say it's unusual. The multifamily we put into the 4 buckets just because, one, it's not material, we don't think. And two, we're not exactly sure what's going to happen now as these sales processes play out. But I think you're right in the sense that vast majority of time, you're going to have these natural linear progressions. But sometimes there's jump risk around a maturity date or around a modification discussion, and we obviously need to just reflect our best case scenario at the time or best guess at the time. Jade Rahmani: And then on the Minneapolis office, it's a risk 5 loan. So I believe there should be something around 23% loss assumption there, reserve that you currently have. And I think that your slides show that the price per square foot at your basis is $182, but that's before CECL. So if we stress that for a 25% severity assumption, I'm just curious if you think that is where the market is or if based on the sale process, there might be some further loss? W. Mattson: Jade, it's Patrick. I'll take that one. So yes, I think the number you're kind of backing into is a blend, is an average. Obviously, as we've seen in the office segment, some of those loss numbers have been higher than average, right? If you think about what's also in that bucket, we've got multifamily as an example. So it's just a proxy. Clearly, that's an asset that we've been working for some time here, and we think it's appropriately reserved for, but the number that you're quoting is just an average. Operator: [Operator Instructions] Next question is from Gabe Poggi, Raymond James. Gabriel Poggi: I've got a couple of questions. On capital allocation, capital management, as you guys think about the buyback versus making new loans to kind of keep a DE run rate going, how do you manage that relative to leverage, right? If your total capital right now to equity is around 4x and your leverage to common is 5x plus, how much of that buyback? How do you think about leverage relative to that buyback? That's question one. Matthew Salem: It's Matt. Let me start out and try to answer that. I would say we're not changing our leverage targets. I think that's the first thing we're kind of solving for, right? We want to kind of stay in that 3.5 to 4x range. So I think we ended this quarter around 4 at the higher end of our range. If we didn't originate any loans, we could bring that leverage way down because we have so many repayments coming in. So we have a lot of flexibility on that, but that's probably the first thing we're solving for, which is like, okay, let's make sure we stay kind of leverage neutral, if you will. And then we're looking at excess capital beyond that. And then we're trying to think about, okay, what's the appropriate amount of share buybacks first. I would say, just given where the stock price trades, how much should we be buying back. The Board authorized $75 million. you put that in context, that's a lot of firepower, right? We have a lot of. We have $500 million of liquidity. So what are we going to do with it? $75 million we authorized for buybacks. I mean that's roughly 25% of the public float, right? So it's a lot of buyback. So that's probably what we're looking at next. And then we have excess capital, right? And that's like, okay, what else should we be doing and thinking about? And that's why we obviously want to think about the ongoing business supporting a dividend and not shrinking the company too much. And that's where the final piece of it, I think, comes in, which is the loan origination side. So hopefully, that gives you some context and kind of how we're from a decision tree perspective going through it. Gabriel Poggi: Yes. No, that's helpful. Second question is, is there any contemplation from KKR, the manager during this transition period regarding a fee cut, fee waiver, just as you guys get from point A to point B, call it, mid-2027? Matthew Salem: Yes. Thanks. Listen, I think we're evaluating everything, all options, I think, are on the table at the KKR level as manager, at the KKR level as the largest shareholder in this company. And then obviously, the KREF level and the Board. So I wouldn't -- we're looking at a number of different -- obviously, a number of different options. Gabriel Poggi: Yes. And I've asked that just in the context of obviously getting from point A to point B, knowing KKR is a large shareholder and thinking about just kind of getting more to the bottom line during the transition. There was nothing pointed in that question, just so you guys know. Last question is, is there any more detail you can provide around the Mountain View lease? Just any term details, things of that nature to give folks some granularity on how you're thinking about the potential value there as you think about monetization over the next 12 to 18 months? Matthew Salem: Yes. We're subject to a pretty tight NDA. So we'd love to provide more, but obviously, we have a contractual agreement with our tenant. What I can say is that it's a long-term lease that we think will trade like a net lease, so we can effectively sell it to net lease type of buyers, right, on a long-term lease basis. So that's really what we're looking at. We think that -- let's just take a step back, right? I mean where the stock is trading today, there's a lot of uncertainty in the world, clearly. And so it's hard to like project -- kind of project forward what happens, whether it's in -- with the war around in the oil prices and inflation, whether it's AI and impact on jobs or growth or GDP. So there's just a lot out there, I would say, right now. But when we look at book value, and we're willing to -- I think you saw it this quarter, unfortunately, and we're willing to pay some bid offer to find liquidity, to clean up the portfolio. It is putting pressure on book value. And like we said, we're going to -- we've got a little bit of ways to go here. We're going to choose to do that going forward to get to a spot where we can feel good about it and have a portfolio that's earning well and give the all clear. But like when we're -- it's not like we're sitting here and like looking at this portfolio and our book value and saying, oh, this is going to -- we can get down to like a single-digit type of book value per share. So like -- we're not exactly sure what the market is pricing, and that doesn't include like back to this discussion around 350 Ellis, where we think we've got a big gain in that asset, right? We marked that down significantly. Now we have a tenant. We've got a good lease. It's a long-term lease. We feel like we can sell that and liquidate that asset over time, and that will be accretive to book value. So we can actually start building this back up a little bit. And then, of course, with share buybacks, we can do the same. So that's a little bit of how we're thinking about it. And I know we've been pressed on this a number of times on Mountain View is timing. Listen, we'll sell this as soon as we feel like we can optimize value. But we're giving the 12 to 18 months because that's kind of the stabilized moment. And if we have options before that, of course, we'll look at those very, very carefully. But we want to be, I think, conservative and judicious as we think about the timing and what's realistic. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Jack Switala for any closing remarks. Jack Switala: Well, great. Thanks, operator, and thanks, everyone, for joining today. Please reach out to me or the team here if you have any more questions. Take care. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Thank you for standing by. My name is J.L, and I will be your conference operator today. At this time, I would like to welcome everyone to the Colony Bank First Quarter 2026 Conference Call. [Operator Instructions] I would now like to turn the conference over to Brantley Collins, Communications Manager. You may begin. Brantley Collins: Thanks, J.L. Before we get started, I would like to go through our standard disclosures. Certain statements we make on this call could be constituted as forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Current and prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance but involve known and unknown risks and uncertainties. Factors that could cause these differences include, but are not limited to, pandemics, variations of the company's assets, businesses, cash flows, financial condition, prospects and other results of operations. I would also like to add that during our call today, we will reference our first quarter earnings release and investor presentation, which were both filed yesterday, so please have those available to reference. And with that, I will turn the call over to our Chief Executive Officer, Heath Fountain. T. Fountain: Thanks, Brantley, and thank you to everyone for joining our first quarter earnings call today. We're pleased to report a solid start to the year with our first quarter operating performance. This quarter marked a pivotal operational milestone as we successfully finalized our core systems conversion and completed the customer integration following the TC Federal merger. We're proud of our team's execution and are now fully positioned to deliver a premier service experience to our new Colony customers. Operating income increased $580,000 from the prior quarter as we begin to see the impacts of the combined company post merger. We expect to see this continue to improve post conversion as we begin to realize operational efficiencies and additional cost savings moving into next quarter. With the primary integration milestones behind us, we're confident in our ability to scale toward a 1.20% ROA benchmark in Q2. Margin continues to expand, and we ended the quarter at 3.48%, which was a little better than our internal projections. This was driven by an acceleration of accretion income on acquired loans from the TC Federal merger. This acceleration was driven by early payoff of loans, several of which were participations that we acquired in the merger. Core margin continues to steadily increase, and Derek will talk more about the projections, but we do expect that margin may be a few basis points lower next quarter without the additional lift of the pull-forward loan accretion. Loan growth in the first quarter was lower than what we realized in 2025. And we mentioned last quarter that we expected 2026 to trend closer to the 8% end of our 8% to 12% growth target. The payoffs in the first quarter impacted loan growth along with lighter demand, which was driven partially by the volatile rate environment driven by the conflict in the Middle East. We are starting to see more activity in our loan pipeline and are having more discussions with customers about loan opportunities. We still feel that a good growth number for 2026 is around that 8% mark. Turning to credit quality. We observed a quarter-over-quarter contraction in NPLs and the decline in criticized loans. Our credit team continues to demonstrate efficiency in resolving identified issues, preventing any buildup or stagnant criticized or classified loans. We provided an overview of our credit migration activity on Slide 33, which shows that we are actively resolving problem loans. The first quarter was a strong quarter for many of our complementary business lines. These are highlighted on Slide 17, and you can see the past quarter showed meaningful improvement on a combined pretax basis compared to the first quarter of last year. Loan production and sales were higher in our mortgage division compared to the same period last year. Pretax income was significantly higher than Q1 2025, driven by more volume and slightly better margins. We believe this sets mortgage up to have a good year, although interest rate fluctuations and housing inventory continue to be challenges that will likely impact mortgage throughout 2026. Marine and RV lending and merchant services continue to show progress, and we expect that to continue, particularly in marine and RV lending as we head into a period of higher seasonal activity. This past quarter was the best quarter to date for Colony Financial Advisors, and we are proud of the progress the division continues to make. Recruiting has been strong with the addition of several new advisers over the past few quarters. These additions, along with the transition of our broker-dealer relationship from a managed to a dual program where we get a larger revenue share, but also bear the expenses has led to meaningful improvement. This has allowed for higher profitability that will continue to scale as we increase assets under management. Slide 20 illustrates that growth in AUM, showing us at $555 million at the end of the quarter, up from $198 million at the end of the first quarter in 2025. This represents significant growth since the formation of Colony Financial Advisors in late 2022. Colony Insurance also had their best quarter to date in Q1 for pretax income. Referrals to insurance from the bank were strong in the first quarter, and we feel we have a lot of opportunity to capture more. Items in force and premiums in force are shown on Slide 21. The premium rate increases in 2025 presented some challenges last year, but there have been recent rate reductions that we think will drive additional policy volume as we go throughout this year. Our SBSL division had a lighter quarter driven by lower sales revenue and variability in charge-offs. The loan pipeline has shown positive improvement and with a shift towards real estate secured loans versus the small dollar loans, we see this as an opportunity for steady volume and improved revenues. Past dues for SBSL were down about 30% and nonaccruals were down around 24% during the quarter. We're likely to see more variability in charge-offs this year. And while some quarters could be around these same levels, we are not seeing anything to indicate significant increases. Also during the quarter, we added a National Sales Manager, John Kay in SBSL and look forward to seeing the expertise he will bring to the division. We've been without a person in that role for a little while, and we believe we found the right person to help us lead our sales team. Last month, we announced that the Kroll Bond Rating Agency affirmed the credit ratings for both the company and the bank with a stable outlook. This independent validation reflects the disciplined execution of our long-term strategy. We believe these ratings serve as a confirmation of our capital strength and the overall stability of our platform. As industry consolidation accelerates, we are seeing significant M&A-related disruptions across our footprint. This environment creates a unique tailwind for us, and our team is focused on capturing high-quality customer relationships that are seeking the stability and high-touch service that our model provides. We are well positioned to capitalize on these market shifts to drive organic growth, and we are seeing positive growth tied directly to this disruption. We remain encouraged by the M&A landscape. Our recent integration success has enhanced our capacity at scale, and we are actively evaluating opportunities that align with our strategic and cultural criteria. We feel very good about our current position and are confident in our ability to execute another accretive transaction as the right opportunities emerge. We're proud of our overall performance in the quarter, and our team has done a great job through our post-merger systems conversion as well as continuing to execute on many of our strategic objectives. We believe this leaves us well positioned to provide consistent execution as we continue on the path of building a sustainable, high-performing independent bank. With that, I'll turn it over to Derek to go over the financials in more detail. Derek Shelnutt: Thank you, Heath. Operating net income increased to $9.5 million in the first quarter and operating pre-provision net revenue increased approximately $1.3 million to $13.9 million in the quarter. Net interest income increased approximately $3.3 million during the quarter and is reflective of a full quarter post-merger, and that's in addition to continued repricing benefits from both sides of the balance sheet. Net interest margin increased 16 basis points to 3.48% with the interest-earning assets component increasing 13 basis points to 5.33% and interest-bearing liabilities decreasing 3 basis points to 2.28%. Our overall cost of funds remained relatively stable, decreasing 2 basis points quarter-over-quarter to 1.94% and we expect that our cost of funds will remain around this level unless we see changes to short-term interest rates. Heath mentioned the accelerated accretion income in the first quarter, and that drove margin above our initial forecast. From a core margin perspective, so excluding the accelerated accretion, we are around 3.41%. Our projections indicate modest increases in margin of a few basis points each quarter and we should see margin trend closer to the core margin in the second quarter under our base case assumptions, which means we are likely to see margin a few basis points lower in the second quarter. Operating noninterest income in the first quarter was $10.7 million. The first quarter is shorter in the number of days and is seasonally lighter for us in terms of activity in our complementary business lines. Compared to the same quarter last year, operating noninterest income increased $1.7 million from $9 million in the first quarter of '25. On Slide 17, we illustrate pretax income by business line. Mortgage pretax income was $222,000 compared with $31,000 in the first quarter of last year. Slide 19 overviews production and sales volume by quarter with the first quarter of 2026 showing meaningful increases in both production and sales compared to Q1 of last year. We're seeing a good start to the year and expect a better mortgage trend this year compared to what we saw in 2025. Over the past several quarters, we've recruited MLOs in key markets and adjusted our products to meet customers' needs and drive increased profitability. Heath mentioned the growth in Colony Financial Advisors and on a pretax income basis, this was their best quarter to date. The AUM growth has been solid, and we see lots of potential to grow that organically in several key markets, and that's in addition to also recruiting new advisers. Colony Insurance had a great start to the year in the first quarter. Heath mentioned challenges on pricing last year and how those have recently been scaled back. We believe these changes will help both customer retention and new customer acquisition and in turn, drive better profitability for that division. SBSL pretax income decreased to $95,000 in the quarter. This was driven by lower revenue and higher charge-offs. Slide 18 shows the production and sales volume by quarter. Seasonally, the first quarter is lighter, but we're starting to see a stronger loan pipeline in both volume and credit quality. Charge-offs with SBSL have variability, and we may see similar levels next quarter with a trend toward improvement in the following quarters. Also during the quarter, approximately $30 million of portfolio mortgages were sold for a gain of about $110,000. We mentioned this on last quarter's call and noted the increase in the held-for-sale classification at the end of the year. We do not anticipate any other pool sales in the near term. Operating noninterest expenses were $26 million in the quarter. This includes the cost and personnel expenses that were needed to get us through the systems conversion and customer integration following the merger. Now we are positioned to begin seeing additional cost savings beginning in the second quarter. However, this is expected to be offset by seasonally higher activity in our business lines that will drive some higher variable expenses. But we expect that to be outpaced by additional revenue, which should generate positive operating leverage across our business lines. Operating net noninterest expense to average assets was 1.68% for the quarter, and this is reflective of seasonally lower activity in our business line as well as the additional expenses through systems conversion. We expect this to trend towards our target of 1.45% over the next several quarters. And merger-related expenses in the quarter were approximately $1.6 million. Provision expense totaled $1.75 million and was a slight increase of $100,000 for the prior quarter. Net charge-offs by type on Slide 32. And while there was a slight increase in core bank loan charge-offs, it only represents $315,000 or about 5 basis points of average loans. Both nonperforming loans and classified loans decreased quarter-over-quarter. The allowance for credit losses was 0.90% of total loans and 122% of nonperforming loans. As you may remember from last quarter call, a large percentage of the increase in classified and criticized loans starting in the fourth quarter was a result of the TC Federal merger. Loans held for investment increased $32.2 million or around 5.4% annualized. There were early payoffs on acquired TC Federal loans and a portion of those were related to legacy participation loans. And then the weighted average rate on new and renewed loans is shown on Slide 34, and that was 7.11% for the quarter. Total deposits declined slightly during the quarter by $19 million and was a result of repositioning of municipal funds after year-end tax collection. Municipal deposit balances declined approximately $30 million in the first quarter. Our deposit pipeline still see many opportunities to develop strong customer deposit relationships across our footprint. We've developed a deposit strategy to target customer relationships as well as take advantage of M&A disruption in our markets. Deposits remain a key focus in our strategic growth plan. Total share repurchases during the quarter were about 89,000 at an average price of $19.78. This week, the Board also declared a quarterly cash dividend of $0.12 per share. Our AOCI slightly improved quarter-over-quarter despite an increase to interest rates along the curve. This reflects the continued strengthening of our balance sheet health. TCE at the end of the quarter was 8.49%, an increase from 8.30% in the prior quarter and tangible book value per share also increased to $14.65, up from $14.31 at the end of the year and $13.46 a year ago. That concludes my overview. And now I will turn it back over to Heath before we take questions. T. Fountain: Thanks, Derek, and thanks again, everyone, for being on the call today. We're very pleased with our performance this quarter. That wraps up our prepared comments. And with that, I will call on J.L. to open up the line for any questions we have. Operator: [Operator Instructions] Your first question comes from the line of David Bishop of Hovde Group. David Bishop: I'm just curious from the Small Business SBSL segment, is that sort of the key driver of this sort of recent uptick in the loan loss provisioning level this quarter and last? And is this something we should maybe get used to a run rate close to -- closer to $2 million per quarter? You see -- I think you said last quarter, you're trying to migrate away from maybe the Express and Lightning type credits. Do you see maybe some of the credit headwinds sort of abating the latter half of the year as we sort of roll off the books? T. Fountain: Yes, Dave, I think what I would expect to see is volumes pick back up and the overall profitability of that division and revenues get back closer to levels we saw in the middle of last year. On the provisioning and charge-off levels, I think going forward, where our allowance is, we're going to generally see backfilling any charge-offs. And then I think in future quarters, we should see a little more loan growth than we saw this quarter. So we'll keep up with that. So somewhere around the current level, maybe down a little, up a little, just depending on the charge-off activity. So even though it's small in relative dollars, we're replenishing those reserves. David Bishop: Got it. And then I think I heard you say, Heath, at the start of the call, I feel good about the loan pipeline replenishing here. Still talking about 8% loan growth rate. I'm just curious where you're seeing the best opportunity to grow the portfolio and where you're seeing current pricing? T. Fountain: Yes. No. So Derek mentioned, start off with pricing, we were around 7 -- a little over 7% for the quarter. Of course, prime around 6.75%. It's looking like that will be stable. We are seeing more competitive pricing out there. And so I would expect our yields to come down a little bit as volume goes up there. We are committed to good solid pricing. We think that's important. Relationship pricing, we will look to be as competitive as we can be there, but just kind of measuring and monitoring that growth versus pricing because we like what we're seeing in terms of continuing to improve our margin and our asset yields. So -- but it is competitive out there. I think we're seeing it geographically across the board. And I would say there's -- it would look like our current portfolio. So obviously, commercial real estate, we're seeing good opportunities there, but also on the commercial business side, C&I, we're seeing good opportunities there as well. So I think we'd see it track similar to the breakdown of our portfolio today, and we are seeing it pretty good across our footprint. David Bishop: Got it. And then one final question, I guess, I'll before I hop in the queue. The insurance group, you recognize their contribution here. Do you think pricing and conditions can improve that market, you can continue to see an uptick in pretax profitability there this year? T. Fountain: Yes. I do think we will -- last year, we've added the LOB agency to that team. And we got through that integration at a time where we were seeing rate increases and it was a tougher environment. We're now starting to see some rate decreases. Plus we also had the time to integrate a better sales platform, better sales training, better integration of working with the bankers to get referrals. So we've seen a big uptick in those referrals, and we expect to continue to see that grow. So I think we'll continue to see good things out of the insurance group. Operator: Your next question comes from the line of Christopher Marinac of Brean Research. Christopher Marinac: Can you talk a little bit about the Merchant Services business and how that can not only further grow, but also impact deposits and pricing for the overall spread business going forward? T. Fountain: Yes, Chris, that's a great question. And we see this as a really good deposit acquisition part of our business. So we have taken our Merchant, our Treasury and our Credit Card group and moved that all into what we call banking solutions. And because of doing that, we've made it simpler for how we interact with the customers. We made it simpler for how we interact with the bankers. And there's a ton of opportunity to lead with the right product. And so we find Merchant Services to be one where in that field, there's a lot of turnover with other companies. There's a lot of ambiguity into the rates charged. So we find that customers really are happy to meet with us on our first call and turn over their merchant statements to us and give us an opportunity. And of course, when we do that, if we're able to win that business, we establish a deposit relationship for settling there, and then we just continue to work on that relationship to bring over deposit business. So it's really a great customer acquisition tool to bring in core commercial small business deposit relationships, and we're seeing really good success. And then as you see that just incrementally grow, that's very much a recurring revenue business. So we just keep building that, and we don't really have to add much level of expense there as we grow. So we're excited about that business. They're doing a great job in the banking solutions team altogether, how that's integrated and made it simpler for us. It leads to a quicker time to win a relationship. And so we're very pleased with how that group has performed. Christopher Marinac: Great. And my follow-up was about just loan pricing in general. With the loan yields this quarter, I know TC impacted that to some extent. But is there opportunity for that loan yield to rise with the repricing and the details that you had repeated again this morning? T. Fountain: Yes, I think so. I mean if you look at our new and renewed loan rate in the past quarter at 7.11% relative to where our overall loan yields are, I think that we could see some incremental increases there. I don't expect anything drastic. I mean, obviously, that depends on the level of growth that we see. And as Heath mentioned earlier, we're starting to see some competition there on loan pricing. So that will have some impact there as well. But I do think that we have the possibility to see that continue to kind of chug along and increase over time outside of the impact of any accelerated accretion that will see the impact overall loan yield. And Chris, if you think about it, even if we pull back a little bit on our new and renewed rate yield, there's still a delta there between where our portfolio yields. I think for the quarter, it was 6.35%. Now some of that is some of that accelerated accretion. But even if we pull back some, there's opportunity to be originating new and renewed above our current yield and then plus the amortization that's running off any payoffs that we get that are at those lower yields that were -- previously that are starting to renew and amortize. So we feel like that place on the asset side, there's really -- we should see continued improvement there. Christopher Marinac: Great. And last one for me just has to do with the overall expense efficiency in general. I mean, should we continue to see that progress as this year plays out? And any, I guess, just general goals on next year? T. Fountain: Yes. Very much so. We're very focused on that. And again, we look at that from the standpoint of our net NIE, which was 1.68%, and we should start seeing that trend towards that 1.45%. We'll have merger expenses or additional staffing and contract expenses from TC that were in Q1 that will have rolled off many of them, the staffing side is done and most of the contract expenses are done now or will be done during the quarter. And so you'll see improvement there. Where we will see -- we expect some of the variable expenses in our business lines to increase a little bit as we go through Q2 and Q3, which are seasonally higher plus the return of SBSL. And I just point out, we saw year-over-year increases in our complementary lines really in the quarter that our SBSL was down a little bit, and it's a significant driver. So as it returns, to a higher level of revenues, mortgage improvement for seasonality. You can look on our mortgage slide and see how that Q1 is always a light quarter, but a much more profitable this quarter. So we'll see that net NIE start to improve in the second quarter, both from the revenue side on the complementary lines, but also from the expense side in the core bank. Operator: And we have a follow-up question from David Bishop of Hovde Group. David Bishop: Maybe just curious, now that you have TC Federal behind. From an acquisition perspective, just curious what might be in your target sights here? There's been a lot of consolidation within your markets. Just curious where you're focusing your efforts these days on potential acquisitions? T. Fountain: Yes. Thanks, Dave. Good question. And we do believe we're in a place we've gotten the TC Federal integration complete, and we are actively having conversations. It's an area of focus for our team, but particularly for me. And so we're out being very active throughout our footprint. On Slide 14, we laid out kind of our target area, which is really Georgia and the contiguous states. So we're out in -- both in Georgia and in these other states actively having conversations with other management teams that we think will be a good fit. The TC merger, I think, just shows how a good cultural fit is important. It made the integration much easier both from the team member side, but also from the customer side. And so our focus is really on strategic deals where we can have alignment with the other bank's management team, and they view it as an opportunity to continue their investment and see that the combined company can be more profitable, have more scale and also have additional products and services and larger lending limit to be able to grow better as a combined company than either could on their own. And we think those opportunities are out there. It takes time in developing relationships and it's something that we're spending our time on and particularly my time. And we are at the place now where we feel good about being able to start the process with another one. So hopefully, we'll keep having good success there like we have with this last one and just keep the momentum going forward. Operator: There are no further questions at this time. That's concluding our Q&A session. I will now turn the conference back over to Heath Fountain, CEO, for closing remarks. T. Fountain: Thanks, J.L., and thanks again, everyone, for being on the call today and for your support of Colony Bancorp. We're excited about the opportunities ahead and appreciate you being on the call today. Operator: This concludes today's conference call. You may now disconnect.
Operator: Good afternoon, everyone, and welcome to Associated Banc-Corp's First Quarter 2026 Earnings Conference Call. My name is Kevin, and I'll be your operator today. [Operator Instructions] A copy of the slides that will be referred to during today's call are available on the company's website at investor.associatedbank.com. As a reminder, this conference call is being recorded. As outlined on Slide 2, during the course of the discussion today, management may make statements that constitute projections, expectations, beliefs or similar forward-looking statements. Associated actual results could differ materially from the results anticipated or projected in any such forward-looking statements. Additional detailed information concerning the important factors that could cause Associated's actual results to differ materially from the information discussed today is readily available on the SEC website and in the Risk Factors section of Associated's most recent Form 10-K and subsequent SEC filings. These factors are incorporated herein by reference. For a reconciliation of the non-GAAP financial measures to the GAAP financial measures mentioned in this conference call, please refer to Pages 28 and 29 of the slide presentation and to Page 9 of the press release financial tables. Following today's presentation, instructions will be given for the question-and-answer session. At this time, I'd like to turn the conference over to Andy Harmening, President and CEO, for opening remarks. Please go ahead, sir. Andrew Harmening: Well, good afternoon, and thank you for joining our first quarter earnings call. I'm Andy Harmening, and I am once again joined by our Chief Financial Officer, Derek Meyer; and our Chief Credit Officer, Pat Ahern. I'll start off with some highlights from the quarter. And then from there, Derek will cover the income statement and capital trends, and Pat will provide an update on asset quality. We entered 2026 with strong momentum as a company following a pivotal 2025 that advanced our growth strategy in several important ways, with relationship loan and deposit growth, record customer growth, and solid credit performance, combining to drive the strongest annual net income in our company's history. In the first quarter of 2026, we remain squarely focused on maintaining momentum with our growth strategy, and our first quarter results reflect that trend. We posted annualized first quarter checking household growth of 2.2%, an encouraging result in what is typically a slower season for checking acquisition. We delivered over $500 million of period end C&I loan growth, a 4.6% increase point-to-point versus December 31. We've also made meaningful progress on our commitment to accelerate our growth momentum in the major metropolitan markets over the remainder of '26 and into '27. Year-to-date, we've made several key hires across our revenue lines of business, increased marketing acquisition spend, launched our new C&I office in Dallas and launched a new national franchise banking vertical. To further complement and accelerate our growth momentum, we announced the closing of our acquisition of American National Bank on April 1. Upon conversion, the combined company will feature a proven relationship-focused strategy, a dynamic product suite, a modern digital experience and effective marketing acquisition engine and expanded commercial capabilities, all positioning us to grow and deepen relationships in growth markets, such as Omaha and the Twin Cities. Colleagues from both organizations continue to work closely together to facilitate a smooth and successful integration. And we expect to complete the conversion process late in the third quarter of this year. We're excited about our growth prospects at Associated over the remainder of the year and beyond. But as always, our intention is to grow in a disciplined way. Recent events have introduced volatility at the macro level, but we feel well positioned to navigate this uncertainty, thanks to our disciplined approach to risk management, our enhanced profitability profile, a solid capital position and the resilience and stability of our Midwestern markets. We look forward to providing additional updates on Associated Banc's growth journey along the way. With that, I'd like to walk through our financial highlights for the quarter on Slide 4. We reported earnings of $0.70 per share in Q1. Total loans grew by over $600 million or 2% versus the prior quarter. The growth was driven primarily by commercial with C&I balances growing $540 million versus the prior quarter. On the funding side, total deposits grew by $179 million, while core customer deposits grew by over $800 million versus Q4. As is typical this time of the year, the quarterly increase was impacted by strong seasonal inflows and a handful of accounts in Q1 that flow back out in Q2. With that said, Q1 core customer deposits were up $1.3 billion or 4.5% relative to the same period a year ago. Moving to the income statement. Q1 net interest income of $307 million dipped slightly from the record quarterly NII we posted in Q4, but increased 7% relative to Q1 of 2025. Similarly, total noninterest income of $76 million decreased by $4 million from Q4 that saw strong capital markets activity, but was up meaningfully versus the same period last year. Total noninterest expense of $219 million decreased slightly from the prior quarter, delivering positive operating leverage remains a primary objective as we continue to execute our plan. Shifting to credit. Credit asset quality trends remained strong in Q1. Total criticized loans decreased. We booked $11 million of provision and saw just 7 basis points of annualized charge-offs for the quarter after posting 12 basis points of charge-offs in 2025. As I mentioned previously, we've seen strong growth momentum in the early part of 2026, and Slide 5 lays that picture out in greater detail. After several years of investments to modernize our digital experience, enhance our product set and improve our marketing and acquisition capabilities, we now have a proven ability to grow our customer base sustainably over time. In the first quarter, we posted annualized household growth of 2.2%. This number gives us a strong start to the year as we continue to focus on attracting and deepening customer relationships as a means to decrease our reliance on higher cost wholesale funding sources. We've also made significant investments to grow relationships and take market share on the commercial side with a steady cadence of leadership hires, RM hires and expansion capabilities. In Q1, we posted over $500 million in C&I loan growth, nearly a 5% quarterly growth rate. Pipelines have remained strong on both loans and deposits, and we expect our momentum to carry throughout the year. And as mentioned, we closed our acquisition of American National Bank on April 1. This partnership provides opportunities to deepen relationships with existing American National customers through our expanded product set and capabilities, while also providing growth opportunities in major metro markets like Omaha and Twin Cities, which are both growing faster than the average Midwest. The investments we've made in prior years are driving results in 2026, but we also expect to sustain and accelerate our growth strategy into '27 and beyond. With that in mind, we executed on several investments here early in 2026 that are intended to drive additional momentum. First, we've leveraged our best-in-class value proposition and a proven marketing acquisition and to accelerate customer growth. As a reflection of these efforts, our marketing acquisition spend was up 23% in Q1 versus the same period a year ago. As we continue to attract and deepen the relationships, we're building a stronger pipeline into our Private Wealth business particularly in major metropolitan markets where we're underpenetrated. To capitalize on these opportunities, we hired Lisa Buto earlier this month as Director of Private Banking for major metropolitan markets. Based in the Twin Cities, Lisa brings more than 25 years of expertise and she most recently served as Managing Director and Private Wealth Banking Manager at Wells Fargo, where she led client-facing banking and lending teams across 11 states. We've also taken several steps to drive incremental growth in commercial, adding another wave of talented bankers and expanding our capabilities. After launching a new C&I office in Kansas City last year and seeing promising results, we expanded the team in Q1 with one additional RM and 2 additional professionals. Based in part on the successful model we've developed in Kansas City, we also officially launched a new C&I office in Dallas. The commercial market leader has been hired, and we expect RM hires to begin in May. And earlier this week, we announced a new nationally focused franchise banking vertical, led by Shaun Coard based in the Twin Cities, Shaun brings more than 30 years of experience with deep expertise in scaling specialty banking platforms and building high-performing teams. Most recently, she led the National Franchise Banking division for Bremer Bank. We also brought on a new RM and 3 other professionals to round out Shaun's team. As we work to accelerate growth across the company, the successful integration of American National is a key priority to position our combined company for long-term growth and success. On Slide 6, we provide a reminder of the expected benefits of the partnership and an updated timeline of the integration process. And 3 weeks post close, we are on track. In the days immediately following the close on April 1, we had over 40 legacy associated colleagues on the ground in Omaha. We've completed culture surveys, repositioned their securities portfolio, completed the colleague decisioning process and achieved several other integration milestones. Along the way, we've been impressed by the passion, enthusiasm and cultural fit. Our new colleagues have shown within the combined organization and the professionalism they've exhibited as a navigate change. Maintaining a strong local leadership presence in our newest market is a top priority. And last week, we announced Jason Hanson as a business segment leader for Commercial Banking and our new market president for Nebraska and Western Iowa. Jason most recently served as President of American National Bank and he's uniquely qualified to position our combined company for a long-term growth and success in Omaha and beyond, having joined American National Bank in 2000. Looking ahead, colleagues from both organizations continue to work closely to ensure a smooth integration process, and we are on track for conversion of accounts, systems and branches in late Q3 of this year. We expect to finalize purchase accounting adjustments later this quarter. On Slide 7, we recap our plan to drive sustainable growth in 2026 and beyond, and it starts right here in Wisconsin. We have a 165-year foundation of long-standing loyal relationships in the Badger State that provide us with strong funding base for growth. Looking forward, we see plenty of opportunities to grow and deepen relationships across the state. But we also see clear opportunities to accelerate our growth momentum with an expanded presence in major metro markets. We're already seeing the strategy pay off in legacy Upper Midwest metros like Milwaukee, Chicago and the Twin Cities, where we're growing households and driving relationship loan and deposit growth. We're seeing similar success stories emerge in newer markets like Kansas City, where we've already expanded a commercial team that launched just a year ago. And already in 2026, we're further expanding our presence in the strategic growth markets. through the American National deal, which provides entry into Omaha and deepens our presence in the Twin Cities and through the new C&I office we launched in Dallas. Based on the strong results we've seen through the first quarter, and the additional investments we've made in early 2026, we're on track to achieving our targets for household growth and C&I loan growth in 2026, and we expect our ongoing efforts to drive growth momentum sustainably over time. Shifting to our core financial results. We highlight our quarterly loan trends on Slide 8. We saw strong loan growth in Q1, particularly in the back half of the quarter, with total period-end loans up 2% or $635 million relative to Q4. As has been the case in the past several quarters, C&I loans led the way with nearly $540 million of period-end loan growth during the quarter. We also saw total CRE balances increased by $143 million as loan production outpaced lower-than-expected payoffs during the quarter. We continue to expect payoffs to materialize throughout the year. After including the impact of American National acquisition, we now expect 2026 period-end loan growth of 17% to 19% as compared to Associated stand-alone results for the year ended December 31, 2025. Shifting to Slide 9. Period-end deposits grew by $179 million during Q1, while core customer deposits grew by 3% or $820 million. As mentioned, the strength in some core customer balance flow was impacted by seasonal inflows we typically see towards the end of the quarter in a handful of accounts. With that said, Q1 core customer deposits were up 4.5% relative to the same period a year ago over the course of the quarter. We also saw balances shift away from brokered CDs and network transaction deposits and into customer deposits and wholesale sources, such as FHLB and other wholesale. We also accelerated our funding in Q1 to keep pace with strong loan growth we saw during the quarter. Over the remainder of 2026, we're bullish on our ability to drive incremental core customer deposit growth, thanks to the best-in-class consumer value proposition, household growth momentum supported by increased marketing acquisition spend in growth markets and significant momentum in our commercial deposit gathering capabilities. After including the impact of American National acquisition, we now expect 2026 period end total deposit growth of 17% to 19%, and period end customer deposit growth of 19% to 21% as compared to associated stand-alone results for the year ended December 31, 2025. With that, I'll pass it over to Derek to discuss our income statement and capital trends. Derek Meyer: Thanks, Andy. I'll start with yield trends on Slide 10. In Q1, the yields on our largely floating rate CRE and commercial books both decreased by 29 basis points during the quarter. We also saw an 11 basis point decrease in auto yields, but slight increases in the investment portfolio on resi mortgage. Total interest-bearing deposit costs decreased by 17 basis points in Q1 and were down 47 basis points since Q1 of last year. In Q1, total earning asset yields decreased 14 basis points to 5.2%, while interest-bearing liabilities decreased 15 basis points to 2.67%. The benefit in net free funds compressed by 5 basis points. Moving to Slide 11. I First quarter net interest income of $307 million decreased $3 million versus the prior quarter and increased $21 million versus Q1 of 2025. As Andy mentioned, the timing of our strong loan growth during the quarter outpaced the natural run rate of our deposit battery. As such, we accelerated our funding to match, which put some short-term downward pressure on both NII and margin. With this in mind, our net interest margin decreased 3 basis points to 3.03% for the quarter as compared to the same period a year ago, our NIM increased 6 basis points. Looking ahead, we continue to assess the balance sheet and income statement impacts from the acquisition of the American National Bank that closed at the beginning of the month. As it stands today, balances are generally in line with our due diligence assumptions. We expect to share an income growth of 8% to 10% in 2026 as compared to associated stand-alone results for the year ended December 31, 2025. Moving to Slide 15. Total noninterest expense came in at $219 million in Q1, slightly lower versus the prior quarter. During the quarter, we saw slight increases in FDIC assessment technology, legal and professional fees, offset by quarterly decreases in business development, equipment and other expenses. In Q1, our adjusted efficiency ratio increased slightly from 55.2% to 55.8%. Throughout the year, we continue to invest in the growth of our franchise, but we're anchored on delivering positive operating leverage. We expect to share an updated noninterest expense outlook for the next quarter following the finalization of purchase accounting adjustments tied to the acquisition of American National. On Slide 16, our CET1 ratio finished at 10.47% in Q1. This figure was up 36 basis points from Q1 of 2025, but decreased slightly quarter-over-quarter due in part to the strong loan growth we saw in the quarter. Our TCE ratio also decreased slightly from the prior quarter to 8.27%, down 2 basis points versus Q4, but up 31 basis points versus Q1 of 2025. We've continued to see our tangible book value per share expand on a quarterly basis with Q1 finishing at $22.23, up nearly $2 versus Q1 versus last year. I'll now hand it over to our Chief Credit Officer, Pat Ahern, to provide an update on asset quality. Patrick Ahern: Thanks, Derek. I'll start with an allowance update on Slide 17. Our CECL forward-looking assumptions utilized the Moody's February 2026 baseline forecast. The forecast remains consistent with a resilient economy containing a more optimistic GDP outlook despite the higher interest rate environment, higher levels of inflation and tariff negotiations. The Moody's forecast now contains less total rate cuts in the latter half of 2026 compared to prior quarter forecast. In Q1, our ACLL increased by $6 million to $425 million. The increase was primarily driven by commercial and business lending and CRE construction, which largely stemmed from a combination of loan growth, plus normal movement within risk rating categories. Our ACL ratio as a percentage of total loans has remained stable for the past several quarters. Here in Q1, the ratio decreased 1 basis point to 1.34%. On Slide 18, we continue to review our portfolios closely, amidst ongoing macro uncertainty, but we continue to see solid performance in Q1. Total delinquencies increased versus the prior quarter to $88 million with $43 million of the increase being driven by 2 managed credits, in which an extension process carried into Q2. We remain comfortable with benign delinquency trends we've seen over the past several quarters. Total criticized loans decreased by $29 million versus the prior quarter with decreases in the special mention and substandard accruing categories being partially offset by an increase in nonaccrual loans. Nonaccrual balances increased to $111 million in Q1, up $10 million versus Q4, but down $24 million from the same period a year ago. We remain confident there hasn't been a material shift in the credit profile of the portfolio that would result in a corresponding risk of loss. Finally, after booking just $2 million of net charge-offs in Q4, we booked $5 million in net charge-offs here in Q1. Our net charge-off ratio for the quarter was just 7 basis points. We also added a modest provision of $11 million during the quarter. Here in 2026, our teams remain diligent in reviewing our portfolios and staying in regular contact with customers to stay ahead of any emerging risks. We also remain diligent in monitoring credit stressors in the macro economy to ensure current underwriting reflects the impact of ongoing inflation pressures, shifting labor markets, tariffs and other economic concerns. In addition, we continue to maintain specific attention to the effects of elevated interest rates on the portfolio, including ongoing interest rate sensitivity analysis bank-wide. We expect any further provision adjustments will reflect changes to risk rates, economic conditions, loan volumes and other indications of credit quality. With that, I will now pass it back to Andy for closing remarks. Andrew Harmening: Thanks, Pat. On Slide 19, we provide an initial update to our outlook following the close of American National acquisition. As we sit here 3 weeks post close, we haven't seen any major surprises, and our current expectations are largely in line with the assumptions provided when we announced the deal. This outlook does not assume any material incremental growth expectations for the American National business in 2026. We expect to update this 2026 outlook with estimates for the net interest income and noninterest expense categories following the finalization of purchase accounting adjustments, which are expected to be completed later this quarter. With that, I'll open it up to questions. Operator: [Operator Instructions] Our first question today is coming from Jared Shaw from Barclays. Jared David Shaw: Maybe you could just help us with how we should think about 2Q. I know you're still finalizing some of those marks. But I think you said in the commentary that you sold all the securities and reinvested. So I'm guessing that there's no real accretion coming from the securities book. But maybe just walk through a couple of the puts and takes on margin and as we're going into the second quarter, if you can? Andrew Harmening: Yes. The puts and takes on margin relative to the ANB acquisition will not be any different than what we have disclosed before because, as you know, we took over April 1. We haven't closed a month, and we need to get through the marks. However, we haven't seen anything that really surprises us to this point, and we had initially forecasted a potential increase of 5 to 10 basis points. That's where we would sit today, Jared, as the potential impact once we get through the marks in the second quarter. Jared David Shaw: Okay. All right. And then just sort of separately, looking at some of the new growth markets that you're talking about and the ability to hire RMs there. How competitive is it to find good people out in some of these markets? We're hearing from other people that they're targeting some of the same areas. Are you able to -- are you starting to see pricing run up there? And how much growth do you expect to get for those markets over this year? Andrew Harmening: No, I'd equate this to start in a 40-yard dash and we already had a running head start. So we've been in the acquisition of new colleagues for a little bit. And what happens is when you hire at the top and you get a really strong person which we did in Phil Trier, and then you get market leaders along the way over the course of the last 4 years that are very strong And then you start to get RMs underneath there. I'd say this long explanation because what's happening is we are able to get quality folks in each market. And so Kansas City, a great example of that, where we've not only grown, but we've doubled down on that bet because of the leader we got in that market. We have -- we just hired this week, Brandon White from the legacy middle market team with Comerica, who has a fantastic reputation personally, but also the banking for their middle market was significant. So the way I see this, Jared, outside of just the $500 million growth is, we started 2025, and we basically had 4 major metropolitan markets we're operating in Milwaukee, Chicago, Twin Cities and St. Louis. We added Kansas City in '25. We added Omaha in '26. We added Dallas in '26, and that just gives a tailwind to what we're doing, and then we expanded in Twin Cities. So the talent that we're able to bring in, there's a lot of word of mouth at this point, and that's good for us. And when somebody wants to find out what it's really like working here. What is the culture really like? What is the support to get a deal done? What is credit really like? Look, they'll interview with Pat Ahern, if they need to, our Chief Credit Officer, they'll interview with me, but mostly, they're taking care of that with the local hiring manager. So it's a very different game we're playing right now than one year ago, 2 years ago, or 3 years ago on the hiring front. We're in a really good position. I just spent time with our commercial team our top 60 leaders in the company and the energy in that room and the connectivity to our culture was palatable. Jared David Shaw: If I could just put one more in there. On the deposit funding side, some pretty good trends there, good data so far. Without any more rate cuts, how much more do you think you can squeeze from funding costs -- deposit funding costs? Andrew Harmening: Derek, do you want to take that? Derek Meyer: Yes. So I think there's still opportunity for remixing because we have most of our growth for the rest of the year coming from products like interest checking and savings, which are relationship-based and not as expensive as CDs, although we also have CD growth in there. But what we've seen based on our overall NII outlook at the legacy ASP part, given where our loan growth came in is probably some upside opportunity from -- on net interest income versus our original guidance. And so we don't think funding is going to stop that. Operator: Next question is coming from Casey Haire here from Autonomous Research. Casey Haire: Yes. Great. Thanks. Maybe taking the flip side of the deposits, the loan yields. Where do we expect those to trend going forward? And then in your expansion markets, how do the new money yields in your expansion markets compare to your core footprint? Derek Meyer: Yes. We don't give out the market by market yield. I think we look for where the best opportunities are, where we're going to get most of the household growth. I think if we punch through the loans, you're still going to see most of our growth, as we've outlined in our guidance coming from C&I and CRE, which are still higher yields than the rest of other loan categories. So that's favorable. And obviously, it's more favorable for us given the no cuts outlook and the fact that those are more closely tied to the short end of the yield curve. We don't expect yields to go up in auto. Those are trickling around the areas we've seen. They took a step down, but we've seen that happen before, and that should moderate. So if we do get rate cuts, that will still help us as a hedge and we still expect resi to continue to trickle upwards a few basis points a quarter. So net-net, given the outlook on rate cuts, it's very favorable compared to what we thought about at the beginning of the year. Casey Haire: Okay. Great. And then on the capital front, apologies if I missed this, the Basel III impact from the proposal and then any updated thoughts about share buyback appetite with ANB now closed. Andrew Harmening: Yes. ANB is closed, but we're working through the marks, which is the important part of understanding the balance sheet. So that hasn't really changed as a result of the close, but it will be very informed over the course of this quarter. I'm very bullish on where we are if we just looked at our forecast for the year relative to the legacy stand-alone ASP and what that means is we would be forecasting net interest income likely above the range that we have today. Well, when you start to do that and you start to get a return that puts you in a positive position to free capital and grow at the same time, which is why we got the original $100 million authorization. I fully expect that we'll use that this year. Casey Haire: With regards to the regulatory changes, you want to touch on that? I mean it's in the comment period. Derek Meyer: Yes. It's in the comment period. There's -- obviously there's 2 ways you can go on that, depending on whether we opt in or opt out on the methodology. So we'll see which one makes sense given the cost. We expect that to go to be favorable for us. We need a scenario, but we don't think that's going to change the near-term outlook on the repurchase. Andrew Harmening: And then the reality is we're very comfortable with the guidance we gave with CET1 in the 10% to 7.5% range. When we get to the comment period, we only see that would likely have an upside for us to comment on the specific number on that would be premature because we don't have final guidance, but if you think about the fact we're bullish on our NII and our return profile and if there is a regulatory change, that could only be good for us. I think that puts us in a great position to have flexibility with capital. Operator: The next question is coming from Brandon Rud from Stephens. Brandon Rud: If I could touch quickly on the C&I growth. I'm just curious how much of that was seasonality. And I ask, I think on Page 22, it looks like a little over $100 million came from the mortgage warehouse business. So I'm just curious how much of that is based on seasonality and how much should stay on the balance sheet a bit longer? Andrew Harmening: Yes. I mean the mortgage warehouse business has become a fairly small part of the balance sheet, but seasonality on that piece is there is a benefit there. I would say the rest of it you don't typically see getting out of the gate this fast in commercial. So I'm very bullish on C&I growth for the year. I think we've forecast is 9% to 10%. And I would tell you, I would put us at the high end of that range today. Because when you get done with a quarter where you grow 540-ish million, I think, is the number you get through that quarter and then you look at your pipeline. And we have a pipeline after getting through that where the same period prior year, we're up 20%. So -- from a pipeline standpoint. So I feel very, very good about that. We we've hired a team on the Franchise business that I expect will start to add to that during the year. And that's a pipeline we don't even have yet. And we expect that because of their knowledge of the marketplace, we'll have some good benefit there. And getting opened in the Dallas market. It will take time in 90 days, but I would expect in 90 days, we'll start to have a pipeline there that's not even part of the increase. So we have tailwinds there, and we're seeing pull-through of pipeline, and I'm very bullish on our ability to meet the high end of the guidance on C&I loan growth for the year. Casey Haire: Got it. And maybe just one more. The 2.2% annualized checking household growth, is that primarily still coming from the legacy markets and as the marketing spend hits the newer markets. Would that -- would you anticipate that number continues to accelerate? Andrew Harmening: I feel like I wrote that question, Brandon. Thank you. The answer is, it has nothing from the new market. It has nothing from Omaha. Obviously, we're in the Twin Cities, but it doesn't have anything from those new branches. The time that you turn on that [ spig ] is when you get done with systems conversion typically on the marketing side. So as we -- assuming a late third quarter integration, you start the marketing in the fourth quarter. And so when we think about the efficacy of our company and what that means to things like fee income, debit card fee income, credit card fee income, we're actually experiencing a tailwind right now for the first time in probably 20 years. When we get done with that, we have a major growth market in Omaha that we will market heavily into. So I think this is where we say, hey, can we get above 2% this year in our legacy markets and then go into 2027, challenge the team to get to 2.5%. As we start to get to 2.5%, I think we'll be in the top quartile or decile of the peer group in that category. So when I think about our ability to continue to grow, I'm pretty optimistic based on what we've put together so far and then putting that out into the Omaha market. Operator: Your next question is coming from Daniel Tamayo from Raymond James. Daniel Tamayo: I'll take a swing at the expenses. I completely understand that you guys don't have a number out there yet for the all-in. But a lot of good revenue opportunities and trends you're talking about here, Andy. Is it fair to say the stand-alone expense numbers are drifting up off the original guidance as well? Andrew Harmening: No. Actually, it's probably one of the things I'm most proud of. I mean we went from fourth quarter to first quarter and we're almost flat as a pancake. I mean we could say we went down, but it's $300,000. So let's say, flat in the first quarter. And our legacy stand-alone ASB business because we made difficult decisions at the end of each year, we are in a position to meet the expense number, while we are seeing NII forecast creeping up and noninterest income forecast at the high end of the range or above as well. So no, I believe the legacy business will manage to that 3% number. Daniel Tamayo: Great. And then I guess as we think about the expansion markets here, you talk a lot about the loan growth. Still no branches, I think, in Dallas or Kansas City how should we think about the infrastructure build that's planned over the next couple of years there? And if you're -- I'm assuming going to attempt to capture perhaps some retail deposits as well. Andrew Harmening: Yes. Yes, maybe we will, maybe we won't. I mean, really, what's on my mind and stop me if you've heard this I want organic growth, first and foremost. And we did these deals because we thought very strongly that in Twin Cities by getting a little bit bigger, that actually advances our marketing capabilities in that market. So it increases our exposure, our visibility, the places we can drive business into. So that's the first thing. The second thing is Omaha is an incredible market. It is the fastest-growing major metropolitan market outside of Dallas, where we have branches, it's the fastest growth market of any major metro we have. And so our ability to grow that we think is going to be significant for us. With regards to adding infrastructure, really, what I want to do is execute on this integration. We've executed on Phase 1 and Phase 2 of our plan, and it's driving a profitability profile that helps the bank significantly in capital accretion and return. We believe once we close on the -- once we finish the integration on the ANB deal, because we have such similar cultures, we actually think we'll start the growth on that one in a significant way, and it will accelerate our organic growth. Beyond that, really, to me, organic growth is the #1 question as opposed to building out expensive infrastructure that's difficult to pay for. Daniel Tamayo: Understood. And probably the last most important question here who are the Packers going to take tonight? Andrew Harmening: I don't think we have a first round pick. I'm going to punt on -- that's almost a jab, an unintended jab at the end of the questions. Operator: Next questions coming from Scott Siefers from Piper Sandler. Robert Siefers: Andy you actually already answered my question on sort of disaggregating the underlying loan growth versus what's coming from the American National transaction. It's obviously really good there. I was hoping you might please just sort of share your thoughts on the same thing on the deposit side sort of legacy Associated -- how those expectations might have change if we weren't layering in A and B? And then maybe as you think about the mix of deposits going forward through the remainder of the year, how do you see sort of noninterest-bearing levels sort of trending as a percentage of the total? Andrew Harmening: Yes. I mean a couple of good questions in there. So the way that I think about ASP overall, if I just think about the stand-alone, which we don't -- we debated whether we have the stand-alone because we're not stand-alone anymore, and we don't want to act like we are. However, we want to be transparent. So on loans, we're at the high end of our guidance. On deposits, we are the same as when we started the year. We're tracking exactly to where we expected to be. net interest income, we're above the range that we had. Noninterest income, we're at the high end of the range or above that range and expenses we are at that -- we're at our 3% number. So what you probably can take out of that is the change in the view on rate cuts that helps our company. Our loan growth momentum, that helps our company. The accelerated deposit growth in the second half of the year, that helps our company. The short-term nature of our contractual liability obligations puts us in a really good position to navigate the rate environment. So that foundationally is where the legacy Associated Banc is right now. You asked a second question. Sorry, I forgot that one. Robert Siefers: No problem. And by the way, that was very good color on the first one. And it was just sort of mix of deposits as you look through the remainder of the year, especially if you can talk to the noninterest-bearing. Andrew Harmening: Yes. So I mean, everyone would love to have noninterest-bearing grow like a weed. It's just not the way it works in banking. And so what I would say is a couple of things and Derek and I discussed this all the time, I'm really, really pleased with the direction of our household growth. I mean I really think we're moving towards ultimately a best-in-class. And that helps your demand deposit growth over time. If somebody is growing at 2.5% and the market is growing at 0, where you're growing at 2% and the market is growing up 0. Over time, you're going to inch up in that category. So the goal is that you are not moving backwards in demand deposits as we saw the market do for a long time. We've stabilized and now we have a faster growing customer base. But I would expect the interest-bearing would dominate that category. And right now, the thing that's probably most interesting to me is we have HSA business that is one of the fastest organic growth -- HSA businesses in the country. And it's being fueled largely by our retail and commercial teams. We have an HOA title business that is launched right now and has a pipeline that we can actually execute because we did the technology already. We have a platform on consumer that is adding growing at a 2.2% annualized pace and maintaining the quality of the customer. And so we're not adding customers just to add them. And frankly, our attrition is one of the lowest in the business because we have products out there that keep them and deepen them. So as we head into the second quarter and the second half of the year, I expect to have a good deposit growth and acquisition in the second half of the year with modest increase from demand deposits as you would expect. Operator: Our next question is coming from Chris McGratty from KBW. Christopher O'Connell: This is Chris O'Connell filling in for Chris. Yes, no problem. So I just wanted to touch on the balance sheet and interest rate positioning following the close of the American National deal. Just any updates there as to how it impacted the balance sheet? And then was the securities repositioning, I guess, a part of bringing you back to -- towards the stand-alone positioning? Andrew Harmening: Derek, I'll have you take that. Derek Meyer: Yes. So you're going to get a little bit, and then we'll probably give you the rest in when we closed the books for second quarter. So the easiest thing to say without the marks is that the loans and deposit balances came in, unmarked came in right where we expected during due diligence. That gives us comfort in the first step telling us that we're materially on track from a balance sheet standpoint with what we expected during due diligence. Now the impact of the rate changes since then and how those affect the marks on capital and then the accretion of earnings after that. We're going to wait until we actually do work through the market process and then report it, and then we'll give you the -- how that accretion that we expect to impact NII and NIE going forward when you look at CDI also. So that's probably the best I can tell you because we have done the securities repositioning, but that's only one part of it, and you really can't get a grip on the whole impact, but we still think we're materially on track. Christopher O'Connell: Okay. Got it. And then just as a follow-up on the same vein as you guys have closed the acquisition taking a look at the overall loan portfolio. Is there any areas that are contemplated in terms of further balance sheet runoff or pockets of the portfolio that you guys might shy away from? Andrew Harmening: No, the portfolios that they're in and the business that they do largely looks like what we do. Pat Ahern has commented on the strong kind of credit write-up and process that they had. The fact is that their Chief Credit Officer, we were keeping him, he's staying on board because he's good, and their approach to credit is good. And so there have been no surprises on that front. We got through a lot of those credits during due diligence and felt like we knew the portfolio very well. And frankly, since close, there has been no change to that. Operator: The next question is coming from John Arfstrom from RBC Capital Markets. Jon Arfstrom: Just a few follow-ups. One on the commercial growth in the pipelines, Andy, I don't know if there's a way to separate this, but in your mind, what would you say the kind of the legacy associated client utilization looks like. I know you've got a lot of new hires that are driving the pipelines higher. But for the clients that have been around for a long time and associated. What is the pipeline like for clients like that? Andrew Harmening: Are you asking about the individual RM productivity or I'm not -- if you could just clarify that, Jon. Jon Arfstrom: No, I'm just asking for how much of your pipeline growth is driven by the new hires and the new RMs versus the people that have been there for a while. And I'm just trying to get a gut check on like utilization from the typical metal vendor of Oshkosh or something like that. Does that make sense? Does that make sense, what I'm asking? Andrew Harmening: Yes. I mean it's a little bit hard to answer at this point because they are becoming us so quickly now. And so what I mean by that is we're up 44% in RM since I started. So there are a lot of new folks in what we do, and some are 1 year, 2 year, 3 year, 4 year. What I would say is that the legacy, if you want to call something over 2 years or 3 years legacy, they are driving more of the pipeline. They should. They're more of those folks. However, the gap is being bridged on the productivity per person. So we are seeing, whether it goes from 50% to 75%. And now as we head into the year, we have absolutely no non-solicitation agreements which we have very strictly lived up to. And so we have a team that there is upside from what we are doing today with the existing team, which is why I think we've seen another bump in what we see in the pipeline now versus 12 months ago. And that's what gives me a lot of confidence as we get through the rest of this year that we are at the high end of that we're at the high end of that forecast. But more of it has been done by legacy colleagues, but the -- just on a per person basis, we're bridging the gap and they're getting closer and closer to 100% productivity. Jon Arfstrom: Okay. So broad and deep, you would say, the pipeline increases? Andrew Harmening: No, absolutely yes, yes. Jon Arfstrom: Yes. Okay. Derek, one for you. Slide 9, customer CD increase. I understand that you have deposits that ebb and flow in the first quarter, but kind of what's the strategy behind that? And it looks like there was more of kind of a period-end increase. Derek Meyer: Yes. I mean that's where you saw -- when we saw during the quarter, I think we came into this quarter with a 41% increase in the pipeline on the C&I loan side. And we started to see that pipeline come through, and we were a little bit below market on CD rates. We decided to raise our rates and try and make sure that we weren't looking into funding all of that growth that started to look like it was going to hit this quarter, which is well above our annual run rate, which is pretty high guidance anyways. And so we decided to go ahead and front load that production. And the easiest way to do that in this market with these rates, I want to do it with the CDs. Now those CDs are all 7 months that's the promo rate and we still stay very short on all our contractual fundings, which you'll see later in the deck. So we thought it was a good move. Ended up, we were right because the spot balance loan growth was very strong. And so we feel pretty good about it, but we'll have a chance to reprice all of that before the year end. Jon Arfstrom: Yes. Okay. Makes sense. And then just last one, Slide 19, the guidance. I'm assuming this is the case. But any material changes to like the core guidance that you gave last quarter. Is there any puts and takes there if you take American National off that slide? Derek Meyer: I think the biggest one is net interest income. Our guidance was 5.5% to 6.5%. If you look at where our balances ended this quarter. And if you recognize the fact we're asset sensitive, we don't have 2 rate cuts our guidance would be more like 7% to 8%. Operator: We reached the end of our question-and-answer session. I'd like to turn the floor back over to Andy for any further closing comments. Andrew Harmening: Yes. I'll just make a couple of quick comments. One, if you try to separate this into 2 pieces and hopefully, very soon, we won't anymore. It will be one company. But the legacy guidance on ASB basically improved from last quarter, if we break that out in the specific categories. And I'm very bullish on the trends that I'm seeing that back that up. With regards to ANB there are a lot of questions in a lot of different ways. And I just want to give a quick summary on that. One is we have a strong reinforcement that we have cultural alignment. That is a big deal. We have detailed plans to achieve our noninterest expense takeout that is right on track. There's an ability at some point here to advance growth and it's becoming more clear based on FX, wealth, syndications, balance sheet size, common credit background, consumer products at digital platform and marketing acquisition capabilities. That's a long list, which gives me confidence that we will hit in some or many of those and that will be impactful. We're on track on systems integration and the timeline there. We will work through our purchase accounting marks in the second quarter. And most importantly, I saying all that is the ANB deal is what we had hoped it would be. So that's our story. We appreciate your interest, and we look forward to continuing to provide updates throughout the year. Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.
Operator: Thank you for standing by, and welcome to the Intel Corporation First Quarter 2026 Earnings Conference Call. To ask a question during the session, you will need to press 11 on your telephone. If your question has been answered and you would like to remove yourself from the queue, simply press 11 again. As a reminder, today's program is being recorded. I would now like to introduce your host for today's program, John Pitzer, Corporate Vice President of Investor Relations. Please go ahead, sir. John Pitzer: Thank you, and good afternoon to everyone joining us today. By now, you should have received a copy of the Q1 earnings release and earnings presentation, both of which are available on our Investor Relations website intc.com. For those joining us online today, the earnings presentation is also available in our webcast window. I am joined today by our CEO, Lip Bu Tan, and by our CFO, David Zinsner. Lip Bu will open with comments on first quarter results, as well as provide an update on the progress we are making on our strategic priorities. Dave will then discuss our overall financial results, including second quarter guidance, before we transition to answer your questions. Before we begin, please note that today's discussion does contain forward-looking statements based on the environment as we currently see it and, as such, are subject to various risks and uncertainties. It also contains references to non-GAAP financial measures that we believe provide useful information to our investors. Our earnings release, most recent annual report on Form 10-K, and other filings with the SEC provide more information on specific risk factors that could cause actual results to differ materially from our expectations. They also provide additional information on our non-GAAP financial measures including reconciliations, where appropriate, to our corresponding GAAP financial measures. With that, let me turn things over to Lip Bu. Lip Bu Tan: Thank you, John, and good afternoon, everyone. Q1 results demonstrate continued and steady progress across the business, reflecting strong demand for our products and disciplined execution to expand available supply. Revenue, gross margin, and earnings per share were all above the high end of guidance, marking our sixth consecutive quarter of exceeding financial expectations. Even as we improve factory output, demand continues to run ahead of supply for all our businesses, especially for Xeon server CPUs where we expect sustained momentum this year and next. Intel 3–based Xeon 6 and Intel 18A–based Core Series 3 products are now in full volume production ramp, and each represents the fastest new product ramp in five years. We are maximizing and optimizing our factory output to meet customer needs. It is our top priority. Intel is now a very different company than when I first joined over a year ago. We have taken, and continue to take, deliberate steps to rebuild Intel into a more competitive and more profitable company. Our cultural transformation is well underway, and we are embracing our roots as a data-driven, paranoid, and engineering-centric company. We are also listening closely to our customers and putting them at the center of everything we do. Intel processors are some of the most vital assets necessary to be successful and to flourish in this era of extraordinary opportunity for the semiconductor industry. With a stronger balance sheet, a new leadership team, a rejuvenated and motivated workforce, and a renewed focus on engineering execution, we are turning our attention squarely towards innovation to capture opportunities in the near term and to position the company for robust growth in the long term. Driven by tremendous demand for AI, the semiconductor industry TAM is now approaching $1 trillion. Intel is well positioned to benefit from this demand with three strategically important assets: our x86 CPU franchise, our advanced packaging technology, and our vast manufacturing network. Artificial intelligence is now moving into the real world towards more distributed inference and reinforcement learning workloads, like agentic, physical AI, robots, and edge AI. This shift is now beginning to show up in our results, and I want to spend some time on this today. For the last few years, the story around high performance computing was almost exclusively about GPUs and other accelerators. In recent months, we have seen clear signs that the CPU is reinserting itself as the indispensable foundation of the AI era. The CPU now serves as the orchestration layer and critical control plane for the entire AI stack. This is not just our wishful thinking; it is what we hear from our customers, and it is evident in the demand profile for our products. Xeon server demand is seeing strong and sustained momentum. Customers are deploying server CPUs alongside accelerators in a ratio that is moving back towards CPU. The accelerator remains central to frontier AI, and we will continue to participate, innovate, and partner in that category. Our recent announcement with SambaNova Systems is an example of such partnership on heterogeneous compute architectures. But the backbone of AI computing in production remains a CPU-anchored architecture. That is good news for the x86 ecosystem. It is great news for Intel Corporation. And it is a structural reason I am confident that the CPU franchise will continue to be a meaningful growth engine for the company in the years ahead, not just the quarters ahead. Turning to Intel Foundry, the accelerating deployment of AI infrastructures creates a meaningful opportunity for us as we continue to build our foundry business. I am pleased with the progress we have made in foundry technology development over the last year, even though I will continue to remind you this will be a long journey for us. We have made steady progress with Intel 4 and Intel 3, and 18A wafers are now running ahead of internal projections, representing a meaningful inflection in our execution and our factory finished-good output. We also continue to make steady progress on our advanced packaging technologies, including additional growth in customer backlog in the quarter. On Intel 18AP and Intel 14A, we continue to be encouraged by our external engagements. Intel 14A maturity, yield, and performance are outpacing Intel 18A at a similar point in time, and we continue to develop PDKs with multiple customers actively evaluating the technology. Their partnership has been critical, and their feedback is continuing to help us define the technology so that we can cater to their needs. We expect to see earlier design commitments emerge beginning in 2026 and expanding into 2027. I am particularly pleased that our progress to date has driven us to land more of our own future product tape-outs on Intel 14A as well. At a time when advanced wafer capacity is in short supply, this enables us to have better control over our supply chain. Intel has pioneered nearly every major innovation that has enabled dimensional scaling and high-volume manufacturing of silicon transistors over the last six decades. We have always been willing to take measured risks that have eventually paved the way for step-function improvements in transistor density, cost, power, and performance. As we look to continue challenging the status quo, I can think of no better partner than Elon Musk. We recently announced our partnership with SpaceX, xAI, and Tesla to support TeraFab. Elon and I share a strong conviction that global semiconductor supply is not keeping pace with the rapid acceleration in demand. We are excited to explore innovative ways to refactor silicon process technology, looking for unconventional ways to improve manufacturing efficiency that will eventually lead to a dynamic improvement in the economics of semiconductor manufacturing. A year ago, the conversation about Intel Corporation was about whether we could survive. Today, it is about how quickly we can add manufacturing capacity and scale our supply to meet enormous demand for our products. This is a fundamentally different company today, and we still have a lot of work ahead. I would like to take this opportunity to thank our many customers, partners, and our hardworking employees across the world for their contributions towards building a new Intel. I remain firmly convinced of, and focused on, the opportunity ahead for Intel Corporation. With that, I will pass it to Dave. David Zinsner: Thank you, Lip Bu. We delivered robust Q1 results reflecting strong demand and better-than-expected available supply. We also benefited from improved product mix and pricing actions, in part to offset higher costs. First-quarter revenue was $13.6 billion, $1.4 billion above the midpoint of our guide. Q1 revenue would have been meaningfully higher, but demand continues to outpace our growing supply. Our collective AI-driven businesses now represent 60% of revenue and grew 40% year-over-year. These results reflect real and deliberate changes we have made to be more responsive and accountable. This quarter, our teams worked directly and diligently with customers to reach mutually beneficial outcomes in weeks, not months. We value the partnership and support shown by our customers, partners, and suppliers as we work to navigate this environment together. Non-GAAP gross margin came in at 41%, approximately 650 basis points ahead of guidance due to the combination of higher volume, which included previously reserved inventory, mix, and pricing. In addition, better yields on Intel 18A offset some of the higher costs we always incur in the early part of ramping a new node. We delivered first-quarter non-GAAP earnings per share of $0.29 versus our guidance of breakeven on higher revenue, stronger gross margins, and continued spending discipline. Q1 EPS included a roughly $0.06 one-time gain in interest and other. Q1 operating cash flow was $1.1 billion with gross CapEx of $5 billion in the quarter and adjusted free cash flow of minus $2 billion. Moving to segment results. CCG revenue was $7.7 billion, down 6% sequentially and better than our expectations. Even with improved factory output, demand outstrips supply against a client TAM that remains resilient despite industry-wide component shortages and inflationary pressures. Our AIPC revenue grew 8% sequentially and now represents greater than 60% of our client CPU mix. Operating profit for CCG was $2.5 billion, 33% of revenue, and up approximately $300 million quarter-over-quarter on improved mix and product margins, sales of previously reserved inventory, better 18A yields, and lower operating expenses. Within the quarter, CCG launched Core Ultra Series 3 and expanded our offerings across consumer, commercial, and edge. This has proven to be our strongest product launch in five years, delivering better performance-per-watt, stronger integrated graphics, and more capable on-device AI features, all while maintaining our broad ecosystem of compatibility that partners and customers value. In Q1, CCG also expanded the reach of our Core family by launching the Intel Core Series 3 processor, which brings the latest IP, modern features, and all-day battery life to the mainstream for the first time. We are enabling a new class of mainstream systems that once again set the standard for everyday computing. DCAI revenue was $5.1 billion, an increase of 7% sequentially and 22% year-over-year, well above expectations and reinforcing the strong year of growth for DCAI we signaled 90 days ago. Strength continued across all segments and customers, as investments in CPUs are accelerating to support the evolution of AI from foundational training to inference and from inference to agentic. We also saw strong ASIC growth with revenue up more than 30% sequentially and nearly doubling year-over-year. Operating profit for DCAI was $1.5 billion, 31% of revenue, and up approximately $292 million quarter-over-quarter on improved product margins, better cycle times and yields, especially on Intel 3, and lower operating expenses. Within the quarter, DCAI signed multiple long-term agreements, including Google, supporting our view that the current business momentum is sustainable. In addition, Xeon 6 was selected as the host CPU for NVIDIA’s DGX Rubin NVL8 systems, and Xeon remains the most deployed host CPU due to its industry-leading memory, security, and networking orchestration. Lastly, DCAI also established a multiyear collaboration with SambaNova to design a next-generation heterogeneous AI inference architecture combining SambaNova’s RDUs and Intel Xeon 6 processors. Intel Foundry delivered revenue of $5.4 billion, up 20% sequentially, on increased EUV wafer mix driven by Intel 3, and significant growth in advanced packaging. External foundry revenue was $174 million in the quarter. Intel Foundry operating loss in Q1 was $2.4 billion, improved $72 million quarter-over-quarter as better yields across Intel 4, Intel 3, and 18A drove higher gross margins. This was mostly offset by increased operating expenses associated with an intentional step-up in Intel 14A investments to support both internal and external customer evaluations. As a reminder, Intel Foundry carries the bulk of the cost associated with the early ramp of Intel 18A, and we expect Intel Foundry’s operating loss to improve through the year as 18A continues to ramp into volume and yields improve further. Within the quarter, Intel Foundry delivered output above our expectations, drove steady improvements in yields, and met key 14A milestones. Intel Foundry also added to its backlog of advanced packaging services and announced a multiyear expansion of our back-end facilities in Malaysia. This expansion will help support the committed demand that will begin to convert to revenue in 2027. Turning to All Other. Revenue came in at $628 million and was up 9% sequentially due to a strong quarter for Mobileye. Collectively, the category delivered an operating profit of $102 million. Now turning to guidance. As we look ahead, we remain mindful that the macroeconomic and geopolitical environments are dynamic. Views on global growth, policy, and trade continue to shape customer behavior and investment decisions. In addition, constraints and rising prices around key components like memory, wafers, and substrates are driving higher costs that could impact demand for our product at some point in the year. We are prudently planning for PC demand to weaken in the second half of the year and expect the full-year PC unit TAM to be down low double-digit percent, in line with industry peers and experts. Offsetting this, near-term customer order patterns remain very robust across all of our businesses. In addition, our confidence in the sustained growth of CPUs, driven by the AI infrastructure buildout, is growing. Our outlook for server CPU demand has improved over the last 90 days, and we expect a strong year of double-digit unit growth for the industry and for us, with momentum extending into 2027. Combining all of these factors, we are guiding Q2 to a range of $13.8 to $14.8 billion, up 2% to 9% sequentially. As we work hard to support the needs of all of our customers, we expect sequential revenue growth in both CCG and DCAI on improved supply and a full quarter of pricing actions, with DCAI up double digits. At the midpoint of $14.3 billion, we forecast a gross margin of 39%, a tax rate of 11%, and EPS of $0.20, all on a non-GAAP basis. Our Q2 gross margin guide declines modestly from Q1 due to a meaningfully larger contribution from Intel 18A, still early in its ramp, and some inventory benefits in Q1 that are not expected to repeat in Q2. On the full year, we expect our factory network to continue increasing available supply in the third and fourth quarters at a more measured pace than we anticipated 90 days ago, reflecting the base effect of much stronger-than-expected first-half output. We also expect 2026 revenue on a half-on-half basis to follow the seasonal trends experienced over the last ten years, with servers above and PCs below. We were very pleased with Q1 gross margins, and we will continue to push for gross margin expansion. It is my top priority. Our foundry team is delivering consistent yield and throughput improvements across all process nodes, which will help gross margins. With that said, Intel 18A is still early in its ramp, and rising input costs, especially in memory, present growing headwinds in the second half that we need to overcome. For OpEx in 2026, we had been directionally targeting $16 billion but are likely to be higher due to inflationary pressures, variable compensation, and targeted investments we are making to capture the opportunities ahead. The drive for efficiency is core to the new culture Lip Bu is creating, and we will remain laser focused on finding additional operational improvements and maximizing ROI on all of our investing activities. We forecast capital expenditures in 2026 to be flat to last year versus our prior expectation of flat to down, reflecting increased capacity investments to support committed demand and a continued emphasis on improving fab productivity and output. We now expect expenditures to be roughly equal across the year and still to be heavily weighted towards the equipment that directly grows wafer outs to support growth this year and next. We recently closed the transaction to repurchase the 49% equity interest in the joint investment in Fab 34 in Ireland, a highly accretive deal allowing our shareholders to participate in the full economic benefits from a fab just now hitting its stride. As a result, we now expect noncontrolling interest, or NCI, to net to approximately $250 million in each of Q2, Q3, and Q4 of this year, and be approximately $1.1 billion for 2027 and 2028, on a GAAP basis. Lastly, excluding the buyout of the Fab 34 joint investment, we still expect positive adjusted free cash flow for the full year. As a reminder, we funded our purchase with approximately $7.7 billion in cash and $6.5 billion in new debt. We remain committed to retiring all $2.5 billion of maturities as they come due this year and all $3.8 billion in 2027. In closing, Q1 was a strong quarter financially and operationally. All demand signals continue to emphasize the growing and essential role of the CPU in the AI era and the unprecedented demand for leading-edge wafers and advanced packaging to realize the vision of driving silicon-based intelligence to the edge efficiently and at scale. Our confidence is growing. We have the right team and the broad IP portfolio needed to solve our customers' most pressing economic challenges and drive long-term value for our shareholders. With that, I will turn it over to John to start the Q&A. John Pitzer: Thank you, Dave. As a reminder, please ask one question and a brief follow-up in order to allow us to accommodate as many callers as possible. We will now open the call for questions. Jonathan, can we please take the first question? Operator: Certainly. Our first question comes from the line of Ben Reitzes from Melius. Your question, please. Benjamin Reitzes: Hey, guys. Thanks a lot, and congrats on the quarter, and this is good news for the country too. Regarding my questions, the first one is on LTAs. Could you just talk about the Google deal, and then there was a comment in the release that you signed other LTAs. How are these structured, and how do they get better for you in the long term in the next phase? Lip Bu Tan: Yeah. Good question, Ben. Let me describe Google as one of the multiple long-term contract agreements in Q1, and this is significant. With Google, we have the Xeon in production, and we are building a long-term, trusted partnership. It is very important for us. It is evidence of strong demand for our CPU and some of the ASIC business. That is important for us, and this is a good example of how we win in the AI infrastructure buildout. Stay tuned. At the right time, we will announce other contracts. Dave, anything to add? David Zinsner: Maybe just to add, most of these agreements are structured with volume and pricing, and they are usually somewhere between three and five years. The Google one, I think both parties wanted to see an announcement. In some cases, customers want to keep that confidential, and we respect their desire to maintain confidentiality, so some of them we just did not announce. It is a win-win in a lot of ways. We get a good understanding of the volumes that we can then build into our assumptions around supply. It is good for the customer because they know where the supply is coming from, and they get a good sense of what pricing they can expect. John Pitzer: Ben, do you have a brief follow-up? Benjamin Reitzes: Yes, thanks, John. With regard to CapEx, is there anything in there with regard to investing in foundry customers? Or is that still not in there? And when do you think we will hear more about that in the CapEx figure? David Zinsner: Let me unpack CapEx just for a minute. We are now calling it flat year-over-year. Initial thinking was that it was going to be down. I think we moved it last quarter to flat to down, and now I think we are looking at flat. That is really a function of the current demand environment we are seeing. One thing to keep in mind: in the last few years, a lot of our CapEx spending was space, and I think we are actually in a pretty good position in space. We wanted to have white space available to move into when needed, and I think Lip Bu and I both feel like we are in a good place. So we will be bringing the space spend down pretty materially, even though the total is flat. What that means is the tool spend is actually increasing pretty significantly. In fact, tool spending will be up year-over-year ~25% or so. That is a function of the fact that we see a lot of demand, and we want to make sure we are catching up on the supply front. As we get into next year, we will have a better sense of what CapEx looks like. As it relates to external customers on the foundry side, our expectation—which we have been pretty consistent on for about a year—is that customer signals would be more concrete in the back half of this year and into early next year. As we pull that information together, combined with our own requirements, which are growing over time, that will give us a good sense of what supply we need over the next few years, and we will put the spend in place. Lastly, our relationship with the equipment vendors is quite strong, so I think we have a pretty good ability to flex as needed. Naga and Lip Bu are in regular engagement with all of the CEOs of the equipment suppliers, so we will be able to manage and course correct as necessary as we get a better sense of the supply dynamics for us, both internal and external, and move our capacity accordingly. John Pitzer: Thank you, Ben. Jonathan, I think we have the next caller. Operator: Certainly. Our next question comes from the line of Ross Seymore from Deutsche Bank. Ross Seymore: Hi, guys. Thanks for letting me ask a couple of questions. First, on the server CPU side, can you talk about how Intel Corporation is positioned competitively? Is the strength that you are seeing more that the market demand is just that high, or do you believe that your product line actually has some competitive differentiations versus either other x86 competitors or ARM offerings? Lip Bu Tan: Yeah, Ross, good question. First, the feedback from the customer is that CPU is very important when you move from training to inference. On the inference side, in terms of orchestration, control plane, and also managing all the different agents with data, CPU is much more efficient. The ratio of CPU to GPUs used to be 1-to-8, and now it is 1-to-4, and I think it could move towards parity or even better. So I think that demand is very strong. On your competitive question, we continue to refine our roadmap—at the end of the day, the best product wins. We have made a lot of changes in terms of CPU architecture to optimize for different workloads. We also have a big advantage: we do not just have the CPU; we have advanced packaging and foundry. We can drive changes more quickly to serve the customer for their different workloads. It is an exciting time—we call it XPU. Besides CPU, we are also quietly building up the GPU with new hires, and we are moving into accelerators so that we can serve the customer from the edge to physical AI and drive new initiatives to stay competitive. David Zinsner: Ross, maybe one other thing to add is that it is obviously early in the Granite Rapids life cycle here, but so far, the early traction has been quite good. We see it as a positive step for the data center CPU business. John Pitzer: Ross, do you have a follow-up question? Ross Seymore: Yeah, I do. You said a year ago Intel Corporation was trying to survive and now it is trying to scale supply—that is a very positive change year-over-year. How does the business model and the spending behavior strategically change in that environment? Dave talked about increasing CapEx a relatively small amount, maybe $17 billion up to $18 billion this year. But if you are scaling supply and supply is under demand across the board, is that something that you can handle with just improving yields, or does CapEx need to go up and maybe call into question the thesis that you are not going to spend on 14A until you actually get customers? Lip Bu Tan: Yeah, good question. In terms of spending, like Dave mentioned earlier, over the last year we have driven a lot of efficiency, flattening layers of management. Now we are really focused on customers and engineering. I spend a lot of time meeting with customers and customers’ customers, understanding the workloads and how we can drive improvements in the architecture, execution, tape-outs, and design to drive efficiency. On the foundry side, we have driven yield improvements—we see very nice yield improvement on 18A. On 14A, we already have the 0.5 PDK available and we are aiming for the 0.9 PDK. That is where customers start to decide which products, how much volume, and capacity we need. Besides driving yield, we are also driving improvement in cycle time so we can meet customer demand and timing and really optimize for them. Operator: Certainly. Our next question comes from the line of Stacy Rasgon from Bernstein Research. Your question, please. Stacy Rasgon: Hi, guys. Thanks for taking my questions. I wanted to dig into the segment outlook and the implications for gross margin. You said data center is up double digits, which puts it up roughly 40% year-over-year. Assuming PC is similar, maybe up low single digits, I am just surprised. I understand the inventory benefit in Q1, but it feels like gross margins are probably flat excluding that inventory benefit, maybe even down a little bit. I am surprised given the magnitude of the server growth, especially given the 18A yields are supposed to be improving. Are they still low enough that the 18A mix is completely offsetting that? Any color on the gross margin drivers in the near term would be really helpful. I am a little confused. David Zinsner: I obviously do not have your model in front of me, but if I unpack Q2, we will see some benefit from pricing. We got a little bit of pricing benefit in the first quarter, but I would expect to see some more meaningful improvement in the second quarter—that is certainly going to help. Mix will be plus or minus in the zip code; data center is going to grow faster, but I am not sure mix drives much. 18A is going to be a pretty decent headwind to our gross margins. If you look at Panther Lake volume increases, it is going to be up six or seven times in the second quarter relative to the first quarter. While the gross margins are improving in Panther Lake quarter to quarter, it is still below the corporate average. When you have that big a shift in the mix, with gross margins below the corporate average, it weighs down on the gross margins. But we are roughly in the zip code of what Q1 was like anyway, so I am not too concerned. In the back half of the year, we will have some dynamics helping us. The one cautionary concern I have on gross margin in the back half is some of the materials cost increases—substrates are going up, glass substrates, memory is going up. Those things offset some of the improvements that we are having through the year. Longer term, I am still hyper-focused on gross margins. We have elements of the roadmap in the right place in terms of cost structure—certainly on client, definitely seeing improvement on the foundry side. We have more work to do on the data center front, but our goal is to get the gross margins up clearly. John Pitzer: Stacy, do you have a follow-up question? Stacy Rasgon: I do, thanks. I want to push on the PC a little bit. You said industry volume is probably down double digits, so it is going to be even worse in the second half given you are running pretty strong in the first half. Do you expect your full-year client revenues to be down consistent with that industry outlook, or is pricing helping you or hurting you? Is share helping or hurting? How should we think about the shape of your client business in the wake of that industry forecast? David Zinsner: Good question. One thing you have to separate is when we talk about the industry, we are generally talking about consumption, and that is different than our billings because of inventory movement to customers. We are not going to be as impacted as the industry TAM because we expect, partly because of pricing a little bit, but also because of inventory replenishment at the customer level. From a modeling perspective, whatever we get to in February is probably what we run the rest of the year roughly. So it is going to be kind of flattish from Q2 onward from a revenue perspective—at least that is how we are modeling it. Operator: Certainly. Our next question comes from the line of Timothy Arcuri from UBS. Your question, please. Timothy Arcuri: Thanks a lot. Lip Bu, I wanted to ask about the evolution of your foundry model. You are of course pursuing typical foundry customers, but it seems like TeraFab is a little bit of a different deal and maybe even like a process licensing agreement. I would not normally ask about one particular customer, but he did talk about it yesterday. Is that going to be a typical foundry arrangement, or are you possibly going to turn the keys over on an entire fab to them? Lip Bu Tan: Yeah, Timothy, thanks for the question. On 14A, we are making great progress in terms of yield and cycle time, and we are engaging heavily with multiple customers. My style is under-promise, over-deliver, so we have no plan to announce the customer unless the customer wants to announce it, and we support that. Back to TeraFab, clearly Elon and I believe that global supply is not keeping pace with the rapid acceleration in demand. We both share the vision that we are going to learn a lot together, exploring innovative ways in process and manufacturing. It is a very broad relationship, and we will update you as we go. Clearly, this is a very exciting customer to work with, and we have multiple other customers we are engaging. Stay tuned. Do you have a follow-up? Timothy Arcuri: I do. Dave, is there a way to quantify how much demand you are missing out on? How much are you undershipping the market still in Q2? Is it as much as 10%—so if you were unconstrained, revenue would be like 10% higher? Is that a reasonable number? David Zinsner: I probably do not want to put a specific number on it. Let us just say it starts with a “b.” So it is meaningful. Operator: Certainly. Our next question comes from the line of Vivek Arya from Bank of America Securities. Your question, please. Vivek Arya: For the first one, I wanted to understand the server CPU TAM growth this year. Dave, I think you mentioned up double digit. Can you help tighten that—10%, 15%, 20%? And then how much ASP expansion do you expect this year also? What I am really curious to understand is the new server TAM growth that you have—how does this compare versus what you thought six months ago, just so that we can get a better sense for what this agentic CPU workload means in terms of incremental unit and ASP growth? David Zinsner: When we are talking about the market, we are generally talking about units. Six months ago, we probably were thinking it would be up instead of down from a units perspective; now it is going to be up meaningfully. I will leave it to industry analysts to pinpoint the exact number. ASPs—we have moved pricing to offset some of the cost increases we have seen over the last couple of quarters, but it is not the biggest driver of our revenue outlook. Unit volume is going to be the biggest driver. That is on an ASP-per-core basis. Obviously, core count is increasing significantly in the data center CPU space, so we get a lift as core count increases, and that is meaningful. John Pitzer: Vivek, do you have a follow-up question? Vivek Arya: Yes, thank you, John. Lip Bu, on server CPU competition—near term versus AMD in x86, do you think you are gaining share and expect to gain share? And then medium to longer term against ARM—NVIDIA is planning to launch a standalone CPU, Amazon has Graviton, Google said they would launch Axion. How do you see competition versus AMD near term and versus ARM longer term? Lip Bu Tan: Good question, Vivek. First, CPU demand is great right now—we all benefit from that. On our product roadmap, we have been fine-tuning. A typical new chip takes about 12 to 18 months. We are laser focused on execution. We are putting simultaneous multithreading into the roadmap—so we are going to have it in Coral Rapids so we can compete effectively with AMD, and we are trying to accelerate Coral Rapids. We are also looking at CPU and GPU architecture and have been recruiting top talent to refine new products to compete effectively. On ARM, clearly we know ARM well. Rene is a good friend of mine. They have a licensing model and have been effective; of course they continue to raise license fees. They also have a silicon team building reference silicon. Amazon and Google are using ARM—that is not news. The good news is we have OEM customers working with us and long-term visions with important customers. The roadmap from Granite Rapids to Diamond Rapids and then to Coral Rapids is coming on strong. We like our portfolio. On the server side, besides x86, we also have the SambaNova partnership for dataflow architecture—we already have some success there. We also recruited top talent—Kavault, who used to run ARM data center server chips, and Srini, who worked with me at Cadence on optimization. All in all, we have the team and the technology roadmap. Over time, we are going to be very competitive. David Zinsner: Keep in mind, Vivek, that beyond the product side, we have another bite at the apple, or maybe multiple bites, on the foundry side. We can provide customers with advanced packaging and wafers. We have a strong breadth of offerings to support their CPU or AI needs in the marketplace. Operator: Certainly. Our next question comes from the line of C.J. Muse from Cantor Fitzgerald. Your question, please. C.J. Muse: Good afternoon. Thank you for taking the question. Could you walk through how you are planning to drive increased output through the second half of the year? How much of it is yields? How much of it is cycle times? How much is incremental wafer fab equipment, as well as outsourcing to TSMC? David Zinsner: First and foremost, we are increasing wafer starts in all three of our nodes—Intel 10/7, Intel 3, and 18A. More meaningfully on the EUV nodes, of course, but even Intel 10/7 will be increasing wafer starts this year. That is a key component of our ability to meet demand. That said, Lip Bu has pushed the team really hard to provide more supply the old-fashioned way with better yields and better throughput, and that is largely how we got it in the first quarter. We can expect him to do that through the year, and I think that will be a meaningful contributor to our output. Of course, we use outside foundries as well, and we flex them as needed. Lip Bu has great relationships with the external foundries, and he is able to leverage that to help us in that area as well. There will certainly be a component of that as we move through the year. Lip Bu Tan: Just to add, TSMC is a very important partner for us. Morris and C.C. and I have decades of friendship. Our product groups will decide which is the best foundry. We are going to use a multi-foundry approach—our own internal and external—so we can benefit customers. C.J. Muse: I do. Thanks, John. I would love to level set where we are on the advanced packaging front. You talked about rising backlog. Anything you can share—what that number looks like, revenue targets this year or next, number of customers? David Zinsner: I have said this in the past—we have been really pleased with our traction there. Maybe naively I thought these opportunities would come in the hundreds of millions of dollars level, but so far what we are seeing is demand in the billions of dollars per year kind of level. This is going to be a big part of the foundry revenue as we get through this decade. The good news is advanced packaging really is a differentiated offering for us and does a lot for the customer, including allowing them to use larger reticles. There is real value to the customer, and as a result we get very attractive pricing relative to some other areas of the foundry business. We would expect this to be at least at foundry average gross margins over time. Operator: Certainly. Our next question comes from the line of Suneet Pajjuri from RBC. Your question, please. Suneet Pajjuri: Thank you. My first question is on 18A yields. Dave, you said the yields are better than you expected and look like they are improving further, but at the same time, it is still a headwind to your gross margin. Can you give us some context as to how much better they are? And as we go through the year, when do you expect that headwind to gross margin to become at least neutral? David Zinsner: 18A yields are a closely guarded proprietary piece of information for us, so we do not typically disclose specifics. I would just say Lip Bu had a target as we came into the year for the end of this year, and we are probably going to hit that around the middle of this year. He has done a very good job working the team to drive a better response there, and of course that carries on to next year’s expectations around yields. As we get towards the end of the year, on a combined product-plus-foundry basis, we will be in a relatively decent place in terms of the gross margins at Panther Lake. We have more work to do at the foundry level to drive gross margins to where we want to be—that is going to be multiple quarters before we get those to be foundry-average gross margins—but it is tracking better than we expected, which is good. We have focused a lot on yields. Lip Bu has brought in a lot of talent into that space, and we have brought in external partners that are particularly good at metrology, which has helped us execute better. We are starting to see the benefits this quarter. John Pitzer: Do you have a follow-up question? Suneet Pajjuri: Yes, thank you. On the ASIC business, Dave, I think you said it doubled year-on-year. Could you help us with what is included in that? I believe it is IPUs? I just want to get a better sense of how big it is, and as we look out to the next few years, what is the strategy for that business to grow? Are you going after the classic ASICs in terms of XPUs, or is this more adjacencies? Lip Bu Tan: Thank you. It is a good question. This ASIC business is sometimes purpose-built silicon optimized for specific workloads that customers want, and that is very important. Besides running and focusing on engineering improvement, we are spending a lot of time with customers. It is important to understand the workload and then tailor for their requirement. It is important to have the right, strong IP portfolio to do that. We have a unique position—we have CPU/XPU and advanced packaging and advanced processing so that we can optimize for the customer. It is a very exciting opportunity and a fast-growing area. We already are engaging with a couple of customers; the feedback is very positive. Stay tuned—over the next five years this is going to be fast growing for us. David Zinsner: One thing that people have been surprised about is how big the business already is—it is at a run rate that is north of a billion dollars already. I think Lip Bu and his partner, Srini, have barely gotten started in terms of what we can make from that, so it has a really strong base from which to grow meaningfully. Operator: Certainly. Our next question comes from the line of Joshua Buchalter from TD Cowen. Your question, please. Joshua Buchalter: Hey, guys. Thanks for taking my question, and congrats on the very strong numbers. I wanted to follow up on Vivek’s question from earlier. You gave some metrics on the near-term CPU TAM, but investors are struggling with how to model CPU demand for agentic workloads. Any help you can provide longer term about how we should think about growth—in units, cores, gigawatts, CapEx? Put bluntly, is the $100 billion number that ARM gave reasonable in your view? David Zinsner: One statistic we look at is the ratio of CPUs to GPUs. If you look at training solutions, they are generally running seven to eight GPUs to one CPU. As we look into inference, it is probably three to four to one. As you get into agentic and multi-agent, it is potentially even flipping the other direction a little bit. That is one way to think about it. As you think about the growth rate going forward, it is going to become a significant part of the AI TAM. Keep in mind, data center is where we are focusing a lot of our conversation, but there is going to be AI—and particularly CPU—opportunities in a lot of different areas: the client space migrating toward AIPC, edge computing, and physical AI specifically. All of those can benefit a lot from CPUs because of the nature of the power consumption relative to performance. Those areas could have even more explosive growth than the data center space. Lip Bu Tan: Just to add, think about the full stack. For agentic AI and later physical AI, how the CPU optimizes working together with foundation models, using data to drive the massive opportunity in agentic AI. Inference is going to be a much bigger market. Physical AI is another big market. It is hard to quantify, but as we go, we will update you. John Pitzer: Josh, do you have a quick follow-up? Joshua Buchalter: Sure, thank you. As we think about your capacity tightness, the leading-edge foundries are also quite tight. Has this driven any near- to medium-term share gains? And longer term, how important is your captive capacity to winning business with customers on a multiyear basis? David Zinsner: Obviously, all the supply right now—or the lion’s share—is internal. We do expect to win external customers over time. Our captive capacity and advanced packaging are important differentiators as customers think multiyear. Operator: Certainly. Our final question for today comes from the line of Aaron Rakers from Wells Fargo. Your question, please. Aaron Rakers: Yes, thanks for taking the question. On the supply side, I think in prior quarters you suggested you were reallocating some supply of wafers from client to data center, and the notion was that Q1 would be the peak degree of constraint. As you rolled out your guidance for this current quarter, how would you frame the level of constraints you see in the guidance this quarter, and does the back half improve dramatically? David Zinsner: Supply will go up in the second quarter. It is going to go up every quarter now going forward. We were certainly at our lowest point in terms of supply in the first quarter relative to the rest of the year. What we were able to do in the first quarter was go through finished goods inventory and find opportunities to sell product we did not think we would be able to move. It was either de-spec product or legacy product we had shelved, and then we worked with customers and found opportunities for them to leverage that technology in their systems. That helped a lot. I am not sure we have that benefit in the second quarter. We will scrutinize finished goods inventory to see if we can find some opportunities, but for the most part, what we are relying on for volume growth Q2 versus Q1 is increasing supply. John Pitzer: Do you have a quick follow-up? Aaron Rakers: I do. As a follow-up, on the progression of your server CPU roadmap—Xeon to Diamond Rapids to Coral Rapids—and really closing the gap with simultaneous multithreading, any color on the cadence of the roadmap would be helpful. Lip Bu Tan: Clearly, demand is strong, and we have fine-tuned the roadmap. We highlight Diamond Rapids after Granite Rapids, and then Coral Rapids is the next one where we have multithreading. That is our roadmap, and we are laser focused on execution. Meanwhile, we will use our ASIC business to drive some customer requirements with purpose-built silicon in the short term. That is a huge opportunity for us—we have unique assets we can provide. 2026 is the year of execution—we are improving yield, productivity, and cycle time to make sure we can catch up with demand. I would like to thank everyone again for joining us today. It has been an eventful first year for me at Intel Corporation. It is gratifying to see our progress, even as we know we have a lot more to do. I am looking forward to seeing many of you at the JPMorgan conference in May and at Computex in June. Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Operator: Good afternoon. My name is Colby, and I will be your conference operator today. At this time, I would like to welcome everyone to Carlisle Companies Incorporated’s First Quarter 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, we will conduct a question-and-answer session. I would like to turn the call over to Mehul S. Patel, Carlisle Companies Incorporated’s Vice President of Investor Relations. Mehul, please go ahead. Mehul S. Patel: Thank you, and good afternoon, everyone. Welcome to Carlisle Companies Incorporated’s First Quarter 2026 Earnings Call. We released our first quarter financial results today, and you can find both our press release and the presentation for today’s call in the Investor Relations section of our website. On the call with me today are D. Christian Koch, our Board Chair, President, and CEO, along with Kevin P. Zdimal, our CFO. Today’s call will begin with Chris providing key highlights for the first quarter. Kevin will follow Chris and provide an overview of our Q1 financial performance and our reaffirmed outlook for the full year of 2026. Following our prepared remarks, we will open up the line for questions. Before we begin, please refer to slide two of our presentation. We note that comments today will include forward-looking statements based on our current expectations. Actual results could differ materially from these statements due to a number of risks and uncertainties discussed in our press release and SEC filings. As Carlisle Companies Incorporated provides non-GAAP financial information, we provided reconciliations between GAAP and non-GAAP measures in our press release and in the appendix of our presentation materials, which are available on our website. With that, I will turn the call over to Chris on slide three. D. Christian Koch: Thank you, Mehul, and good afternoon, everyone, and thank you for joining us today. Carlisle Companies Incorporated’s first quarter results exemplify the focus and execution our teams consistently deliver even in challenging operating environments. Revenue for the first quarter was $1.1 billion, down 4% year over year, driven primarily by two timing-related factors. First, winter weather delayed projects and shipments across many regions in North America. Second, last year’s first quarter benefited from approximately $15 million of tariff-related order pull-forward from Canadian customers, which did not repeat this year. Despite those headwinds, the underlying fundamentals of the business performed as expected and delivered better EBITDA margins in the quarter despite the sales challenges. As we reflected in our year-end 2025 call, improving profitability was a top priority for 2026. Q1 results reflected strong execution on that priority, with adjusted EPS rising to $3.63, up 1% versus last year, and adjusted EBITDA margin expanding by 50 basis points to 22.3%. It is important to underscore that margin expansion in the quarter was a result of our focused efforts, particularly worth noting in a quarter where volumes were pressured. The margin improvement reflects work that has been underway for several quarters. Our teams have been systematically driving productivity, improving manufacturing efficiency and execution across the network, tightening cost discipline, and simplifying, effectively using all parts of the Carlisle Operating System, or COS. Those actions will continue to compound over time and will drive our forecasted margin expansion under our Vision 2030 goals. This is another reminder that Carlisle Companies Incorporated is built to perform through cycles, not just at peaks, regardless of the environment. Q1 was a demanding quarter operationally, and the team responded exactly the right way. We stayed focused on the areas we can control: cost discipline, thoughtful pricing execution, and supporting customers through innovation and the Carlisle experience. That execution is clearly reflected in our results. Underlying demand trends in our end markets were consistent with the information from our Q1 outlook based on the Carlisle market survey, with weather being the key variable that caused a slight shortfall to projections for the quarter. Reroofing activity grew low single digits, continuing to provide the stable, recurring demand base that defines Carlisle Companies Incorporated’s resilience across economic cycles. Commercial reroofing remains our primary revenue engine, accounting for roughly 70% of CCM’s commercial roofing business, supported by an aging installed base with 20- to 25-year roof life cycles and increasing content per square foot driven by innovation that improves energy efficiency and reduces labor costs. We also understand that to protect and grow our position in the market, we must drive to be the leader in specifications, systems performance, comprehensive warranties, the Carlisle experience, and most importantly, trust with contractors, architects, and building owners—areas where Carlisle Companies Incorporated continues to lead. Importantly, orders improved as the quarter progressed, and we exited March with better momentum than we entered the year. April activity to date has been encouraging, with reroofing work in line with seasonal norms and backlog conversion improving as weather disruptions have subsided. Offsetting this is the continued uncertainty in new construction related to the issues we have discussed before, notably interest rates and economic and geopolitical uncertainty. While we remain early in the quarter, the level of order activity we are seeing gives us increased confidence in the trajectory of the business as we move into the second quarter and into the heart of the roofing season. However, at the same time, we remain cautious about the second half given the ongoing geopolitical volatility. New construction remains soft across both residential and nonresidential markets, as expected. Our full-year outlook does not assume a near-term recovery. A higher-for-longer interest rate environment continues to weigh on construction activity, and our plans appropriately reflect that reality. Turning to pricing and input costs, recent geopolitical escalation has materially increased uncertainty in global energy markets. Rising oil prices impacted our petrochemical-linked raw materials and freight. We acted quickly in mid-March, announcing price increases across both CCM and CWT effective mid-April, and implementing real-time freight surcharges to drive more immediate recovery. In addition, we announced a second round of price increases at CCM today to offset the additional cost pressures that disruptions in the petrochemical supply chain are driving. Those actions are beginning to work their way through the market, and we expect price-cost dynamics to improve sequentially through the remainder of 2026. It is also important to be clear that we are constantly evaluating the actions in the market by our suppliers and will act accordingly to address any misalignment. More specifically, heightened risks surrounding the Iran conflict and sustained disruption through the Strait of Hormuz introduce uncertainty, which we are monitoring very closely. If volatility persists and structural cost levels reset higher, we are prepared to take additional pricing actions as needed. Our approach remains disciplined and deliberate. We have seen this type of situation play out repeatedly during periods of significant disruption. Whether during the global financial crisis, the COVID-19 pandemic, or now amid elevated geopolitical risk, Carlisle Companies Incorporated has demonstrated exceptional margin sustainability. That durability is reinforced by the discipline embedded in Vision 2030, the depth and tenure of our team, our recurring reroofing revenue base, the fact that over 90% of our revenue is generated in North America, and our superior capital allocation approach. Another important contributor to that durability is the way Carlisle Companies Incorporated allocates capital. We view capital allocation as a core competency, not a byproduct of the business. Across cycles, we have consistently prioritized returns over growth for growth’s sake, investing organically where we have durable competitive advantage, pursuing acquisitions only when they meet our stated criteria, and returning excess capital to shareholders when that represents the highest and best use. This balanced and disciplined approach continues to differentiate Carlisle Companies Incorporated and supports our ability to compound value over time. Based on our execution and the actions already underway, we are reaffirming our full-year 2026 outlook of low single-digit revenue growth and approximately 50 basis points of adjusted EBITDA margin expansion. Kevin will now walk through the financials in detail. Kevin? Kevin P. Zdimal: Thank you, Chris, and good afternoon, everyone. I will review our first quarter financial results and then provide additional details on our full-year outlook for 2026, which is unchanged from the outlook we provided in our previous earnings call. Beginning with consolidated results on slide four, first quarter revenue of $1.1 billion was down 4% compared to last year. As Chris mentioned earlier, the two primary drivers of that decline were the adverse impact of this winter’s harsh weather limiting the number of days that roofing contractors were able to spend on the roof, and the absence of approximately $15 million of tariff-related pull-forward that benefited 2025. M&A contributions from our recent acquisition slightly offset the organic shortfall. Adjusted EBITDA was $235 million in the quarter, resulting in adjusted EBITDA margin of 22.3%, a 50 basis point improvement from 2025. The margin expansion on decreased revenue is the result of strong execution led by COS-driven productivity gains, procurement discipline, and efficient management of selling and administrative costs. Adjusted EPS was $3.63 for the quarter, up 1% year over year. This increase was driven by share repurchases, which more than offset lower organic earnings and higher interest expense. Our segment performance starts on slide five. CCM generated first quarter revenue of $758 million, a 5% decline year over year, reflecting lower volumes due to this winter’s weather and last year’s tariff-related pull-forward, along with continued softness in commercial new construction activity, partially offset by solid reroofing growth. CCM adjusted EBITDA was $208 million in the quarter, down 4% year over year. However, adjusted EBITDA margin increased 30 basis points to 27.4%. COS productivity gains, disciplined procurement, and selling and administrative cost controls all contributed to the improvement in the EBITDA margin. Moving to CWT on slide six, CWT reported Q1 revenue of $294 million, down 1% year over year. The slight decline reflects contributions from recent acquisitions, which mostly offset volume pressure from continued softness in both residential and nonresidential new construction activity. CWT adjusted EBITDA was $45 million, down 3% year over year. Adjusted EBITDA margin was 15.2%, a decrease of 40 basis points compared to the first quarter of last year. This margin decrease reflects the impact of lower volumes, partially offset by the benefits of internal initiatives, including footprint consolidation and the expansion of in-house production of expanded polystyrene resin from our Plasti-Fab acquisition. We continue to see a clear path to meaningful margin expansion at CWT over the balance of 2026 as these actions compound and integration synergies build. For your reference, slide seven provides our first quarter adjusted EPS bridge. Turning to slide eight, Carlisle Companies Incorporated’s financial position remains strong. As of 03/31/2026, we had $771 million in cash and cash equivalents and $1 billion available under our revolving credit facility. Our net debt to EBITDA ratio was 1.7 times, within our target range of 1 to 2 times. This financial strength continues to provide us with significant flexibility to invest in innovation and capital expenditures, pursue synergistic M&A, and consistently return cash to shareholders. Moving to our cash flow on slide nine, seasonally, Q1 is the quarter where we deploy cash to pay down year-end incentive and rebate liabilities and build working capital ahead of the construction season. Net cash used in operating activities was $45 million in the quarter, and free cash flow used in continuing operations was $73 million, reflecting a $125 million post year-end settlement of an accrued tax-related liability. Excluding this tax-related payment, operating cash flow improved year over year as we deployed less cash into working capital. During the quarter, we invested $28 million in capital expenditures. We also returned $296 million to shareholders through $250 million of share repurchases and $46 million of dividends, and we are maintaining our pace toward our annual repurchase target for 2026 of $1 billion. Now turning to our outlook on slide 10, oil cost volatility, interest rate uncertainty, and prolonged geopolitical conflicts are adding broader macro pressure to an already soft new construction market. However, based on our progress to date, we are reaffirming our 2026 outlook. We continue to expect full-year consolidated revenue growth in the low single-digit range, and with our recent price increase announcements, we now expect revenue growth at the higher end of that range, along with double-digit growth for EPS. Our consolidated full-year revenue outlook reflects CCM revenue growth in the low single digits driven by higher prices and continued strength in reroofing more than offsetting slower new construction, and CWT revenue also up low single digits as contributions from higher prices and share gain initiatives more than offset continued end market softness. Consistent with our guidance at the beginning of the year, we still expect consolidated adjusted EBITDA margins to expand by approximately 50 basis points for the full year, supported by price realization building through the year to offset raw material increases, continued COS-driven productivity gains across both segments, and the structural operational improvement actions underway at CWT. We will continue to execute the levers within our control while remaining mindful of the macro risk and limited visibility in this dynamic environment. We remain confident in Vision 2030 and our long-term financial targets of $40 of adjusted EPS and 25%+ ROIC. Our path to Vision 2030 is founded on organic growth anchored in steadily increasing reroofing demand and content per square foot, COS-led margin improvements in both segments, disciplined capital return through share buybacks, and targeted, synergistic M&A when the right opportunities are available at the right price. These are flexible, independent levers. Our strategy does not depend on all of them contributing in every year. As we showed under Vision 2025, the trajectory toward the target can accommodate choppy periods, and cumulative execution across these levers over time is what ultimately drives us to our destination. With that, I will turn the call back to Chris for closing remarks. D. Christian Koch: Thanks, Kevin. Overall, the first quarter was challenging, but the team delivered results with the kind of perseverance and disciplined execution that compounds over time and ultimately distinguishes Carlisle Companies Incorporated from its peers. While we are very cognizant of the volatility that continues in the markets, what we are targeting for 2026 is designed to place a minimal reliance on new construction from current levels or a broader macro tailwind. We remain an imperative business with a leading position in what we believe is the most attractive building products market in the world. The structural demand drivers in North America are secular and intact. Our balance sheet is strong. Our operational capabilities are advancing. And our capital allocation remains disciplined. We remain very confident in Carlisle Companies Incorporated’s position as we move further into 2026. Before I close, I want to acknowledge and thank the Carlisle Companies Incorporated employees who produced these results through their daily effort and commitment to excellence. Over the years, they have made the commitment to ensuring our success. Thank you all for your time and continued interest in Carlisle Companies Incorporated. We look forward to providing further updates as the year progresses. I will now turn the call over to the operator to open the line for questions. Operator: Thank you. Ladies and gentlemen, we will now open the call for questions. For the sake of time, we kindly request each person limit themselves to one question to give everyone the opportunity to participate in the question-and-answer session. If you would like to ask a question at this time, please press star then the number one on your telephone keypad to raise your hand and enter the queue. We will pause just for a moment to compile the roster. Our first question comes from Susan Marie Maklari with Goldman Sachs. Your line is open. Susan Marie Maklari: Thank you. Good afternoon, everyone. Good afternoon. My first question is about demand. Can you give us an update on the new products, how they are doing in the market, the path for further introductions that you expect this year, and within that, can you talk about how these product offerings and the service that Carlisle Companies Incorporated has for contractors help in terms of price elasticity? Do you think that is partially what you are seeing when you talk about the level of activity and the improvement you are getting into the spring season? D. Christian Koch: Good questions. On new products, we are forecasting to release just over 10 to 12 new products this year. Probably the biggest one is our ThermaThin R-7 insulation, which I am sure you have read about, what it is doing for R-value per square inch, and the implications for cold storage, for reduced inches on the roof in terms of insulation, or being able to put more inches of insulation on for a given vertical inch. It is significant. We have been out doing testing. We launched at IRE. We won two awards—one from specifiers and industry experts for a new product award, and the other was the show attendees voting it the best new product at IRE. That recognition from both specifiers and contractors is encouraging. The product is gathering momentum in terms of recognition and more testing. We do have test sites where people are using the product and giving feedback, not to determine whether it is good—it is—but to understand how it works and validate some marketing considerations. Deliveries will start around July, so it is creating enthusiasm but not really impacting any growth in Q1 or Q2. We also have a new gun for our foam adhesives that has come out, introduced and reflected more in Q2 as we start to sell it. So a lot of these new products are, I will say, second-half loaded in terms of growth. On how service and new products help, they really do differentiate us in the eyes of the contractor. We want to increase energy efficiency, which is important to specifiers and building owners, and we want to get labor off the roof. As we know, there are labor constraints in the industry. To grow as an industry, we must use the existing labor pool more efficiently. Products like ThermaThin, our new FAST-like scan, and solutions like Peel-and-Stick and Seam Shield are designed to help contractors install faster. Coupled with the Carlisle experience—having the right product in the right place at the right time—contractors are not standing around wondering where the shipment is. They can depend on us. That plays into growth, makes us stickier with customers and architects, and hopefully allows us to grow share while increasing profitability and sales dollars per square foot because we price to value. I hope that covers it. Susan Marie Maklari: That was perfect. And then my second question is on the CWT margins. Can you talk about the efforts coming through there, how we should think about the path of improvement, and your ability to realize some level of expansion this year despite the tough environment? D. Christian Koch: Profitability growth in CWT is a key focus for Frank Ready and his team. We set a goal this year of getting as close as we could to 20%. We want to return to those margins we expected when we bought Henry—into the 20s—and ultimately push to 30% over time. Volumes in resi have been tough, but the team has done a lot: automation, footprint consolidation, and insourcing have had sizable impacts. In Q1, we would have made more traction toward the 20% goal if the mix had been a little different. Sales had a heavier mix on the foam side, which is a lower margin than the retail side we had anticipated in our plan. That was a bit of a drag, but even with that, they are making good progress. We expect progress to play out linearly through Q2, Q3, and Q4, and hopefully a rebound in volume would make a big difference. Kevin P. Zdimal: Yes, we see improvement from quarter to quarter. Q2 might be around 19%, improving to 22% in Q3, and overall for the year, in our guidance, we are looking for at least 100 basis points of margin improvement year over year for CWT. Susan Marie Maklari: Okay. All right. Thank you both, and good luck with the quarter. D. Christian Koch: Thank you. Operator: Your next question comes from the line of Timothy Ronald Wojs with Baird. Your line is open. Timothy Ronald Wojs: Hey, guys. Good afternoon. Maybe just on the pricing piece, are you seeing anything you can share on stickiness? The first round has only been effective for a couple of weeks. Also, usually you need price because of demand-driven inflation, and this is more of a supply-side shock. Does that change how the industry deals with price or how contractors accept price? D. Christian Koch: I will start, and Kevin can jump in. We did have two price increases—one in March and one in April. The effective date of the first one was around April 15. As you know, we are protecting jobs that were already quoted; we did not retroactively increase those. We will see it move through into Q2 and then into Q3. I think the stickiness will be pretty good. There is clear line of sight to the driver. Contractors and distributors see what is happening with oil and petrochemical derivatives, and they understand diesel and freight impacts because they feel them on their own fleets. This is broad-based across the industry, not unique to one player, so I think industry resolve will be there. We will watch it play out in Q2. It is a bit different than a rising-demand situation, but for us, we will control what we can—continue to drive innovation and efficiency, take labor off the roof, and provide value with new products and service. Hopefully that results in share gains or maintenance through a difficult time. Our feeling is there could be resolution sooner than later compared to, say, the residential housing cycle. Kevin P. Zdimal: On CCM margins specifically, as we get into the second quarter, we think we will be approaching 31% EBITDA for Q2, slightly exceeding 31% in Q3, and around 28% in Q4. For the full year, about 50 basis points of improvement for CCM. Timothy Ronald Wojs: Great. I will hop back in the queue. Thanks. Operator: Your next question comes from the line of Bryan Francis Blair from Oppenheimer. Your line is open. Bryan Francis Blair: Thank you. Good afternoon. Somewhat of a follow-up to Tim’s first question. You are still expecting low single-digit revenue growth for 2026, but you have announced a fair amount of pricing since last quarter. In the revised, reaffirmed guide, what are you now baking in for volume versus price per CCM and CWT for the year? Kevin P. Zdimal: It is really the same for both CCM and CWT. As we went into the year, we had said low single digits and talked at the bottom of that range—probably 1%. Now we are talking at the top end of that low single-digit range—about 3%—and all of that improvement is price. We will see some price in Q2 and much more in Q3, so the second half is where more of the price realization comes through, but we will see some in Q2 as well. For the full year, it is hard to put the full number on it, so for now we have increased to 3% for the year, and we will update at the end of next quarter if needed. D. Christian Koch: One addition: we started the year expecting a bit of a favorable from raws, and now our forecast is more neutral as price offsets raw inflation. Operator: Your next question comes from the line of Analyst with JPMorgan. Your line is open. Analyst: Thank you for taking my questions. I would like to double click on distribution channel inventories. There has been industry-wide discussion about consolidation leading to inventory destocking and order volatility with distributors including QXO and other key channel partners. Are you seeing signs that distributor inventory levels and ordering patterns have returned to more normalized levels, and how would you characterize the current activities in your distribution channels? If you could also talk about consolidation dynamics for the short and medium term, please. D. Christian Koch: On inventory, we are moving into what we would think is a more normal inventory situation as we move into the construction season. There needs to be more out there to sustain increased activity and service levels. In Q4, we saw destocking—carrying less inventory with higher interest rates and a less favorable economic outlook. In Q1, we saw a continuation of Q4 levels. As we got into April and closer to the construction season, we saw a pickup in distributors’ willingness to carry inventory if they see building activity improving. The ABI at 49.8, getting close to 50, might support a bit more inventory, and we might also see some inventory picked up ahead of price increases. On distribution dynamics, the QXO situation we have talked about continues to improve, and we continue to have great conversations with them as integrations progress. We also have excellent relationships with other distributors—good programs and progress. The recent TopBuild acquisition activity in the industry is not as impactful to Carlisle Companies Incorporated. Much of that is resi fiberglass insulation where we do not play, and Beacon’s significant presence in shingles is also not a market we are in. So the direct effect is more limited. With QXO and Beacon, we are focused on the initiatives we started the year with to get back to historical levels with both. Operator: Your next question comes from the line of Analyst with William Blair. Your line is open. Analyst: Hey, everyone. Thanks for the question. I wanted to ask about 2Q revenue. Can we assume normal seasonality? And Chris, you mentioned March exited better. Did you see trends improve once the weather got better? D. Christian Koch: Yes, weather improved later in the quarter and activity picked up. We estimate weather impacted about three days in Q1, which we ballpark at around a $30–$35 million impact on the top line. As weather improved in March, momentum improved. ABI trends also looked a little better. Warehousing is improving; our outlook there is up around 2% this year after being down 5% last year. Educational buildings were down about 13% last year, and they are seeing some positive growth. That aligns with ABI improving. The price increase timing also pulled some activity forward into the transition, contributing to momentum exiting March and into April. Kevin P. Zdimal: On quarterly seasonality, we really look at it in buckets. It is a very seasonal business. For CWT, typically about 23% of revenue is in Q1, 27% in Q2, 27% in Q3, and 23% in Q4. CCM is a little different: about 20% in Q1, around 30% in Q2, Q3 a little lighter than Q2, and Q4 is the balance. Operator: Your next question comes from the line of David MacGregor with Longbow Research. Your line is open. David MacGregor: Thank you, and good afternoon, everyone. I wanted to go back to elasticity of demand and the extent to which the rapid onset of higher project costs could give rise to project deferrals or limit job scope. Also, is warranty expiration still a business driver, or are people approaching that differently? D. Christian Koch: We have seen some project delays, but we started seeing them around August–September last year as rate-cut expectations shifted. The current Middle East crisis can cause additional delays, but it has not been as impactful as we might have thought so far. If the crisis continues longer, recovery could take longer and have a bigger impact on prices. Another dynamic is supply availability—similar to labor constraints. If there is not enough supply, delaying a project risks not getting materials later, and labor could be reallocated, pushing work into next year. On warranties, they remain a driver, especially for larger projects. Building management teams value the warranty; they do not want exposure. When a warranty expires, they prioritize reroofing and a new warranty to avoid risk. So for us, availability and supply are bigger concerns than elasticity right now. Operator: Your next question comes from the line of Garik Simha Shmois with Loop Capital. Your line is open. Garik Simha Shmois: Thanks. On the CCM revenue guidance moving toward the higher end of low single digits, it seems driven by pricing. Any change to your volume expectations, especially given momentum in March and April? Is there some conservatism given the magnitude of the price increases? D. Christian Koch: It is largely price-driven at this point. With geopolitical uncertainty, we do not know how much that could impact demand, so as we enter Q2, we are guiding to low single digits at about 3%. Maybe it gets better in the second half, but for now, that is a conservative guide. Operator: Your next question comes from the line of Adam Baumgarten with Vertical Research Partners. Your line is open. Adam Baumgarten: Thanks for taking my question. On the price increases, the ones you announced in March/April were about 5% to 7% on membranes and polyiso. What is the magnitude of the incremental price increases you announced today? The change in guidance to the higher end of the low single-digit range implies realization is relatively low—maybe conservative. And what are you thinking about for price-cost in 2Q? Kevin P. Zdimal: For Q2 price-cost, we are looking to offset cost increases with price—neutral for Q2, and that is the same assumption for Q3 and Q4. It is hard to predict exactly how much pricing and raw inflation we will see. We are seeing raw increases now, which is why the second announcement came out. I would expect that pricing to stick in the marketplace. If it all goes through, you will see higher revenue, but EBITDA dollars will not be incremental from that pricing because it is offsetting raw inflation. The second price increase was approximately 5% to 8%, very similar to March. Operator: Your next question comes from the line of Analyst with Zelman & Associates. Your line is open. Analyst: Thanks. On the raw material piece, can you give us a sense of the magnitude of input cost inflation you are baking into your guidance? Mehul S. Patel: Overall, as Kevin mentioned, moving our revenue outlook from the low single-digit range to the higher end is basically a couple of points of price, and with a neutral price-cost assumption, that implies a similar level of raw material inflation. If you do the math, that implies about high single-digit raw material inflation as a percentage of raws for the full year. Operator: Your next question comes from the line of Keith Brian Hughes with Truist. Your line is open. Keith Brian Hughes: Hello? Can you hear me now? On the last answer, the high single-digit raw material inflation—some inputs are up more, some less. What is the range of inputs coming in year to date? Mehul S. Patel: Yes, Keith. MDI is our biggest raw material purchase. Walking down the top inputs: MDI is up double digits, impacted by supply-demand dynamics and benzene, which is up significantly and linked to petrochemicals. Our TPO resins, closely linked to propylene, are up double digits and tie closely to the propylene index. Polyols are also up, driven by supply-demand dynamics and diethylene glycol, running high single digits. Keith Brian Hughes: On polyols, there have been shortages with a plant outage. Is that causing any problem? Mehul S. Patel: For us, polyols for polyiso insulation in CCM and spray foam in CWT have a bigger impact on CWT given the types of polyols we use. We are in a pretty good position with options to get volume. Keith Brian Hughes: Okay. Thank you. D. Christian Koch: Thanks, Keith. Operator: Our last question comes from David MacGregor with Longbow Research. Your line is open. David MacGregor: Thanks for taking my follow-up. Could you talk about acquisitions made over the past couple of years, synergies captured versus your initial plans, and whether you could squeeze a little more out this year if needed to offset some of the price-cost dynamics? D. Christian Koch: Results vary by deal, as you would expect. At the top end, the MTL acquisition has been exceptional in every way. The management team has done a very good job managing through raw material volatility, taking share, and developing new products. Plasti-Fab has also been a great acquisition; the vertical integration around EPS bead has been valuable. The team continues to invest in automation and strengthen manufacturing in Canada. The fill-in EPS acquisitions are performing, building a North American-wide EPS network. They are meeting deal models. The bigger impact is volume, particularly in CWT, where end markets have been soft. The team’s work on margin expansion continues—footprint consolidation, insourcing, automation, technology, and new products. Could we squeeze more out? We can, but to really push back to the mid-20s, some volume increase would help. The improving ABI and a potential housing recovery would be the bigger drivers. David MacGregor: Got it. Thanks for that detailed answer. D. Christian Koch: Of course. Operator: There are no further questions at this time. I will hand the call over to Chris Koch for closing remarks. D. Christian Koch: Thanks, everybody. It is a very challenging time as we work through these issues. This concludes our first quarter call. We look forward to talking with you again on our second quarter call, and we will have more information about how pricing and everything else has played out by then. Thanks very much. Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.
Operator: Thank you for standing by, and welcome to World Kinect Corporation's First Quarter 2026 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. I would now like to hand the call over to Braulio Medrano, Senior Director of FP&A and Investor Relations. Braulio Medrano: Good afternoon, everyone, and welcome to World Kinect Corporation's First Quarter 2026 Earnings Conference Call, which will be presented alongside our live slide presentation. Today's presentation is also available via webcast on our Investor Relations website. I am Braulio Medrano, Senior Director of FP&A and Investor Relations. With me on the call today is Ira M. Birns, Chief Executive Officer; Michael J. Kasbar, Executive Vice President and Chief Financial Officer; and [inaudible], President. And now I would like to review our safe harbor statement. Certain statements made today, including comments about our expectations regarding future plans and performance, are forward-looking statements that are subject to a range of uncertainties and risks that could cause actual results to materially differ. Factors that could cause results to materially differ can be found in our most recent Form 10-K and other reports filed with the Securities and Exchange Commission. We assume no obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events. This presentation also includes certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures is included in our press release and can be found on our website. We will begin with several minutes of prepared remarks, which will then be followed by a question-and-answer period. At this time, I would like to introduce our Chief Executive Officer, Ira M. Birns. Ira M. Birns: Thank you very much, Braulio, and good afternoon, everyone. I want to start by saying how proud I am of our team. Despite a far more volatile and unpredictable environment than anyone could have expected, we delivered a strong start to 2026, driven by strong execution and the continued benefits of our focused portfolio strategy. As conditions shifted rapidly following the escalation of the conflict in the Middle East, driving sharp price movements and heightened uncertainty across global energy markets, our teams remained focused, disciplined, and deeply engaged with our customers and suppliers. They navigated real-world complexity, managing rapid price changes, logistical challenges, and tightening conditions while maintaining a clear and consistent focus on safely and efficiently serving our customers. That combination of execution, professionalism, and focus is a defining strength of our organization and one that continues to set us apart. Importantly, what you are seeing in these results is not just resilience in a volatile operating environment, but evidence of the successful execution of our portfolio optimization strategy. As we have discussed, our exits from noncore and lower-margin activities, particularly within land, have enhanced our financial flexibility and increased our ability to focus on investing in areas where we see more predictable, durable, and attractive returns. We announced today that World Kinect Corporation will serve as our unified corporate and commercial brand for substantially all internal and external purposes. This is the logical next step in our repositioning efforts and reflects our strategic clarity and conviction in our approach to value creation. Our customers around the world already know us as World Kinect Corporation. And this brand clearly reflects who we are today: a trusted provider of transportation fuels and complementary services. Just as importantly, this return to our roots reflects the progress we have made simplifying the business and allowing our teams to fully focus on the core activities that benefit from scale, generate solid returns, and offer meaningful opportunities for long-term growth. As noted in our earnings release, World Kinect Corporation will remain as our corporate legal name and our ticker symbol will remain as WKC. With that, I would like to provide an overview of each of our core operating segments before passing things over to Mike to walk through the financials for the quarter. Marine results were consistent with what we have long communicated. When prices rise materially and volatility increases, this business performs exceptionally well. It has happened before, and, well, it just happened again. It is important to note that this was not simply a quarter in which markets did the work for us. Performance was driven by teams executing under pressure, actively managing pricing, credit exposure, and operational risk in real time, while continuing to support customers despite challenging market conditions. We consider this a remarkable outcome and I want to recognize our entire marine team for their accomplishments in the first quarter. Aviation also exceeded expectations this quarter, as higher prices and increased volatility expanded opportunities in our core commercial business while also driving increased government-related activity. The integration of the Universal Trip Support Services business is well underway, and we are pleased with both its performance and how effectively the teams are coming together. Land core activities performed largely in line with expectations, with strong cardlock and retail results offset by modest softness in our natural gas business. As I mentioned earlier, we have made significant progress with our portfolio exits and expect the vast majority of that work to be completed by the end of the second quarter. Excluding these exit activities, land delivered an operating margin significantly above the prior year, reflecting continued momentum and the benefits of our portfolio optimization efforts. Across the enterprise, and more broadly across the markets we serve, customers increasingly rely on trustworthy counterparties with scale, financial strength, and execution capability. Our global platform, long-standing supplier relationships, and strong balance sheet position us to meet and exceed customers' expectations and to continue delivering when reliability matters most. Together, this reflects a simpler, more focused business with the scale, measured execution, and balance sheet to perform across a broad range of market conditions. From an earnings standpoint, we delivered incremental profitability in the first quarter, with results supported by the high price, high volatility environment we saw across the market. And while more upside is possible given day-to-day unpredictability, our core expectations for the balance of the year have not changed, and our full-year assumptions have only been adjusted to reflect the profitability already generated during the first quarter. Mike will walk through our updated guidance in a moment. This quarter's performance reinforces my confidence in our platform, the strength of our team, and the durability of our customer and supplier relationships. Our strong results demonstrate the consistency of our model across a wide range of market conditions and the discipline with which we operate. With that, I will turn the call over to Mike to walk through the financial results in more detail. Michael J. Kasbar: Thank you, Ira, and good afternoon, everyone. Before I discuss the results, I want to briefly address our use of non-GAAP measures. As we have stated previously, our GAAP results can include items that do not reflect our ongoing operating performance, such as restructuring and exit costs, impairments, operating results of noncore divestitures and business exits, and other nonrecurring items. We provide reconciliations on our Investor Relations website and today's webcast materials. Total non-GAAP adjustments in the first quarter were approximately $60 million, or $13 million after tax. Now on to our consolidated results, which exclude these non-GAAP adjustments. As Ira mentioned, we delivered a strong first quarter, benefiting from a dynamic market environment. While our results were grounded in our core businesses performing in line with the expectations we set last quarter, they were further enhanced by our team's strong execution and ability to capture additional upside from pricing- and volatility-driven opportunities. Our first quarter results were impacted by the conflict in the Middle East and the related market dynamics. In environments like these, we have demonstrated a proven ability to balance our role as a critical partner to our customers while leveraging our scale, supplier relationships, and the balance sheet to capture market-driven opportunities. That is a key strength of the World Kinect Corporation platform, one that affords us the flexibility to generate incremental value when opportunities arise. While these opportunities are not always predictable, they can be meaningful contributors to our overall performance, as we saw this quarter. On a consolidated basis, first quarter volume was 4 billion gallons, down 6% year-over-year, while first quarter gross profit was $254 million, up 10% year-over-year, which was above our expectations going into the quarter. Since marine was the principal driver of our strong performance this quarter, let us start there. Volumes were approximately 4 million metric tons in the first quarter, up 4% year-over-year, and gross profit was $66 million, up a significant 82% year-over-year. This strong performance marks our third-best quarter on record for marine. We ended the quarter expecting a low-price, lower-volatility environment. However, in March, conditions shifted quickly, with volatility increasing sharply and average bunker prices rising approximately 70% month-over-month. By leveraging our supplier relationships and strong balance sheet, the team did what they do best and executed extremely well, supporting our customers while capturing strong risk-adjusted returns in our core retail business and at our physical inventory locations. As we have discussed in the past, marine's baseline performance in low-price, lower-volatility environments delivers solid returns with minimal working capital requirements. However, when prices rise, credit availability tightens, and volatility increases, the spot nature of the business positions us well and enables us to continue to provide our customers with the products, services, and credit they require when they need those. Our marine business has a proven track record of executing in these environments while maintaining disciplined risk management, and this quarter was no exception. This performance is a testament to our team's capabilities and the optionality embedded in our model. We continue to view this as a major differentiator and a clear driver of value. Looking to the second quarter, we expect marine gross profit to be lower sequentially as price and volatility moderate, though gross profit should be meaningfully higher year-over-year. Now turning to aviation. For the first quarter, aviation volume was down 5%, as expected. However, gross profit was $138 million, up 20% year-over-year, and ahead of our expectations heading into the quarter. Base performance in our core offerings was in line with expectations, and the year-over-year increase was driven primarily by the Universal Trip Support acquisition, which we closed in November, and is performing as planned. Core aviation results exceeded our expectations, driven principally by favorable market conditions, which created some short-term opportunities to generate incremental returns in our core commercial business while also driving increased government-related activity. Looking ahead, we remain confident in aviation's outlook. We are closely monitoring the global supply landscape as we progress through the year. We recognize that if conflict in the Middle East continues for an extended period, it could begin to more broadly impact global supply and customer demand beyond what has so far been generally contained. From a baseline standpoint, and as we discussed last quarter, we expect the benefits of our expanded service capabilities and growing international activity to more than offset any competitive pressure. Heading into the second quarter, we expect our aviation gross profit to be up sequentially, driven in part by the typical seasonal increase in activity as well as some continued contribution from the current market environment, as well as up year-over-year with the inclusion of the Universal Trip Support acquisition. Our land business delivered results in line with our expectations in the first quarter, with volume and gross profit down 15% and 38% year-over-year, respectively, reflecting the impact of our portfolio actions and previously announced business exits. The remaining exit-related activities are progressing as planned and are expected to be materially complete by the end of the second quarter. While these lower-return businesses were a meaningful part of our portfolio in 2025, they are not part of our core growth strategy going forward. However, we continue to invest resources to support customers through a smooth transition. For the quarter, our cardlock and retail business performed well, benefiting from disciplined yield management that helped margins keep pace with higher working capital costs and credit requirements in a rising price environment. These results were offset by our natural gas business, which was negatively impacted by severe weather in the Midwest in January. We expect second quarter gross profit to be up sequentially, though down versus the prior year, principally due to the businesses we have exited or are in the process of exiting, and the resulting impact on the comparative period. That said, we continue to expect our core land businesses to further improve and drive meaningful year-over-year growth, with operating income still on track to nearly double, and operating margin improving significantly toward our 30% target for 2026. Next, I will cover operating expenses and net interest expense. Operating expenses in the first quarter were $181 million, up 2% year-over-year. The year-over-year increase reflects the inclusion of the Universal Trip Support business, as well as higher variable compensation costs driven in part by our strong results in the first quarter. These operating expense increases were mostly offset by lower costs in land from the simplification actions we have been executing. Net interest expense in the quarter was $26 million, up versus prior year, driven in part by a reduction in interest income as well as additional working capital requirements during the quarter as prices increased. With that backdrop, let us turn to our outlook and guidance framework. As a reminder, for 2026, we are providing full-year adjusted EPS guidance. We believe this approach better reflects how we manage the business, accounts for seasonality, and provides investors a clear framework for evaluating performance. For the second quarter, while we do not expect marine to repeat its exceptional first quarter performance, we do expect overall adjusted EPS to be higher year-over-year. For full-year 2026, we are updating our adjusted EPS guidance to $2.65 to $2.85 per share, up from the prior range of $2.20 to $2.40 per share. This reflects our overperformance to date, underpinned by baseline expectations that remain on track. Turning to cash flow. Driven mainly by a sharp increase in commodity prices, which impacted working capital, our first quarter operating cash flow was negative $46 million and free cash flow was negative $69 million. While we expect prices to normalize over the coming quarters, we are proactively managing our exposure, and we believe that we remain well positioned with strong liquidity to deliver positive free cash flow in 2026, consistent with prior years. And finally, a reminder that we returned $86 million of capital to shareholders through dividends and share repurchases in the first quarter. This includes the $75 million of share repurchases we completed in January and discussed in the February call. Moving to the remainder of the year, we remain disciplined in our capital allocation framework, with a key focus on returning capital and delivering long-term value to our shareholders. And to wrap up, I would like to leave you with some key takeaways. First, we delivered a very strong start to the year, with results well above expectations. While our core businesses executed on target, we captured additional upside in a higher price and more volatile market, especially in marine. While these conditions have persisted into April, our outlook assumes a return to a more normalized market environment. Importantly, periods such as these reinforce our role as a trusted partner to customers, driving value with market expertise and access to key supplier relationships, supported by a strong credit and liquidity position. Second, as we discussed, marine delivered extremely strong results in the volatile market, allowing us to capture attractive market-driven opportunities, underpinned by disciplined risk management. The strength of our team and market-leading position enabled us to significantly outperform our expectations for the quarter. Third, aviation outperformed our expectations this quarter, and we continue to benefit from our strong global network and expanding service capabilities. We remain focused on disciplined returns. Our integration of the Universal Trip Support business is on track, and we believe we are well positioned to deliver meaningful year-over-year growth. Fourth, land is progressing well through the exits and divestitures we discussed last quarter. With a simpler, more focused portfolio and improving operating leverage, we are starting to see a steadier, more predictable baseline contribution from our core offerings. We expect to build on this trend as we move forward with a focus on growth, and improved year-over-year operating income and operating margin. And finally, financial discipline remains essential to how we operate. From cost management to capital allocation, we remain focused on executing our strategy, maintaining a strong balance sheet, and delivering consistent core earnings growth and cash flow generation. We will now open the call for questions. Operator: Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. Our first question comes from the line of Ken Hoexter of Bank of America. Your line is open, Ken. Kenneth Scott Hoexter: Great. Thank you, operator. Hey, good afternoon, good evening, Ira and Mike and team. Braulio, great job in a volatile environment. You beat by our estimates at least $0.44. For your full year, you are targeting about $0.45. So, Mike, maybe you answered this a little bit in the last part, but maybe you could delve into it. I guess you are expecting a pullback, right? If you have got, just based on your estimate, you have got what, $2 remaining for the rest of the year, so about $0.66 a quarter. So you are expecting a consistent pullback through the year. Maybe just walk us through how we should think about that. Michael J. Kasbar: Yes. Hey, Ken. Thanks for the question. What we are flowing through our guidance is a pickup from Q1. While we are taking some headwinds into April—obviously the market is pretty volatile—we are balancing it out. There is a lot of quarter left. So our guidance for the remainder of the year holds consistently. The increased guidance really is a reflection of the Q1 overperformance that we have already recorded. So we are maintaining where we were before for the balance of the year. Ira M. Birns: Said in a different way, considering where we informally guided to for the first quarter, that $2 that you are referring to for the rest of the year is pretty consistent with where we thought Q2 through Q4 would be going into the first quarter. There is obviously the opportunity for some additional upside, but as you see from what is going on today, we have a different story every day, and we are assuming that we generate the same level of profitability over the balance of the year that we expected going in. If there is some upside, we will talk about that next quarter. But we decided to play it safe. Kenneth Scott Hoexter: So to be clear, though, what you are saying now is it is not that it has pulled back to that level right now, it is just you are expecting the rollover and pullback in your forecast model. But right now, are we still seeing that volatility in pricing or profit per metric ton or gallon remaining elevated, or has it already backed down to a historical normalized level? Ira M. Birns: It is not back to where it was. It is still above where it was. The peak volatility was clearly when these conflicts happened—the craziness is always most severe at the very beginning, if you combine price and volatility and uncertainty. So there is still some of that. It is not the same degree that it was the first couple of weeks in March. But there is still volatility in the market that is greater than it was in February. No one knows how long that is going to last. It could last another week, another month, another quarter. It is very difficult to predict. If it lasts longer, in theory, there could be some additional upside. But I do not think any of us could predict that one. So again, for now, we are just assuming that the balance of the year comes through the way we forecast before the conflict began, and there is certainly the possibility for some additional upside, but we will wait until we have that in the books and closed before we report on it. Kenneth Scott Hoexter: If we look at bunker fuel—and, Ira, maybe tell me if that is a good read on how we should think about marine—you doubled your gross profit per gallon. What should we expect there? It looked like volumes were down, yet profitability obviously doubled. So maybe talk a little bit about the backdrop on the marine side. Given you said you really do take advantage of that volatile market, talk about the sustainability of that. Michael J. Kasbar: Ken, maybe just to add in, like Ira said, I think that the peak of the volatility we saw so far was in March. So April is definitely coming off that level of volatility, which is one of those areas where you could see some additional incremental contribution. Going off the average of the month, April is performing stronger because, obviously, January and February factored into that. Volatility and price are definitely elevated and higher. So for April, we definitely have some higher level of performance. But as Ira indicated, that can go away quickly. As we said on the last earnings call, we would not have forecasted or expected the increase in price and volatility that we saw throughout the month of March. So we are taking a cautiously optimistic view on the rest of the quarter and about the year kind of getting back to normalized levels. Ira M. Birns: Just some facts. Average prices for the various products in marine at the peak doubled in March versus February's average. They backed off about 20% from that max in April. But they are still well above February's average. So you could look at that number and read into it and say, if we stay at the level that we are even at today, even though it is off the high of March, that could be an opportunity for some incremental profitability—not the same level that we saw in March, but certainly a greater profit contribution than we saw in the first two months of the year. But that number could change dramatically overnight, or maybe it will not. So we are watching that very carefully, and the teams are out there trying to generate the best risk-adjusted returns they can without taking any undue risk in this uncertain environment. Kenneth Scott Hoexter: Ira, maybe that is a good one for you or Mike. Seasonality—how do we think about if you have got maybe a stabilized April and what you are talking about for 2Q through 4Q? We normally seasonally see a sizable uptick in 3Q. Do you think that goes away given this volatility? Or would you still see some seasonality there in terms of the bump? Ira M. Birns: That is really more of an aviation seasonality thing. That does not go away. And that seasonality was factored into our guidance at the beginning of the year. Conflict or no conflict, the third quarter seasonality is still there. The first quarter is generally our weakest quarter of the year—obviously that is not what happened this year. We generally pick up a bit in Q2 and peak in Q3, and then come back down in Q4. So the Q3 story should not change that much. Obviously, the delta between the first quarter and the third becomes a lot smaller than you thought it was going to be at the beginning of the year. We could add the fact that—John, do you want to talk a little bit about what some of the risks to that might be? Unknown Speaker: Well, we have seen a lot of the airlines announcing schedule [inaudible], so that could offset some of the growth that we should be seeing in the third quarter. So that is a possibility that we could see some reduction there. Ira M. Birns: So we will still have seasonality, but of course, we do not know what will happen. You heard, I think, Lufthansa announced that they were cutting back a whole bunch of flights to be precautious. So we could see some volume degradation if this drags on much longer. But even with that, the likelihood is it is still going to be a seasonally strong quarter. It may just not be as strong as we would have thought going into the year if those situations start materializing as the summer season carries on. Kenneth Scott Hoexter: And aviation—just to understand—we saw a nice bump in gross profit per gallon in aviation, not to the extreme we saw in marine. How much is tied to armed services? How much is tied to maybe changing flight patterns given the Middle East? Michael J. Kasbar: One thing to consider, Ken, when you look at our Q1 performance is Universal Trip Support. As a services business, there is no volume associated with that. So when you think about it on a gross margin basis, on a per-unit basis, it is going to show that we are stronger; we did have a good Q1. Kenneth Scott Hoexter: So there were some spot business activities and some government-related activity as well? Michael J. Kasbar: That is not a massive part of our business. That is something that we were able to see some opportunities in during Q1, and the team was able to take advantage of those. However, part of the margin that you are seeing is related to services. Kenneth Scott Hoexter: Okay. And then last one for me—appreciate the time—is thoughts on credit extension. Usually, when prices go up, you have got to extend a lot. We saw accounts receivable go up almost $800 million sequentially. Your payables did almost $900 million. But when you look at the receivables, is that something we should look at? I know you have historically been such good risk managers. Maybe just walk us through that process, because usually it decreases your cash flow, increases your opportunity. Maybe, Ira, just if you want to update on thoughts on that given we have not seen moves like this in a while. Ira M. Birns: Great question. First quarter was literally hand-to-hand combat, customer by customer. Obviously, if you have got a customer with an X-million-dollar credit line and they are pulling the same volume and the price of jet fuel doubles, you need to double their credit line to support that level of volume. You have to decide whether you want to do that. The team has historically done a phenomenal job looking at each and every customer, each and every situation, and determining where we have that room and where we might not, what our options are—and they are all different outcomes. I think we have worked through that. The team has done a phenomenal job of that to date. Obviously, we are spending more time focusing on credit-related risk—not that we do not do that all the time—but we have stepped up that game in this situation. The numbers, as you pointed out, have grown by several hundred million dollars in aggregate. But it is something we do very, very well—something that could always, God forbid, go wrong, but we manage that well. We monitor it on a day-to-day basis and stay as close as we can to our customers, especially the most sizable ones where the risk is greatest. Kenneth Scott Hoexter: That is it for me, Ira. Have a great weekend. Enjoy all the activities, and thanks for the time, guys. Appreciate it. Ira M. Birns: Thanks. Have a good quarter. Bye. Operator: Thank you. I would now like to turn the conference back to Ira M. Birns for closing remarks. Ira M. Birns: Thanks, everyone. I would like to close out by reiterating how proud I am of our team and the incredible effort they put forth in the first quarter—not that they do not do that every quarter—but this quarter I would use a lot of words: incredible, remarkable. John and Mike and I are extremely grateful for that effort. As we look ahead, we are entering the remainder of the year as a simpler, more focused business, built on scale, disciplined risk management, and a strong balance sheet, as I mentioned earlier, and of course supported by our extremely talented and experienced team, as I just mentioned. We will stay close to our customers, execute with the same rigor you saw this past quarter, and remain committed to delivering strong performance through all market environments. We know we have not always painted a clear picture with all the exits and transformation efforts that have almost been completed. I think our story is getting simpler. We are able to focus more on the core businesses that we have had years and years of experience managing, and those businesses are all generating solid returns, and they all have different levels of growth opportunities that we are 100% focused on now. We are moving in the right direction. We appreciate your time and continued interest in World Kinect Corporation, and we will talk to you again next quarter. Thank you very much. Operator: Today's conference call has concluded. Thank you for participating. You may now disconnect.
Operator: Thank you for holding. For Betterware de México, S.A.P.I. de C.V.’s first quarter 2026 conference call. The conference will begin in a few minutes. We appreciate your patience. Thank you, and welcome to Betterware de México, S.A.P.I. de C.V.’s first quarter 2026 earnings conference call. Before management begins their prepared remarks, please note the disclaimer regarding forward-looking statements on slide two. This call may contain forward-looking statements that are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Please consider these statements alongside the cautionary language and safe harbor statement in today’s earnings release, as well as the risk factors outlined in Betterware de México, S.A.P.I. de C.V.’s SEC filings. Betterware de México, S.A.P.I. de C.V. undertakes no obligation to update any forward-looking statements. A reconciliation of, and other information regarding, non-GAAP financial measures discussed on this call can be found in the earnings release published earlier today, as well as the Investors section of the company’s website. Present on today’s call are Betterware de México, S.A.P.I. de C.V.’s President and Chief Executive Officer Andres Campos, and Chief Financial Officer [inaudible]. Now I would like to turn the call over to Andres Campos. Please go ahead, sir. Andres Campos: Thank you, Operator, and good afternoon, everyone. Thank you for joining our call today. First, I would like to introduce our new CFO. He brings more than 30 years of experience in senior finance roles within multinational consumer companies, playing strategic roles in expanding their brand portfolios and entering new geographic markets, both of which are integral to Betterware de México, S.A.P.I. de C.V.’s own growth strategy. His experience and leadership will be instrumental in supporting our growth objectives. Turning to key highlights on slide four, we delivered slight revenue growth of 0.3% year-over-year and EBITDA growth of 14% year-over-year, expanding our EBITDA margin from 15.3% to 17.4%, supported by improving profitability across all of our business units. Net income and free cash flow remained strong and reflect a more normalized quarter without the extraordinary effects seen last year. Turning to slide five, we continue to diversify our revenue mix in terms of brands and geographies. We expect this trend to accelerate once we receive regulatory approval of the Tupperware transaction, which we expect to happen in Q2. In addition to significantly diversifying our revenue and giving us entry into the Brazilian market, this new brand will be immediately earnings accretive, contributing an estimated 40% to earnings per share. Looking at revenue on a quarter-on-quarter basis, I would like to highlight the early success of BetterWorld’s expansion into Ecuador and its improving performance in Guatemala, the contributions of which increased from 0.1% to 0.7% of total revenue over the past year. We expect this share to continue growing as the business scales in the region. Now, I will hand the call over to our CFO so he can explain Betterware de México, S.A.P.I. de C.V.’s key financials in detail. Raul: Thank you, Andres. Very excited to be part of the team. Let us turn to slide six. Contributing to the 0.3% year-over-year increase in revenue was BetterWork, which grew 2.6% despite one less week in the quarter and which benefited from its geographic expansion. Improving trends at Jafra US also contributed to Betterware de México, S.A.P.I. de C.V.’s top-line growth, which was partially offset by lower sales at Jafra Mexico. Looking at the associate base, we are beginning to see the impact of targeted initiatives, with BetterWork’s base returning to growth. Although Jafra Mexico’s associate base declined as a result of our focus on productivity, we are now shifting towards initiatives aimed at attraction and retention, which we expect to begin showing results in Q2. These trends demonstrate improving momentum across both businesses and position us well for sustained growth. On slide seven, EBITDA performance reflects a clear improvement in profitability across our business units, with margin expanding 211 basis points to 17.4%. It is important to note extraordinary expenses related to the Tupperware transaction impacted the margin. Without these expenses, margin would have been approximately 18.4%. On the right-hand side of the slide, net income accelerated, nearly doubling year-over-year, reflecting a return to more normalized profitability levels following the extraordinary expenses recorded in the prior year, as well as lower interest expenses. Overall, Betterware de México, S.A.P.I. de C.V.’s improving profitability embodies our fifth strategic pillar of maintaining financial discipline. Turning to the next slide, free cash flow normalized during the quarter, converting 58% of EBITDA into cash, supported by stronger underlying profitability and continued discipline in working capital management, particularly with respect to inventory. This will enable us to pay our twenty-fifth consecutive quarterly dividend since going public, which the board has proposed at MXN $200 million, subject to shareholder approval. Dividend payments remain aligned with our disciplined capital allocation framework, maintaining a 33% trailing twelve-month dividend-to-EBITDA ratio, while also using the cash we generate to further reduce debt leverage and continue investing in geographic expansion. Slide nine summarizes Betterware de México, S.A.P.I. de C.V.’s financial strength. Total debt continued falling, with net debt to EBITDA improving to 1.5 times. Following the completion of the Tupperware transaction, we expect our leverage ratio to increase to approximately 1.9 times, with the aim of maintaining healthy leverage levels. As you can see in the chart at the left of the slide, we successfully reduced leverage from 2.4 times at the end of 2022 and 3.1 times at the time of the Jafra acquisition to current levels. Our asset-light model remains a key source of resilience, with ROTA improving to 22.7%, demonstrating greater capital efficiency and stronger profitability. On the right-hand side, you can see that returns have also strengthened versus last year’s quarter, with ROIC increasing to 27% and EPS reaching MXN $31.9 on a trailing basis, reflecting a stronger earnings profile. Overall, we are not only improving profitability, but also translating these gains into stronger results, a healthier balance sheet, and high returns on capital, while enabling us to continue funding initiatives across our five strategic pillars. I will now pass the call back to Andres, who will talk more about each brand’s performance as well as provide an update on the strategic pillars. Andres Campos: Thank you. Turning to slide 10, as in previous quarters, we continue advancing across our five strategic pillars, which define the next stage of Betterware de México, S.A.P.I. de C.V.’s evolution. First, strengthen our leadership in Mexico with our BetterWear and Jafra brands. Second, continue our regional expansion, driving Jafra’s growth in the US and selectively expanding across LatAm. Third, develop or acquire new brands and/or product categories. Fourth, further advance our digital transformation. And finally, maintain strict financial discipline, prioritizing profitability, cash generation, and a strong balance sheet as the foundation of sustainable long-term growth. These pillars remain the framework guiding our strategic decisions and capital allocation going forward. On slide 11 is the first pillar, strengthening our leadership in the Mexican market. Starting with BetterWear on the next slide, the business delivered a solid start to the year with improving commercial momentum. We are seeing a clear inflection point in the associate base, which has returned to growth and is beginning to rebuild scale. This represents an important milestone, as it supports the recovery in revenue and reinforces the strength of our commercial model going forward. It is important to note that the quarter had one fewer week compared to last year, which affected reported growth. On a comparable basis, revenue growth would have been approximately 3.3%. Additionally, although Latin America is currently only 1.7% of BetterWorld’s total revenue, it is expected to continue expanding as we further scale our regional operations. On the right-hand side of the slide, EBITDA margin improved significantly by 190 basis points to 20.5%, with EBITDA increasing 12.9% year-over-year, driven by disciplined cost management and solid execution. Gross margin remained stable despite external pressures. On slide 13, we highlight the progress we are making against the strategic initiatives outlined for 2026. As a reminder, our key priorities for 2026 include innovation, catalog redesign, enhanced associate service, new technology capabilities, and the new payment system. Starting with innovation, we are seeing strong performance from our new fast consumption product line called Better Clean Tabs, as we continue to expand into higher-frequency consumption categories. On catalog redesign, our new catalog format is progressing well and is set to launch in the second half of the year. In terms of associate service, we are currently piloting a new segmentation within our incentive program aimed at enhancing engagement and driving activity, with a broader rollout expected in the third quarter. On the technology front, we have introduced new analytical capabilities and are advancing the development of new BetterWare Plus app features alongside the implementation of our Salesforce CRM, expected to launch in Q2. Finally, regarding our payment system, we are in the pilot phase, with ongoing testing and analysis as we prepare for a full rollout during the second half of the year. Overall, we are making solid progress in executing our 2026 priorities, reinforcing the foundations for sustainable growth. On slide 14, Jafra Mexico’s quarter reflects a temporary moderation in revenue growth. This was mainly driven by a shift in focus towards productivity of the existing consultant base, which ended up undermining base expansion. We recently implemented initiatives to rebalance our focus on capturing associate growth, which we expect to see results during the second quarter. It is important to mention that, according to the latest market reports for 2025, we have reached the number two position in the beauty market in Mexico within the direct selling channel, up from number four at the time of Jafra’s acquisition in 2022. Additionally, we now rank number seven in the overall beauty market in Mexico across all distribution channels. On the profitability side, the business delivered strong improvement, increasing EBITDA margin by 165 basis points to 17%, supported by better cost management, benefits of restructuring initiatives implemented last year, and lower extraordinary expenses. Moving on to the next slide, Jafra Mexico is also making solid progress in executing its 2026 priorities. Starting with innovation, we returned from renovation to innovation, highlighted by the launch of the new Stitch sunblock through our partnership with Disney, among other innovations, as we continue to expand our portfolio and refresh key categories. On sample trial initiatives, we have introduced increasing quantities of sensorial sampling, enhancing the product experience for consultants and customers. Regarding subscription models, we launched our new plan in March, which is already showing early traction and supporting retention. In terms of associate incentives, we are advancing our segmentation strategy with new structures designed to better address different associate profiles, with further rollout expected in Q3. Finally, on the Jafra Plus platform, we are progressing with the implementation of our new CRM expected in Q2 and the Jafra Plus app, which is set to launch in Q3. Overall, these actions position Mexico to transition into its next phase of growth. On slide 16, we highlight our second strategic pillar, which is regional expansion. Turning to slide 17, the business continues to show significant progress in the US, with net revenue in US dollars increasing 8.6%, supported by an expanding associate base growing 3.4% year-on-year and improved productivity. At the same time, profitability improved meaningfully, driven by disciplined cost management. Importantly, excluding extraordinary legal expenses, EBITDA would have been positive, with a margin of approximately 2.6%, showcasing the increasing strength and independence of our Jafra US business. Turning to slide 18, we are pleased to announce the launch of BetterWork Colombia. This marks an important milestone in our regional expansion, further strengthening our presence in the Andean region, building on the success we have seen in Ecuador. Turning to slide 19, our operations in the Andean region and Central America continued to show strong momentum. Both the Andean region and Guatemala remain on a sustained growth trajectory, supported by continued expansion of the associate base. In the Andean region, we have reached approximately 14,000 associates, reflecting solid progress in building scale in a relatively short period of time. In Guatemala, the associate base has also continued to expand, reaching approximately 2,200 associates, demonstrating strong traction and growing engagement in the market. While these markets continue to scale rapidly, they still represent a small portion of total revenue, accounting for 0.7% of the group’s revenue and 1.7% of the BetterWear brand. Turning to slide 20, we continue advancing on our strategy of incorporating new brands and categories that complement our portfolio. We announced the acquisition of Tupper on January 19, and we continue to await approval from the antitrust authority in Mexico, which we expect during 2026. We see significant potential in the Tupperware transaction, as it is highly accretive and strategically positions us to penetrate the far larger Brazilian market, while this iconic brand provides additional expansion opportunities across the region. Turning to slide 21, our digital transformation continues to be strategic and a key enabler across all our strategic growth pillars. Our main objective on this front remains accelerating growth through a digital platform that maximizes the sale opportunity of every person-to-person interaction. On slide 22, we outline our digital transformation across three main pillars. First, growing the business for our distributors and associates. We are focused on enhancing our associates’ and distributors’ digital capabilities, with the first phase of trials underway, to equip them to better leverage digital tools and drive performance with the use of our platforms. Second, digitizing Betterware de México, S.A.P.I. de C.V.’s core operations. This includes customer service automation and end-to-end automation of commercial processes by implementing a CRM with Salesforce and a new artificial intelligence committee. And third, leveraging our data with initiatives like our new BetterWordPlus analytics platform, which helps us improve all of our digital tools. Finally, our fifth pillar, financial discipline and control, which remains the backbone of our strategy. It continues to guide how we allocate capital and operate across the organization, enabling us to grow while preserving the strength of our balance sheet even in volatile operating environments. We remain firmly focused on tight cost management, efficient inventory control, and working capital execution, and on maintaining a prudent leverage profile. Financial discipline is not just a pillar of our strategy; it is embedded in how we operate every day. We are sure that with our CFO’s leadership and experience, we will continue to maintain and improve our strong financial discipline. With this in mind, we began 2026 with a solid performance, reflecting improving momentum across our business units and continued progress in strengthening our commercial and operational execution. While revenue growth at the group level remained modest due to a temporary slowdown in Jafra Mexico, all other business units delivered strong momentum. Additionally, profitability improved meaningfully, supported by better operating efficiencies and disciplined cost management, with all business units contributing to this improvement. At the same time, our expansion strategy continues to gain traction, with renewed momentum at Jafra US and sustained growth across our Andean and Central America operations, including the successful launch of BetterWork Colombia. Looking ahead, we continue to advance on the Tupperware transaction, actively preparing for its integration and achieving the value creation opportunities it represents while we await regulatory approval. Betterware de México, S.A.P.I. de C.V. today stands as a stronger, more diversified, and well-positioned group, with a clear roadmap for long-term value creation, and the start of 2026 reflects a solid footstep into that future. With that, I will pass the call back to our Operator for any questions you may have. Thank you. Operator: Thank you. We will now open the call for questions. To ask a question, dial in by phone and press star then 1 on your telephone keypad. Make sure your mute function is off. If you are using a speakerphone, please pick up your handset before pressing the star keys. To withdraw your question, press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question is from Eric Beder with SCC Research. Please proceed. Eric Beder: Good afternoon. Andres Campos: Hi, Eric. How are you? Eric Beder: I am good. How are you doing? Good, thanks. Could we talk a little bit about the state of the Mexican consumer? I know that Q1 last year was a bit of a shock to them, and how are you seeing them now, and what are they looking out for right now in terms of their purchases going forward? Andres Campos: Sorry, Eric. We had a little bit of a problem there. Can you repeat the question really quickly? Eric Beder: Sure. So what is the state of the Mexican consumer right now? I know last Q1 it was affected by tariffs. What are we seeing now, and what is the Mexican consumer looking for, and how are you changing and shifting for that? Andres Campos: Thank you, Eric. That was clear. We are seeing a slight rebound in consumption in the first quarter. Consumption growth has been decreasing for the past three or four years, and we hit the lowest growth last year with about 1.1% growth in consumption. This year, the expectation is 1.6%, so it is a little rebound, and we are seeing in private consumption up to January and February a slight rebound. It is not a huge rebound; it is a slight rebound. But this helps to change the trajectory in the Mexican consumer and consumption in general. We think this is good news, and we hope to continue seeing this trajectory in the quarters to come. Eric Beder: You did a great job again with inventory, down a significant level, materially higher than the revenue change. When do you start to anniversary that, and what will be the goal after you get there? Andres Campos: Do you mean inventory? Eric Beder: Yes. Andres Campos: As we mentioned before, in inventory, we had already lowered it up to the fourth quarter of last year. It remained pretty stable at those levels at the end of this quarter. We do expect a slight decrease throughout the year. We were talking about a MXN $100 million more of a decrease, but we do not see inventory declining much further after that. We think that we have reached nearly our optimal levels and think it can remain stable from there. Eric Beder: Last question. You announced the acquisition of Tupperware Latin America. I know in the last few months you have met with a lot of people at that company. Are you more excited, less excited? How are you feeling about this acquisition now that it has been announced and you have gone out to the field to talk to people? And how do you look at the near- and longer-term opportunities here? Thank you. Andres Campos: Thank you, Eric. We are very excited about this acquisition. As we have mentioned before, we are still pending approval from the antitrust agency in Mexico, which we expect to happen during this second quarter. We think that Tupperware is a very well-positioned brand in customers’ minds across Latin America. It is not only well positioned, but a very valued brand throughout the years. There is a lot to do in terms of product innovation and of replicating Betterware de México, S.A.P.I. de C.V.’s model in Tupperware in terms of merchandising, innovation, and many things that we can really leverage on such a great brand. We are also very excited to tap into LATAM’s biggest market, Brazil, with a strong foothold when we start. It is already an approximately $100 million revenue company there, so it is a strong foothold to really take off in the Brazilian market. We are very excited and hope we get that approval in the coming weeks during this quarter, and then take off from there. Eric Beder: Great. Thank you, and good luck for the rest of the year. Operator: If you have a question, please press star then 1. Our next question is from Cristina Fernandez with Telsey Advisory Group. Please proceed. Cristina Fernandez: Hi. Good afternoon, Andres and Raul. Nice to meet you. I have a question on Jafra Mexico. When you look at the performance this past quarter, and we also started to see a little bit of a slowdown the quarter before, how much of that do you think is a slowdown in the broader beauty market, or is it just specific to Jafra Mexico and some of the points you talked about as it relates to the consultant recruiting and the innovation? Andres Campos: Thank you, and hi, Cristina. We definitely think it is more internal than external. We see the beauty market continue to grow and continue to expand in Mexico, and it is still a category that has a great tailwind. We expect that to continue. The internal factors that we think impacted the fourth quarter and the first quarter were mainly two. One is that last year we focused more on line renovations than on real innovation. When you are renovating your lines, there is not as much impact as when you are actually innovating into new categories, new concepts, and new lines. We think that had an effect. As we said, last year we finished all our renovations, and this year we are focusing again on real innovation. We are strengthening our partnership with Disney. We launched the Stitch Sunblock, which has been a great success. We launched many different products with Disney, and we are also launching new innovations that are going to impact positively this year. So that is one part, a refocus into innovation. The second part is that while we were trying to incentivize more productivity from our associate base, we think that affected bringing in new associates and also keeping our small, unproductive associate base active. That was an internal factor that made the associate base decrease, and we were not able to compensate with productivity, so growth slowed down. We have already detected everything there and reversed it, starting in March and more so in April, and in April we are back to where we need to be. We expect a rebound throughout the year, and we expect that rebound to start in the second quarter, to get an inflection point and then strengthen growth again throughout the year. We think it is a temporary internal situation that should reach its inflection point in Q2 and start strengthening growth again going forward. With that, we are very happy with our results in terms of profitability. As a group, and even in Jafra Mexico, we strengthened profitability. Across all our businesses, profitability is strengthening, free cash flow is strengthening, and our balance sheet is improving. All of our other business units are growing. Once this issue with Jafra Mexico that we expect to reverse comes back, we think we will have very strong results for the group going forward. Cristina Fernandez: Perhaps a follow-up would be based on the shape of the year you were talking about, because you kept your revenue growth guidance for the year at 4% to 8%, even though the first quarter came in a little bit lower. If I am understanding what you are saying, you expect the second quarter to be better from a growth perspective than the first quarter and then the back half to be the strongest of the year. Is that correct? Andres Campos: Yes, definitely. We expect BetterWorld Mexico’s growth to strengthen. We started the year at 2.6%. On a same-week basis, it was 3.3%, but we expect that growth for BetterWork to keep strengthening. BetterWare Mexico started rebounding in the second half of last year and now we are seeing incremental revenue versus the previous year. At the same time, we expect all of the LatAm expansion of BetterWork to continue contributing to growth. We also expect Jafra US to continue delivering great results. As you saw, we grew 8.6% in dollars, and we expect that to continue strengthening. With this inflection of Jafra Mexico, we think as a group we will start seeing strengthening in growth. We are positive about that, and that is why we are keeping our guidance as well. Cristina Fernandez: Thank you. And the last question I had is, you did a really good job of managing expenses this quarter. Are you seeing any pressure? Should we expect any pressure as the year progresses, either in freight—meaning supply chain or transportation costs—as a result of the volatility in oil prices, or are you contracted out for the year at stable rates? Andres Campos: Yeah. Thank you, Cristina. The volatility that has been happening in oil prices from the whole situation with the Hormuz Strait and all of that is definitely something we are not only keeping an eye on, but we are taking actions. We have seen some slight, temporary increases in freight costs from China because of petroleum. At the moment, we have not received too much pressure from our suppliers in terms of raw material costs. We are vigilant to what happens if this becomes a temporary thing or a more sustained issue, and we are preparing tactics and strategies, as we have done before when things like this happen, to counter these effects. We feel confident that we can react to any sustained pressures from this—not talking about product pricing, but strategies such as negotiations or redesigns or other strategies that can contain any cost increases. It is still early to tell, and we are ready to tackle any counter-effects if this becomes a more long-term pattern. Operator: Thank you, Andres. That does conclude our question. Operator: That does conclude our question-and-answer portion of today’s conference call. I would like to turn the call back over to management for closing remarks. Andres Campos: Thank you, everyone, once again, for your trust and continued support. We look forward to updating you next quarter. Thank you once again. Goodbye. Operator: Ladies and gentlemen, this concludes the first quarter 2026 earnings conference call. We would like to thank you again for your participation. You may now disconnect. Goodbye.
Operator: Hello, and welcome to Newmont Corporation's first quarter 2026 results conference call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Newmont Corporation's Group Head of Treasury and Investor Relations, Neil Backhouse. Neil? Please go ahead. Neil Backhouse: Thank you, Christine. Hello, everyone, and thank you for joining Newmont Corporation's first quarter 2026 results conference call. Joining me today are Natascha Viljoen, our President and Chief Executive Officer, Peter Wexler, our Interim Chief Financial Officer and Chief Legal Officer, and other members of our management team who will be available to answer questions at the end of the call. Before we begin, please take a moment to review our cautionary statements shown here and refer to our SEC filings, which can be found on our website. With that, I will turn the call over to Natascha. Natascha Viljoen: Thank you, Neil, and hello, everyone. Newmont Corporation's focus on operational excellence continues to deliver consistent and predictable performance, with our first quarter results demonstrating that we are on track to achieve our 2026 guidance. Importantly, this consistency is reflected in our compelling financial results. Our unrivaled portfolio of high-quality operations and projects, combined with our focus on cost discipline and productivity, positions us to capture the benefits of higher commodity prices even amid the operational headwinds we experienced in the first quarter, delivering margin expansion and robust free cash flow generation. The benefits of record free cash flow generation are flowing through our enhanced capital allocation framework, resulting in continuous reinvestment in our business, a predictable quarterly dividend, and ongoing share repurchases, supplemented by a new $6 billion share repurchase authorization. Before we review our quarterly results in more detail, I want to begin with an update on Cadia following the magnitude April event. As mentioned in our released statements, our immediate priority was the safety of our people. Our safety protocols operated as designed, and within minutes of the event, all personnel working underground were moved to safe locations before being brought to surface in the subsequent hours following the event, and I am pleased to share that there were no injuries. Based on our initial findings, the damage appears limited, reflecting the strength of our ground control systems. I am pleased to report that the underground power and dewatering systems have been restored and we received approval from the regulator earlier this week to begin repairs. Importantly, all surface infrastructure was inspected immediately following the event and sustained no damage. This includes our tailings facilities. From an operational standpoint, we are currently processing surface stockpiles and expect underground rehabilitation to be completed in the next five weeks, enabling return to 80% operating capacity, with full recovery expected by the end of the second quarter. As a result, second quarter production is expected to be lower due to this short gap in mill feed, with operations returning to normal levels beginning in the third quarter. I want to recognize and personally thank the team at Cadia. We responded quickly and effectively, implementing established emergency procedures to ensure the safety of all personnel and positioning the operation for the best possible recovery. Turning now to our operational performance, in the first quarter, we produced 1.3 million ounces of gold, 50 thousand tonnes of copper, and 9 million ounces of silver, with both copper and silver volumes supporting a favorable byproduct cost profile for the quarter. As the third-largest silver producer in the world, we also benefited from a favorable silver price environment, further supporting our free cash flow generation and unit cost management. Performance translated into strong financial results, including $3.8 billion in cash flow from operations after working capital and $3.1 billion in free cash flow, marking another all-time quarterly record, which is especially notable given the seasonal working capital headwinds typically experienced in the first quarter of each year. During the quarter, we also received approximately $321 million in after-tax proceeds from the sale of equity investments in SolGold and Greatland Resources, along with contingent payments related to the divestments of Musselwhite and Cripple Creek & Victor last year, bringing total after-tax proceeds received from our noncore divestiture program to over $4.6 billion. Touching briefly on cost performance, which Peter will cover in a little more detail shortly, over the last few weeks, the world has experienced a notable increase in energy prices and impacts to global supply chain dynamics as a result of the ongoing conflict in the Middle East. We continue to monitor the geopolitical environment and its potential impact on cost closely, but remain encouraged by our demonstrated ability to effectively manage cost and improve productivity, and are therefore maintaining our full-year cost guidance at this time. Taking our strong first quarter operational and financial performance into account, we expect to remain well positioned to continue executing on the enhanced capital allocation framework that we announced in February. Since our last earnings call, we have reduced debt by an additional $42 million and are pleased to share that we have returned $2.7 billion to shareholders through both regular dividends and ongoing share repurchases, fully exhausting our previous repurchase authorization. In line with our established approach, our board has approved another $6 billion share repurchase program, reinforcing our enhanced capital allocation framework and disciplined approach to returning excess cash to shareholders. This framework is designed to systematically reduce Newmont Corporation's share count and, in doing so, drive sustainable per share dividend growth and improvement across other key per share metrics. Building on our strong first quarter performance and looking ahead to the rest of the year, we remain on track to achieve our 2026 guidance, continue generating robust free cash flow from our world-class portfolio, and return capital to shareholders in a consistent manner. Operationally, we delivered a stronger-than-expected quarter, especially considering challenging conditions faced by several of our sites, including the bushfires at Boddington, where we have since made a full recovery with full throughput capacity back to normal levels for the second quarter. We have had extreme snowfall at Brucejack and record levels of rainfall at Tanami. This performance underscores the strength and resilience of our world-class portfolio, built around high-quality, long-life assets that are intentionally diversified both operationally and jurisdictionally to deliver consistent performance across a range of operating conditions, not only withstanding volatility as it arises, but also capturing value from it. Given this strong start to the year, we believe it is appropriate to maintain our existing production weighting. Our first quarter outperformance provides prudent flexibility to absorb any impact from temporary Cadia downtime in the second quarter as we progress recovery efforts following the earthquake. First quarter production was driven by several key factors. At Cadia, we saw a step up in gold and copper production compared to the fourth quarter, supported by improved throughput and favorable grades from the current panel cave. At Merian, production also increased compared to the fourth quarter as we began to access higher grades from the Merian 2 pit as planned. At Ahafo South, production increased due to higher mining rates and improved underground drawpoint availability. At Yanacocha, we delivered stronger leach production performance from high grades out of [inaudible], and as we discussed last quarter, we have begun executing on a highly capital-efficient plan to continue mining through 2026 and into 2027, adding low-cost ounces that are expected to benefit our production profile in 2027, with further potential upside. Peñasquito delivered strong co-product production in the quarter, particularly silver and zinc, as we continue to process stockpiles during the transition phase between Phase 7 and Phase 8. Finally, the ramp-up at Ahafo North continues to progress very well and in line with plan in its first full year of commercial production. We also achieved several notable milestones in our projects in execution during the quarter. At our Tanami Expansion 2 project, work has now fully resumed following the temporary pause earlier in the quarter, the underground primary crusher is now commissioned, and the materials handling system is on track for completion by the end of the second quarter. We have also completed the investigation into the fatality that occurred at Tanami earlier this year and are committed to ensuring the learnings are shared across our organization and with the broader industry. At Cadia, both PC23 and PC12 are progressing well and are tracking to plan as they move through key phases of development. Newmont Corporation's first quarter performance continues to highlight the strength and resilience of our portfolio, as well as the progress we have made to stabilize and improve our operations, positioning us to deliver consistent performance and achieve our full-year commitments. I will now turn the call over to Peter to walk through our financial results for the quarter. Peter? Thank you, Natascha. Peter Wexler: Thank you, Natascha, and hello, everyone. Newmont Corporation delivered outstanding financial results in the first quarter driven by strong operational performance that Natascha just outlined and a supportive metal price environment. Our continued focus on disciplined execution resulted in adjusted EBITDA of $5.2 billion and adjusted net income of $2.90 per diluted share for the quarter. Most notably, Newmont Corporation generated $3.8 billion in cash flow from operations after working capital and a record $3.1 billion of free cash flow, even after making approximately $1.3 billion in cash tax payments during the quarter. Gold all-in sustaining costs were below our full-year guidance at $1,029 per ounce for the first quarter on a byproduct basis. Our cost profile benefited meaningfully from stronger-than-expected co-product pricing and sales volumes, lower cost applicable to sales as a result of disciplined capital spending, and the timing of sustaining capital. As Natascha noted earlier, we are maintaining our cost guidance and, while higher oil prices may create incremental pressure, we view this as manageable at this time and are actively working to mitigate the impact rather than viewing it as a risk to our operating plan. As a reminder, the guidance we provided in February was based on a $70 per barrel Brent assumption, with diesel making up approximately 6% of our direct operating cost. For every $10 per barrel change in oil prices, we expect approximately a $60 million impact on cost, which equates to roughly a $12 per ounce impact on all-in sustaining costs. We are not currently experiencing any disruption to fuel availability and continue to maintain business continuity by leveraging our scale, and our strong supply chain team is working closely with suppliers to proactively identify and manage risks. While higher fuel prices began to materialize in March, we remain focused on offsetting these pressures through continued cost and productivity improvements across our operations. In addition, in February, we quantified the potential annual impact of the newly introduced Ghana sliding scale royalty on our cost profile. While this will represent an incremental cost headwind of approximately $25 per ounce in 2026, our goal is to mitigate the impact through disciplined cost management and productivity initiatives. Looking ahead to the second quarter, we expect production to be slightly below the first quarter, keeping us on track to deliver our full-year production guidance of 5.3 million ounces. Sustaining capital is expected to increase in the second quarter as we move into the summer season at Brucejack and Red Chris, take delivery of mobile equipment at multiple sites, and continue progressing tailings work primarily at Cadia and Boddington. Similarly, development capital is expected to increase beginning in the second quarter as we progress the expansion at Cerro Negro, advance the feasibility study work at Red Chris, and begin spending on the Lihir nearshore barrier project later this year, with our full-year development capital guidance of $1.4 billion remaining weighted to the second half. All-in sustaining costs are expected to be notably higher in the second quarter and more in line with the guidance we provided in February, driven by the ramp-up in sustaining capital, higher cost applicable to sales, and lower silver production than we saw in the fourth quarter as planned. Turning to capital allocation, last quarter we introduced our enhanced capital allocation framework, which is underpinned by net cash from operations and prioritizes cash flow in a clear and disciplined manner. This framework is designed to be sustainable through the cycle, maximize shareholder returns, and maintain a strong and flexible balance sheet, and we are already seeing the positive benefits of this framework in action through our first quarter results. Within this framework, excess cash is first allocated to sustaining capital spend and our dividend—priorities that are intended to remain consistent through the cycle. We continue to invest in sustaining capital to strengthen the longevity and integrity of our portfolio, with $381 million spent in the first quarter. Next, cash is allocated to our sustainable total cash dividend of $1.1 billion per year, which is paid quarterly. In the first quarter, we declared a dividend of $0.26 per share, which is consistent with the last quarter and aligned with this approach. Following these commitments, our development capital spend and balance sheet position may flex over time to reflect portfolio needs and broader market conditions. We continue to invest in development capital to advance our highest-return opportunities from our deep organic pipeline, with $239 million deployed in the first quarter. At the same time, we remain committed to maintaining a resilient balance sheet anchored by our net cash target of $1 billion plus or minus $2 billion over the course of a year. The target is managed on an annual basis and may vary quarter to quarter due to macroeconomic conditions, including the recent volatility in gold price. Once these priorities are met, excess cash is allocated to share repurchases. Since our last earnings call, we have repurchased $2.4 billion in shares, fully completing our previous authorization and bringing total repurchases to $6 billion since we began repurchasing shares over 24 months ago. As a result, our board has doubled the size of our share repurchase program with an additional $6 billion authorization, representing our fourth authorization since February 2024. We intend to execute this program consistently in line with our capital allocation framework, reflecting our confidence in the intrinsic value of our shares and the benefits these repurchases deliver over time. As we approach completion of this authorization, we expect to seek additional approval from our board, consistent with our disciplined and repeatable approach to returning excess cash to shareholders. Both our share repurchase program and the resulting per share dividend growth are formulaic outputs of our capital allocation framework, with repurchases systematically reducing our share count, driving higher per share metrics, and increasing shareholder exposure to the strong free cash flow generated by our portfolio. In fact, on a per share basis, our free cash flow is already 6% higher than it would have been prior to initiating our share repurchase program. At its core, this framework is designed to deliver sustained per share growth, maintain balance sheet strength, and provide shareholders with consistent and growing exposure to the value generated by our world-class portfolio. With that, I will turn the call back over to Natascha for closing remarks. Natascha Viljoen: Thank you, Peter. In closing, Newmont Corporation has had a very strong start to this year, reflecting the deliberate progress we have made to strengthen our operations and enhance the capabilities of our teams and systems, driven by disciplined execution and a clear focus on our commitments. We remain on track to achieve our 2026 guidance, supported by solid operational and financial performance in the first quarter, and are well positioned to drive margin expansion and generate strong free cash flow through continued cost discipline and productivity improvements across our world-class portfolio, which continues to deliver stable and consistent results. Our enhanced capital allocation framework is translating that performance into shareholder returns through a predictable dividend and ongoing share repurchases supported by a new $6 billion authorization. Looking ahead, we will continue to leverage our industry-leading and deep bench strength of expertise across all functions to build a stable and resilient future for Newmont Corporation, positioning us to generate growing free cash flow and deliver increasing returns on a per share basis even in a dynamic macroeconomic environment. Before turning to questions, I want to briefly address that we continue to engage constructively with our Nevada Gold Mines joint venture partner, with a clear focus on improving the performance of our shared assets and delivering long-term value for Newmont Corporation shareholders. With that, we look forward to addressing your questions, and I will now hand it back to Christine, our operator, to open the call for questions. Operator: We will now begin the question and answer session. We ask that you please limit inquiries to one primary and one follow-up question. If you would like to ask a question, please press star then 1 to raise your hand. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, press star then 1 again. At this time, we will pause to assemble our roster. Our first question comes from Tanya M. Jakusconek with Scotiabank. Tanya, your line is open. Tanya M. Jakusconek: Great. Can you hear me? Peter Wexler: Yes. Yes. We can, Tanya. Yes. Tanya M. Jakusconek: Okay. Great. Thank you. Thank you for taking my question. Natascha, can you comment on where we are on the whole process with the default that was issued in February with respect to Nevada Gold Mines? Natascha Viljoen: Thank you, Tanya. Good question. I will start, and then I will hand over to Peter to get into a little bit more detail. For starters, as we said in our prepared remarks, our focus remains firstly on improving the Nevada Gold Mines joint venture performance. We are continuously working with our joint venture partner to gain more information around Fourmile and the work that we need to do there. For the notice of default specifically, I will hand over to Peter Wexler. Peter Wexler: Thank you, Tanya, for the question. The period of the notice of default is open-ended, and we are working with them, as Natascha said earlier, to work on the operations. We are working through an orderly process on the notice of default, including exercising our audit rights and reviewing those findings. It is really just an ongoing process at this point in time. Tanya M. Jakusconek: Okay. So my follow-up question is that I am just trying to understand how long this process is going to take. I am assuming that you had meetings with them, you have gotten the information or Barrick has handed over the information that you have asked for, and now you are in the process of reviewing this and talking to Barrick on how we move forward. I am just trying to understand the procedure and what to expect on a timeline. Peter Wexler: While you may see timelines in the agreements, it is more of an iterative process between the two companies. We have questions and follow-up questions on information, and, as you correctly assumed, they respond to us, and we work productively through those answers. There is no set timeline for bringing it to resolution, but we hope to do so in the near term and make sure that Nevada Gold Mines is operating at the highest level possible. Operator: Our next question comes from Matthew Murphy with BMO Capital Markets. Matthew, your line is open. Matthew Murphy: Thank you. Congratulations on a strong first quarter. Can you take us through where operations were beating your expectations? And it sounds like Q2 may be a little bit down quarter on quarter. Should we think about Q2 as the lowest production quarter for the business and then progressive momentum from there? Natascha Viljoen: Yes, Matthew, and thank you for that question. If we look at quarter one, the improved performance that we have seen was across, firstly, Yanacocha, where we saw a beat after the last [inaudible] ore that we have mined and we see the benefit of that coming through. We have also seen improved throughput and grade from Cadia coming through, and that was certainly the basis of that improvement. Then the silver production at Peñasquito was higher than what we delivered in any quarter last year, and that is just a phasing on where we are in the pit, importantly also strongly supported by really high silver prices. We have also treated the last remaining stockpile from our Subika open pit material at Ahafo South, and we have started to see Ahafo North continuing well with its production ramp-up. As we look into the second quarter and we have depleted the Subika open pit stocks at Ahafo South, we do see lower grades coming from Apensu and Amoma open pits. For Peñasquito in this quarter, we will have some months that we are treating organic carbon and, therefore, we will also see lower silver production. Then, of course, as we have touched on earlier, we will see the recovery process that we are working through at Cadia. Therefore, a slightly lower quarter as expected, and we will see the third quarter coming back stronger. Matthew Murphy: And as a second question, slightly different topic, related to the CFO recruitment process. Peter, certainly, Newmont Corporation is delivering results with you in the CFO chair, but there is the “interim” in the title. So, Natascha, any update on how that process is going? Natascha Viljoen: That recruitment process is going well, Matt, and we trust that we will be able to share more information soon. Operator: Our next question comes from Anita Soni with CIBC. Anita, you are live. Anita Soni: Hi. Thanks for taking my question, Natascha. I just wanted to ask, when it comes to the discussions around Fourmile, have you had any discussions with Barrick on bringing that into the joint venture partnership at this stage? Natascha Viljoen: Anita, we continue to collect information on Fourmile and to do our technical evaluation, as we have touched on before. Anita Soni: Okay. Sorry, I missed that. And then just in terms of some of the mine sequencing, I think you touched upon the stockpile processing that you would be doing at Cadia. Stockpile to bridge the gap between pulling ore from the underground—could you give us an indication of what grade those stockpiles are at right now? Natascha Viljoen: Anita, we will have to come back to you. I cannot give you an indication now, but I will ask Neil to give you the feedback on the grade. Anita Soni: Okay. Alright. Thank you. That is it for my question. Natascha Viljoen: Thanks, Anita. Our next question comes from Lawson Winder with Bank of America Securities. Lawson, your line is open. Lawson Winder: Thank you, operator. Hello, Natascha and team. Nice quarterly result, and thank you for today’s update. Can I ask about the cost pressures? I mean, it is notable, the impressive unit cost results in Q1 considering what have been relatively significant cost pressures on energy. Could you speak to some of the levers that Newmont Corporation can pull in order to ensure that input cost inflation does not drive 2026 unit cost guidance above the range? And then to what extent might Newmont Corporation be insulated from cost pressures across the supply chain? Natascha Viljoen: Lawson, thank you for that question. Indeed, we were very pleased with quarter one’s all-in sustaining cost on a byproduct basis. Firstly, we have seen the work that we did last year, both on productivity improvement and cost reduction, and now going into cost discipline, flow through in various aspects of our cost applicable to sales. Our cost applicable to sales was impacted in the first quarter by elements like Tanami, where we saw a period of stoppage due to the fatality. We have also had lower production in areas predominantly in the year at Cerro Negro due to shutdowns that impacted cost applicable to sales, and then we have seen a seasonal lower sustaining capital for quarter one. With the discipline that we established last year, the levers sit in two areas. One is productivity, where the best way for us to offset increased input cost pressures is through higher productivity. We have seen through the last quarter and going into this year, as an example, that we have parked a high number of pieces of equipment across our operations to help reduce consumption. That is certainly the first area we will be focusing on. We will also continue to pursue cost discipline work to offset the impact of higher gold prices on royalties and worker participation. As we think going forward, we have not seen the full impact coming through on increased fuel cost, and the same levers that I have touched on will continue to be the levers that we will pull, both in terms of fuel cost and the second- and third-order consequences that might come through as higher energy costs flow through. In the meantime, we have a really strong supply chain team that works closely with our suppliers, and we are leveraging across different jurisdictions the benefits that we have with the geographical spread to pull all of the levers we can to both sustain supply and manage cost. Lawson Winder: Okay. That is extremely helpful. If I could ask what might not be a quick follow-up, but could be— Natascha Viljoen: Sorry, Lawson, yes? Operator: We will move on to our next question while Lawson gets back on. Our next question in the meantime will be from Joshua Mark Wolfson with RBC. Josh, you are currently live. Joshua Mark Wolfson: Thank you very much. I will follow on Lawson’s questions—hopefully I am not taking them before he gets the chance to redial in. Thank you for providing some of that disclosure on energy price or oil price impacts and the diesel overall exposure. You mentioned some of the secondary factors there. Is there any way the company can quantify the impact or sensitivity to some of these overall primary and secondary impacts based on current prices? Natascha Viljoen: Josh, not at this stage. The sensitivities that we supply both, firstly on fuel and then also just our cost mix, are what we have available at this stage. Thank you. Joshua Mark Wolfson: Okay. Thanks. And then just following on that theme of costs, beyond the energy side of things, is there any commentary the company can provide in terms of broader trends in terms of costs—that would include labor or reagents? And then alongside that, regionally, is there any perspective the team can provide maybe where there are higher pressures or lower pressures? Natascha Viljoen: Joshua, if I think through the various elements of our cost—labor, materials and services, and energy—I think we have spoken at length about energy. Labor is always a continuous conversation, and we do see our agreements with labor coming up for renewal on a continuous basis across all of the jurisdictions we operate in. So far, we have been able to get agreements in place in all of the areas where we were negotiating new agreements, so nothing more than what we have planned for and included in our guidance. On services and materials, nothing else to add beyond what we discussed. Joshua Mark Wolfson: Okay. And then maybe a perspective regionally there if there are any specific areas where you see inflation higher or lower. Natascha Viljoen: No. Not on inflation. Costs are higher due to higher gold prices impacting royalties and workers’ participation, but not inflation in specific areas. Joshua Mark Wolfson: Thank you very much. Operator: The next question we have comes from Lawson Winder again from Bank of America Securities. Lawson, you are live. Lawson Winder: Just before I ask my question, I want to double check you can hear me? Natascha Viljoen: Yes. We can, Lawson. Lawson Winder: Okay. Thank you for taking the follow-up. I think Josh actually covered off a lot of the questions, but something else that I have had on my mind is just the M&A outlook. We have seen some activity from one of your peers already this week, and based on the work we have done, it is a pretty conducive environment for M&A. What is Newmont Corporation’s appetite for acquisitions at the current moment? Natascha Viljoen: Thanks, Lawson, and Josh, I do apologize if you are still on the line—I believe I just called you Lawson because I thought we were still talking to Lawson. From a disciplined capital allocation point of view, our focus remains firmly, firstly, on continuing to drive our own operations to be the best operators of these operations and to get them to operate in the way that they should. Then we have a number of brownfields opportunities that we believe would be very value accretive for us. By the time we get to greenfields projects and any potential acquisition opportunities, they will have to compete for capital within the broader portfolio. Our focus at this stage remains firmly internal on our own assets. Operator: Our next question comes from Fahad Tariq with Jefferies. Fahad, your line is now open. Fahad Tariq: Hi. Thanks for taking my question. There was a headline yesterday that Ghana is asking Newmont Corporation, among other companies, to shift mining operations to local firms by the end of this year. Maybe just any color you can provide on thoughts around that and whether that timing is feasible and what that could mean for cost, etcetera. Natascha Viljoen: Fahad, that is a very relevant topic for us. Firstly, we have a long history in Ghana. We have been investing responsibly, and we have built good relationships. The contractor mining issue is not new for us. We have been working with the Minerals Commission on this matter over a period of time and on our approach to this matter. It is important to know that we are following a process that is commercially and technically disciplined, because what we want to do is ensure that what we develop here has long-term options for our investments in Ghana and supports the government’s objectives. We are in active engagement not only with the Minerals Commission, but I had an opportunity last week to meet with President Mahama, and these relationships and conversations are very constructive and in the best interests of all parties. Fahad Tariq: And then maybe just as a follow-up. Based on the work that you have done, would it be possible to use local contractors for all of the mining operations if the deadline does not change? In other words, is that something that is even feasible? Natascha Viljoen: It depends on how you define mining operations. There are certainly certain mining operations where there is good capacity and capability in Ghana, but there are other areas that are more technically complex that would impact the productivity and the safety of our operations. We hold a very firm view on how we manage any of those areas. So I think it is a combination. If we think about some of the more bulk operations across mining, there is definitely capability, but not in all aspects. Fahad Tariq: Okay. Great. Thank you very much. Operator: Our next question comes from Daniel Morgan with Barrenjoey. Daniel, your line is now open. Daniel Morgan: Hi, Natascha. Just on the supply chain—my question is not on cost, but on availability. With regard to diesel and everything else that you need to run your business, is there anything in the supply chain you can identify that you might face shortages on that could impact your business outcomes at all? Natascha Viljoen: Daniel, no. At this stage, there is nothing that we have identified. We do, however, keep a very close eye on all of our supply chain, not only the primary supply, but also how the primary impacts on energy, for instance, will impact some of the second- and third-order consequences of any potential disruptions. We are working very closely with suppliers, industry partners, and governments to support our operations. Daniel Morgan: Thank you very much. And just on Cadia—my question is not related to the seismic event. It continues to outperform expectations with regard to grade. Is that positive grade reconciliation, or is it higher grade ore presenting itself earlier than thought? Basically, I am just wondering if this win we have had in recent times means we see lower production in future periods. Thank you. Natascha Viljoen: Daniel, what we are seeing is coming through the existing caves, PC2 specifically. It is higher grade reconciliation, and we continue to expect this grade to decrease as we get to the end of this cave life. Daniel Morgan: Okay. That is very clear. Thank you, Natascha and team. Natascha Viljoen: Thanks, Daniel. Operator: Our next question comes from Daniel Major with UBS. Daniel, your mic is now live. Daniel Major: Hi, Natascha. Thanks very much for the questions. First one, just thinking about the business beyond the current year. You have not been guiding on a three-year basis. Do you intend to reinstate medium-term guidance at some point in the future? And then, second, looking at an asset level at least directionally, what we should be expecting for the major moving parts into 2027, if you can give any steer at this point? Natascha Viljoen: Daniel, we know that there is keen interest for us to give multiyear guidance, and as we work through this year, we are keeping that in mind to consider for 2027 guidance. If I think about 2027 and key movements as we see this portfolio growing back to 6 million ounces, the areas of interest are, across the various jurisdictions, Lihir, where we are starting to get into high-grade areas—that is part of the mine plan and part of the work that we have been doing there. Cadia, where we see the new caves come on. Boddington, as we complete the pushbacks and get into high-grade areas. Ahafo North fully ramping up. Cerro Negro, as we continue to drive really hard on the productivity work there. We have some other shorter-term options that will come online. Yanacocha, as we see the shorter-term production from mining coming on as well. Those are some of the early movers that will help us—you will remember, we said that in 2026, we are in a trough—and those are the big movers that will start to build up on the other side of the trough. Daniel Major: Okay. So the message is very much this is the trough year, and there should be meaningful improvement in the subsequent years. Is that how I read that? Natascha Viljoen: Yes. That is— Peter Wexler: Thanks, Daniel. Daniel Major: Okay. Then maybe if I could ask my follow-up question on a similar growth trajectory. You have indicated the intention to FID the Red Chris project in the second half of this year. Can you give us any idea on the magnitude of increase relative to the previous CapEx estimates provided by Newcrest? Natascha Viljoen: Daniel, the process that we are following is very structured. We have taken on board the lessons from the fall of ground that we had last year. We are progressing really well with that work. We are also progressing well with the engagements with our [inaudible] community to progress our permits. All of that is tracking well, and we will be able to give you a proper estimate. You will hopefully know by now we want to say what we do and do what we say. By the time we give you an estimate on capital, it will be an estimate that we will hold ourselves accountable for. Daniel Major: Okay. Thanks so much. Operator: Our last question comes from Bob with Bernstein Research. This will be our last question. Bob, your line is now open. Analyst: Thank you very much. Good evening. I had a follow-up related to the notice of default. If I understand it properly, there was an identified event of default related to evidence of mismanagement or diversion of resources at the JV. You filed the notice of default, and there could be a range of remedies—something as simple as Barrick offering a cure related to that event of default up to much more consequential remedies. Can you talk about the range of remedies and what are your rights under the JV related to those? Natascha Viljoen: Thank you, Bob. I am going to ask Peter Wexler to respond to that. Peter Wexler: Sure, Bob, and I think you captured it accurately in your statement. There are a range of possibilities, and discussing each and every range is not practicable. At the end of the day, the best way to look at it is we are working through the process, as I told one of the other analysts, and are going back and forth in this iterative process to try and understand each other’s viewpoint on what transpired and how things were working. Once we have gone through that process, then either a potential meeting of the minds or another avenue would have to be followed. We hope it is the former, because that is part of getting NGM back on track. But, as you said, there is a range of possibilities. We are working through the structured process in the JV agreement, and where that takes us—hopefully we will work that out between us and not need to resort to any third parties intervening. Analyst: Very good. A quick follow-up. Third party intervention—would that be arbitration or litigation? Peter Wexler: It depends. There is a wide variety of ways we could pursue that path if and when it became necessary. We certainly hope it does not. Analyst: Very clear. Thanks for that. Operator: This concludes the question and answer session. Thank you for attending today’s presentation. You may now disconnect.
Operator: Good afternoon, and welcome to the Digital Realty Trust, Inc. first quarter 2026 earnings call. Please note this event is being recorded. During today's presentation, all parties will be in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Callers will be limited to one question, and we will aim to conclude at the top of the hour. I will now turn the call over to Jordan Sadler, Digital Realty Trust, Inc.'s Senior Vice President of Public and Private Investor Relations. Jordan, please go ahead. Jordan Sadler: Thank you, operator, and welcome, everyone, to Digital Realty Trust, Inc.'s first quarter 2026 earnings conference call. Joining me on today's call are President and CEO, Andrew P. Power, and CFO, Matthew R. Mercier. Chief Investment Officer, Gregory S. Wright, Chief Technology Officer, Christopher Sharp, and Chief Revenue Officer, Colin McLean, are also on the call and will be available for Q&A. Management will be making forward-looking statements, including guidance and underlying assumptions on today's call. Forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. For further discussion of risks related to our business, see our 10-Ks and subsequent filings with the SEC. This call will contain certain non-GAAP financial information. Reconciliations to the most directly comparable GAAP measure are included in the supplemental package furnished to the SEC and available on our website. Before I turn the call over to Andrew, let me offer a few key takeaways from our first quarter results. First, we delivered the second-highest bookings quarter ever for Digital Realty Trust, Inc., underscoring the diversity and durability of demand across our platform. We signed the largest megawatt lease in company history, while simultaneously setting another quarterly record in the zero to one megawatt plus interconnection category. Second, the zero to one megawatt signings boosted our 2026 outlook, while the greater-than-a-megawatt leasing increased our total backlog to 1.8 billion, or 1.0 billion at Digital Realty Trust, Inc.'s share, providing strong visibility for our growth into 2027 and 2028. Third, our development pipeline increased by over 50% sequentially to 1.2 gigawatts under construction and is now 61% preleased at an 11.4% average expected yield, mainly driven by successful leasing and our continued efforts to position capacity to support our customers' growing requirements. And finally, we exceeded our earnings expectations, posting core FFO of 2.40 per share for the first quarter, delivering strong double-digit year-over-year growth. Given strong execution across our product offering, visibility from our backlog, and confidence in our operating outlook, we are raising our 2026 core FFO per share guidance range, implying 9% growth at the midpoint. With that, I would like to turn the call over to our President and CEO, Andrew P. Power. Andrew P. Power: Thanks, Jordan, and thanks to everyone for joining our call. Digital Realty Trust, Inc. got off to a record start in 2026, a clear continuation of the momentum we built throughout 2025. Demand for digital infrastructure remains robust, execution across PlatformDIGITAL remains crisp, and our strategy continues to resonate with customers who are navigating increasingly complex power, performance, and connectivity requirements, as well as mission-critical on-time delivery challenges. We continue to gain market share in our zero to one megawatt plus interconnection product category while providing needed hyperscale capacity in our greater-than-a-megawatt category on an expanding playing field. As the global economy continues to digitize, data center infrastructure has moved from being a supporting layer to being foundational. AI adoption is accelerating, compute intensity and cloud demand remain resilient, and enterprises are continuing to embrace technology to improve productivity and efficiency across their core operations. At the same time, power availability, labor and supply chain risks, and community concerns have become meaningful constraints on our industry, creating a widening gap between theoretical demand and deployable capacity. Against that backdrop, only a limited number of providers can deliver fit-for-purpose capacity, future scalability, and deep connectivity across multiple metros and regions with the certainty that customers require. Customers are coming to Digital Realty Trust, Inc. seeking capacity close to users and clouds, to interconnect within and across markets, and the ability to scale as requirements evolve, particularly as AI-driven workloads move from experimentation to production. This demand environment translated into strong leasing activity during the first quarter, reflecting both the breadth of customer needs and the value of our global platform. We signed over 700 million of new leases in the quarter, or 423 million at our share, representing our second-highest leasing quarter and nearly 70% above our next-highest quarter. Strength was broad-based in the quarter, with another record of 98 million of leasing within our zero to one megawatt plus interconnection product, where proximity, connectivity, and access to relevant enterprises and service providers matter most. Notably, a record 21% of zero to one megawatt bookings were AI-oriented requirements. We continue to increase our market share in this category while growing our customer base, with 116 new logos added in the quarter. During the first quarter, we saw both enterprises and hyperscalers continue to expand across PlatformDIGITAL. A few examples include: a global biotech company optimizing its AI infrastructure on PlatformDIGITAL to enable AI modeling, factory design, and diagnostics for safety and reliability; a global social and AI platform expanding on PlatformDIGITAL with a new AI inference node to serve a regional customer base and expanding edge capabilities across global metros while deploying a new subsea cable interconnection node; a multinational pharmaceutical company deploying its AI infrastructure on PlatformDIGITAL to meet growing R&D infrastructure and computing needs; a leading technology services company leveraging PlatformDIGITAL to create a distributed, inference AI-ready ecosystem to support advanced AI workloads for growing enterprise demand; a global cloud computing and content distribution provider expanding their footprint on PlatformDIGITAL by leveraging the market-leading connectivity available to support edge PoP expansions; and a technology services company choosing PlatformDIGITAL to enable cloud-based platforms by leveraging the available connectivity, security, and architecture to support future growth. These deployments highlight the strength of PlatformDIGITAL in supporting increasingly distributed, connectivity-intensive workloads, enabling customers to deploy, connect, and scale critical infrastructure across a global interconnected platform. The momentum in our interconnection-led product set is being reinforced by the continued expansion of our global connectivity footprint. In Europe, we expanded our footprint in the quarter by entering Sofia, Bulgaria through the acquisition of Telepoint, one of Southeast Europe's most important emerging interconnection hubs. This addition deepens our presence along the East Mediterranean connectivity corridor and complements our existing markets in Southern Europe. At the same time, recent land acquisitions in Portugal and Milan position us to extend this connectivity-rich capacity along critical subsea and terrestrial routes, complementing existing assets in Marseille, Athens, Crete, and our soon-to-be-opened facility in Barcelona, reinforcing our ability to serve customers that require low-latency access, geographic diversity, and scalable interconnection across the region. In APAC, we are taking a similar approach to expanding connectivity in strategically important markets. Our entry into Malaysia will add a highly network-dense facility in Cyberjaya that complements our established presence in Singapore, Jakarta, and other key regional hubs. This expands our customers' ability to deploy infrastructure close to end users while maintaining seamless connectivity across markets and provides a clear path for future scalability as requirements continue to evolve. Taken together, these investments reflect a consistent strategy globally: building interconnected campuses in the right locations to support customers as their IT architectures are infused with AI-oriented workloads and become more distributed, more latency sensitive, and increasingly connectivity driven. Switching gears to the greater-than-a-megawatt category, we signed the largest single lease in Digital Realty Trust, Inc. history this quarter: a 200 megawatt AI inference-oriented lease with a AA-rated hyperscaler in Charlotte. This was a milestone transaction for Digital Realty Trust, Inc., representing the largest lease in our history and our first hyperscale deployment in this market, validating our hub-and-spoke expansion strategy in Charlotte and complementing the connectivity hub we have long operated and are currently expanding in Uptown. The breadth of our greater-than-one-megawatt activity in the quarter was also notable, as signings in this category exceeded the level achieved in the prior three quarters even when excluding the record lease. We signed 10-plus megawatt leases in each of Dallas, São Paulo, and Tokyo during the quarter, highlighting the accelerating pace at which large AI workloads are moving into scaled production environments and the continued global appetite for compute. Given record-low vacancy in most of our existing data center markets, we continue to target land and power opportunities adjacent to our connected campuses, allowing us to support large-scale deployments while remaining connected to core cloud and connectivity networks. To meet those needs, we are expanding our ability to deliver hyperscale capacity where land, power, and certainty of execution matter most. In the first quarter, we demonstrated the ability and expertise necessary to source, position, and then lease hyperscale IT capacity for development in less than 18 months. Building on this success in Charlotte, we have a second 200 megawatt building that will follow Building One, and we launched construction on another 200 megawatt development site in Atlanta. We also have in position today, or are preparing, substantial capacity for development in Dallas, Northern Virginia, Hillsboro, São Paulo, Frankfurt, Paris, Tokyo, Osaka, and Seoul. Given the significant development starts in the first quarter, our development pipeline scaled by more than 60% to 16.5 billion at 100% share and strong double-digit unlevered returns. While this marks a historic ramp in our ongoing activity, we remain disciplined and well positioned to continue to meet this opportunity. As we think about our ability to support our customers' long-term growth needs, the combination of land holdings, power availability, supply chain execution, and capital all matter, and each must be sourced in a deliberate and scalable manner. Over the last several years, we have been strengthening each of these disciplines so that we can continue to deliver capacity reliably, particularly as projects become larger, more capital intensive, and thereby more complex to execute. That same discipline has guided the evolution of our capital strategy. In early 2023, we announced a plan to diversify our capital sources by utilizing more private capital, including joint ventures, in our plan. We then evolved that approach with our first U.S. hyperscale closed-end fund, significantly expanding the pool of capital available to support hyperscale development while preserving alignment through our retained ownership and management role. During the first quarter, we continued to scale our strategic private capital platform, shifting to broaden our foundation to support the capitalization of stabilized hyperscale data centers. The objective is straightforward: to align long-duration institutional capital with the long-lived nature of our assets and our customers' digital infrastructure needs. By continuing to diversify, evolve, and expand our capital sources, we are enhancing our ability to secure land, power, and equipment to scale development responsibly, and to deliver capacity when and where our customers need it, while continuing to drive attractive risk-adjusted returns for our shareholders. I will now turn the call over to our CFO, Matthew R. Mercier. Matthew R. Mercier: Thank you, Andrew. As Andrew outlined, the first quarter reflected strong demand across our platform combined with disciplined execution, resulting in record quarterly financial results. In the first quarter, Digital Realty Trust, Inc. again posted strong double-digit growth in revenue and adjusted EBITDA, reflecting continued momentum in our zero to one megawatt plus interconnection business, commencements from our growing backlog, healthy releasing spreads, modest churn, and a favorable FX environment. We achieved these strong results while maintaining significant dry powder to expand and invest in our now six gigawatt development pipeline and simultaneously reducing our leverage to a multiyear low of 4.7x at quarter end. Overall, the strong environment and our favorable positioning are translating into better-than-anticipated execution and results, and we are continuing to lean into the opportunity we are seeing with discipline. During the first quarter, we signed leases representing 707 million of annualized rent at 100% share, or 423 million at Digital Realty Trust, Inc.'s share. This represented the strongest leasing start to the year in Digital Realty Trust, Inc., and as Andrew noted, demand remains robust across our product categories. New leasing was particularly strong in the Americas, which represented over 75% of DLR share of bookings in the quarter, while we also posted a new quarterly leasing record in the APAC region. Our zero to one megawatt plus interconnection product set continued its strong momentum, posting 98 million of new signings, marking a third quarterly record in the past year and reflecting a 40%-plus increase in zero to one bookings versus first quarter 2025. The zero to one megawatt plus interconnection category was driven by a record pace in the Americas region and a meaningful step-up in the largest capacity band within the product category, reflecting an acceleration of larger enterprise deployments. Further highlighting this strength, we also saw a new record level of activity in the one to three megawatt leasing band in the quarter. Interconnection bookings remained strong at 186 million, 24% higher than a year ago. The APAC and North America regions led this growth, driven by demand for our bulk fiber and ServiceFabric products. The record lease signing in Charlotte was the biggest contributor to the 280 million of Americas leasing performance in our greater-than-a-megawatt category. Pricing in this product segment remained healthy, averaging 181 per kilowatt in the quarter, validating the expansion of our hyperscale product in this market. The total backlog at the end of the first quarter reached a new record of 1.8 billion, reflecting the robust data center fundamentals we are experiencing and our ability to capitalize on this demand. At Digital Realty Trust, Inc.'s share, the backlog reached a new record of 1.0 billion at quarter end, as 423 million of new bookings exceeded the strong 204 million of commencements in the quarter. Looking ahead, we have 44 million of leases scheduled to commence somewhat ratably throughout this year, with 247 million of leases to commence in 2027 and another 242 million commencing in 2028 and beyond. While the successful execution of our zero to one megawatt plus interconnection segment is helping to accelerate near-term growth, our scaling backlog is improving our visibility over the long term, helping to support strong, sustainable growth. During the first quarter, we signed 193 million of renewal leases at a blended 5% increase on a cash basis. Renewals were heavily weighted toward our shorter-term zero to one megawatt leases, which represented over 80% of our total renewal activity, with 157 million of colocation renewals at 4.3% uplift. Greater-than-a-megawatt renewals dipped to just 32 million in the quarter, at a 7.4% cash releasing spread, driven by deals in Vienna, London, and Silicon Valley. As for earnings, we reported core FFO of 2.04 per share for the first quarter, up 15% year over year, reflecting the ongoing benefit of strong data center leasing and development-related lease commencements, along with increased fee income associated with the growth in our strategic private capital platform. Same-capital cash NOI growth continued to be strong in the first quarter, increasing by 7.9% year over year. A strong data center rental revenue growth was balanced by elevated operating expense growth. On a constant currency basis, same-capital cash NOI rose 2.5% in the quarter, largely reflecting the above-trend operating expense growth versus the prior-year period. Given the conflict in the Middle East, energy costs and supply chain risks are once again in the spotlight. While Digital Realty Trust, Inc. does not maintain a meaningful presence in the Middle East and has limited direct economic exposure, we recognize that many of our customers may be directly or indirectly impacted by rising input costs. In terms of direct exposure, approximately 90% of our utility expense is reimbursed by customers, meaning fluctuations in energy prices largely flow through rather than directly impacting our bottom line. For the remaining 10%, primarily consisting of smaller colocation deployments, the large majority of our electricity is hedged forward through 2026 and beyond, while most of our contracts provide the ability to adjust pricing, giving us flexibility to respond to changing market conditions. As a result, while energy is critical operationally, Digital Realty Trust, Inc.'s direct earnings exposure remains limited and manageable. As we previewed on this call last quarter, we enhanced our supplemental report this quarter to align with how we manage the business. We have now fully transitioned the occupancy metrics of our operating portfolio toward power-based metrics, removing legacy metrics focused on square feet from our supplemental earnings disclosure. Now the operating portfolio KPIs are consistent with the metrics we use to report new leasing and data center development. We also made other enhancements to our quarterly supplemental by streamlining our debt reporting metrics, the new and renewal leasing pages, and the occupancy analysis page. The objective was to continue to provide industry-leading transparency while making our disclosures easier to digest. Moving on to our investment activity, we spent 910 million on development CapEx in the quarter, net of our partners' share. During the quarter, we delivered 63 megawatts of new capacity, 84% of which was preleased, while we started about 464 megawatts of new data center capacity that was nearly 50% preleased, increasing our total development to 1.2 gigawatts under construction. At quarter end, our gross data center pipeline under construction stood at approximately 16.5 billion, up more than 60% from year-end, reflecting the strong leasing activity executed by our team and the momentum we continue to see in our sales funnel. Consistent with last quarter, nearly 80% of this volume is situated in the Americas region, reflecting the demand for AI-oriented workloads from our largest customers. Notably, while Northern Virginia remains our largest development market for the moment, the Dallas and Chicago markets were eclipsed by both Charlotte and Atlanta, as we activated multi-100 megawatt developments in each of these markets. Accordingly, we continue to invest in our platform through organic new market entries that enhance our global connectivity offering, as well as meaningful existing market expansions designed to meet our customers' long-term capacity and connectivity requirements. Along these lines, in the first quarter, we bolstered our hyperscale capacity with the acquisition of an 873-acre strategic land parcel in the Greater Atlanta Metro that is expected to support a gigawatt data center campus and a 30-acre land parcel in Hillsboro that is expected to support 160 megawatts of IT capacity, adding to the 85 megawatt assemblage that we announced in this market last quarter. In addition, as we have previously announced, during the first quarter, we made three strategic market entrances in Milan, Italy; Sofia, Bulgaria; and Cyberjaya, Malaysia, each of which bolsters our global connectivity footprint. Year to date, we have also sold small non-core facilities in Boston and Atlanta. Turning to the balance sheet, the first quarter was highlighted by a multiyear low in our leverage. Debt to adjusted EBITDA dipped to 4.7x at quarter end, supported by meaningful adjusted EBITDA growth and a further ramp-up in retained capital as our AFFO payout ratio fell to 64%. This decline in leverage, despite the continued ramp in our development pipeline, is intentional and deliberate, consistent with our key strategic priority of bolstering and diversifying our capital sources that we laid out three years ago. In March, we put the finishing touches on our 3.25 billion U.S. hyperscale data center fund, leaving us with approximately 10 billion to support hyperscale data center development and investment. And we continue to bolster our strategic private capital platform as we build investment capacity to support the massive hyperscale data center opportunity that we continue to see before us. In addition, we maintain substantial incremental dry powder within our 8+ billion hyperscale development joint venture, which has been highly successful to date and remains ahead of plan. Our balance sheet is positioned to fuel growth opportunities for our customers around the globe, consistent with our long-term financing strategy. Let me conclude with guidance. We are raising our 2026 core FFO per share guidance range by 0.10 to 8.10 per share, principally reflecting better-than-expected execution across our data center portfolio early in the year. The midpoint of the updated guide represents 9% growth over 2025, reflecting underlying strength in our zero to one megawatt plus interconnection business balanced by the continued ramp in our investment spending that is geared towards supporting our hyperscale customers and extending our runway for growth. We also expect cash renewal spreads of 6.5% to 8.5%, up 50 basis points from last quarter, as stronger greater-than-a-megawatt renewal prospects are balanced by the larger contribution from zero to one megawatt leases renewing. Power-based occupancy is still expected to improve by 50 to 100 basis points from year-end 2025, same-capital cash NOI growth of 4% to 5% on a constant currency basis. CapEx, net of partner contributions, is poised to increase by another 250 million at the midpoint to a range of 3.5 billion to 4.0 billion. And we also continue to expect recycled capital, with 500 million to 1 billion of dispositions and JV capital slated for later this year. This concludes our prepared remarks. Now we will be pleased to take your questions. Operator, would you please begin the Q&A session? Operator: Thank you. We will now open up the call for questions. In the interest of time and to allow a large number of people to ask questions, callers will be limited to one question. As a reminder, to ask a question, you will need to press 11 on your telephone and wait to be announced. To withdraw your question, please press 11 again. One moment for our first question. Our first question will come from the line of Analyst from Stifel. Your line is open. Analyst: Yes, thanks, and congrats on the strong results, especially leasing. Maybe you could just comment on the economics that you are seeing with AI deals versus prior hyperscale deals, maybe comment on pricing, escalators, and, as AI demand continues to show strength, what the portfolio looks like with training versus inferencing, and at what point you think we might be at an inflection. Thanks. Andrew P. Power: Thanks. Speaking to economics, I do not think we are seeing a dramatic difference between the use cases, and that specifically goes to the markets where we are supporting these use cases that have cloud, hyperscale use cases for compute, or, more likely, AI inference than training, given the proximity to data, GDP, and population. The economics really are coming down to a robust and diverse demand backdrop in markets where it continues to be challenging to bring on supply. Fortunately, we have been very well positioned there, and you have seen those flow through to our results with robustness in rates. On the bigger end, our hyperscale contracts are, call it, 15 years, and escalators are certainly 3% or maybe even higher in certain scenarios. Going to your second question, maybe I will tag team this with Chris a little bit. We are obviously supporting hyperscale use cases for cloud computing. We had a large AI inference lease, our largest lease of the quarter for the hyperscaler, but we are also seeing budding use cases in the enterprise. Not only did we have a record quarter to start the year, off a second record at the end of last year, but AI ticked up to, call it, 21% in that zero to one megawatt category, and I honestly think we are just getting going here based on actual enterprise adoption and where this could take us on a broad base. I think our portfolio is well situated. Chris, do you want to speak to the inference inflection point? Christopher Sharp: Absolutely, appreciate the question. Demand has definitely converted from pilot to production. We have seen that both in Andrew's remarks and in the 200 megawatt build that is inference. In the enterprise segment, customers are migrating to larger committed capacity blocks. I think that is a key element to be successful in bringing that type of scaled inference to market. Our portfolio, as we have been talking about for some time now, is workload agnostic. We can provide low-latency metro proximity and dense interconnection, which is an absolute requirement for this inference inflection. One point to appreciate is that as agents come to market, it is a demand multiplier, representing roughly 5x to 30x more tokens per task, and that is the fundamental driver of what AI is delivering. That is going to drive another inflection point, not just on the training to inference shift, but also as agents and agent tech come into the market. We are very excited about that. The last piece I would add is the economics associated with private AI, where you really start to see a change in consumption by being able to own the infrastructure and then rent the spike, if you will. That will represent material savings similar to what we saw with cloud and cloud-hybrid connectivity and multi-cloud. We are at the inflection point of multiple trends coming into the market and are very excited about our portfolio supporting both the hyperscaler and large portions, as well as that enterprise demand. Operator: Thank you. One moment for our next question. Our next question will come from the line of Frank Garrett Louthan from Raymond James. Your line is open. Frank Garrett Louthan: Great, thank you. I wanted to talk to you about the expansion of the land bank. Can you give us an idea of the additional gigawatt that you have secured? How many locations is that, and what is the time frame that the power is available for it and the regions? That would be great. Thanks. Andrew P. Power: Thanks, Frank. I will have Greg walk you through the great work the team has been doing. To set the table, our under-development is up dramatically—call it up 60% to 16.5 billion—while maintaining the preleasing. We are bringing forth capacity for customers from the enterprise to the hyperscalers, and at the same time, we are now increasing our growth capacity up to six gigawatts. So we are activating near term and building for long-term growth. Greg, walk through some of the highlights. Gregory S. Wright: Yes, thanks, Frank. This asset is one contiguous parcel. It is large—call it north of 870 acres—but it is all contiguous and in the greater Atlanta metropolitan area. In terms of power, we are still working through things with the power company and will give you additional guidance later. We are looking at a couple of different alternatives on the power front, so I would say stay tuned. When we look at where it is located, we think it is a product-agnostic market where you are seeing availability in the zones heading that way. We feel very fortunate. We worked this site for quite some time, and we really think it is a rare large-scale parcel of land. We also, during the quarter, acquired land in Hillsboro, in Portland as well, to support hyperscale development. It was a very active quarter, as you can see. Operator: Thank you. One moment for our next question. Our next question comes from the line of Analyst from Truist Securities. Your line is open. Analyst: Hey, thanks so much for taking the question. Congrats on the quarter. I had a question about the commencement lags for new leases signed. It was about 19 months this quarter, a little over 2x what you have seen in recent periods. Is this primarily due to the record lease that was signed, or are you seeing extensions driven by utility power delivery delays in bigger markets? Are customers just booking capacity even more in advance? I am trying to get a better sense of what drove that. Thanks. Matthew R. Mercier: Thanks. I think you nailed it. This is driven by what was our largest lease this quarter—and our largest lease in company history. That project essentially just started, as you can see in our development lifecycle: over 200 megawatts that will be delivering over a phased period starting next year into 2028. We feel great about that project. Given that it just started, that is why you are seeing a slightly elongated period of time between sign and commence. Operator: Thank you. One moment for our next question. Next question will come from the line of Vikram L. Malhotra from Mizuho. Your line is open. Vikram L. Malhotra: Hi, thanks for taking the question. On the zero to one megawatt segment, you have had really strong strength. I remember at our conference last year, you had talked about a run rate in 90 million. Given the strength, is there a pathway now to 100 million, and can you extrapolate and remind us what that means for the interconnection business, the flow-through? Thank you. Andrew P. Power: Thanks, Vikram. I will tag team this with Colin. We are very pleased with the continued momentum to get out of the gates in the first quarter, which can have some seasonal lows given various activities, and we put up another quarter upon a prior quarter. This quarter was up 40% year over year, and we are coming off a record 2025 that in itself was up 35%. Interconnection was a major contributor. Not a top quarter contribution for interconnection, but a top five. There are a lot of good pieces to this. I will have Colin speak to what is next because we are not anywhere near done yet. Colin McLean: Thanks, Andy, and Vikram, thanks for the question and the acknowledgment. We are pleased with our execution and how this manifests in the enterprise space. Strong bookings—record three of the last four quarters—and that is really across our platform. Our resiliency in core markets continues to remain strong. We had a strong booking quarter in Silicon Valley, Chicago, and Frankfurt, and we are seeing industries show up across our portfolio. Our value proposition of being an open, neutral, global platform is taking shape in the enterprise space, both in the bookings, which you saw, and in the pipeline and use cases showing up consistently across the board: hybrid multi-cloud (the de facto standard for deployment), data localization and sovereignty, and AI. As Andy highlighted, AI is becoming an emerging part of our portfolio of conversations—north of 20% of bookings this quarter. We are getting to show that off in tangible ways, like the Digital Realty Trust, Inc. Innovation Lab, which we just launched another one in Japan. The success and the response we are getting from customers and partners alike—we are really pleased with. Operator: Thank you. One moment for our next question. Our next question comes from the line of Michael Elias from TD Securities. Your line is open. Michael Elias: Great, thanks for taking the question, and also congratulations on the quarter. This one is a bit of a two-parter: first for Andy and then for Chris. In the past, I believe, Andy, your commentary had been that while there were fixed-price renewal options in the larger contracts, if there was a change in design, the renewal option was less relevant. We are seeing some of the largest hyperscalers signaling intentions for a hybrid design—AI and cloud in a single data center. To the extent we see that, do you think that means we will see the existing set of cloud data centers go through a change in design? If that is the case, then for Andy, do you think that increases the long-term opportunity set to reprice contracts? Andrew P. Power: Thanks, Mike. As a refresher, when markets were not at this position of supply-demand dynamics, we essentially had contracts, some inherited, with provisions that prevented us from getting to the full mark-to-market potential upon renewal. We handicapped how many of those would actually be hit as we moved through those expiration schedules. Over time, the odds have continued to move in our favor on those caps. Often the customer is changing configurations or choosing different durations of renewal. In the backdrop of a rapidly changing design with a mix of GPUs and CPUs, the percentage of liquid cooling versus air cooling, and the pervasiveness of growth, more often than not we are seeing customers—even with an advantageous renewal option—not take advantage of that and say, “Let us work together.” That is an opportunity for us to bring those rates to market more and more often. This quarter, we had good results in that category—no question—but it was a small sample set. We raised the outlook a little bit for our cash mark-to-markets because we think we will see even stronger cash mark-to-markets, largely driven from that category, come through the back half of this year. Chris, do you want to add anything about what you are seeing on the forefront of design changes? Christopher Sharp: One hundred percent, and I appreciate the question, Michael. Your reference to silicon and the advancements of silicon is across the entire stack. It is not just about GPUs; it is about CPUs, and there is even new equipment coming to market for inference particularly. There is a broad spectrum of infrastructure driving demand. There are two key underlying things we have been watching for some time. Modularity allows us to densify power and cooling according to the workload. That is a key element we have been working with in our HD colo program and being able to retrofit and pre-engineer the ability to go up to 150 kilowatts per rack in a relatively quick period of time. Second, AI is additive to cloud today. Cloud is comprised of a lot of data assets, and AI absolutely requires that data. We are seeing a lot of additional demand with AI infrastructure trying to be proximate to those availability zones. That is where Greg’s expanded hub-and-spoke land banks come into play. A lot of that is being married together in a contiguous way. Lastly, it all has to be engineered from the start for bulk connectivity. Beyond the four walls of the data center, it is about the connected campus, which we pioneered in this industry for some time. That represents a unique footprint for our customers to get benefit out of the leases they have today and, as they renew, from some of the new designs we are bringing to market for them tomorrow. Operator: Thank you. One moment for our next question. Our next question will come from the line of Analyst from Jefferies. Your line is open. Analyst: Great, thank you, and congrats on the great leasing quarter. I wanted to talk about organic growth. The constant currency cash NOI growth was 2.5% this quarter. You mentioned operating expenses were a bit higher. People’s knee-jerk reaction is going to be energy costs, but you talked through that. Can you talk through what operating expense line items are pulling down organic growth to be a little slower than we might expect? Matthew R. Mercier: Sure. It was largely a result of a low operating expense comp in the prior-year same quarter, driven by R&M and labor. We expect that to smooth out as we go through the next three quarters, in line with what we were talking about on our renewals. Despite being at 2.5% in the first quarter, we are still guiding to 4% to 5% for the year. We have not moved that at all. The first quarter came in as expected per our budget, and we expect accelerating same-store growth over the next three quarters. Operator: Thank you. One moment for our next question. Our next question comes from the line of Eric Thomas Luebchow from Wells Fargo. Your line is open. Eric Thomas Luebchow: Great, thanks for taking the question, guys. There have been a lot of reports recently around data center delays and projects getting pushed out. Can you talk about any incremental constraints around the supply chain, whether it is utility power, equipment, labor availability, local community pushback—anything that is extending construction timelines? And second, how are these supply chain constraints translating into market rent growth? Are you still seeing positive momentum there, and do you still think market rents are growing above development cost inflation? Thank you. Andrew P. Power: Thanks, Eric. Taking it in reverse, the punch line is we are still seeing market rent growth outpacing inflationary pressure in build costs. We are at a point of incredible demand and competition over supply chain and labor. Certain parts of the country have shortages of skilled labor, particularly electricians. The industry is moving at an incredible pace to deliver critical digital infrastructure, and that puts pressure on costs, but we are seeing rates ahead of that. At the same time, these challenges make our value-add—having a 20-plus-year track record and consistency of building and operating in our markets—shine in the eyes of our customers and all constituents. Our execution, our say-do ratio, is something we pride ourselves on at Digital Realty Trust, Inc., and that shows through time and again. We are working through every step with all constituents—utility partners who may have delays, where we can get creative—and making sure we navigate when the stakes are incredibly high so that Digital Realty Trust, Inc.'s value proposition shines, flowing through to the value we deliver to our customers and ultimately shareholders. Operator: Thank you. One moment for our next question. Our next question will come from the line of Michael Ian Rollins from Citi. Your line is open. Michael Ian Rollins: I was thinking about some of the opening comments about the diversity of leasing. Of course, you have the 200 megawatt lease, but you said there were also multiple 10-plus megawatt leases and record one to three megawatt leases. As you look at the AI composition of the over one megawatt leasing, how far down the size level is AI going right now, and what does that mean for trying to fill any remaining capacity that is available in your portfolio now that you have the new disclosures on utilization on power versus square footage? And if I could squeeze in one other quick thing, just a clarification on the guidance. It looks like core FFO per share on a constant currency basis was 11% year over year, and given the commencements that you are planning for this year and the midpoint of guidance you mentioned at 9%, why does core FFO per share need to slow on average for the remaining nine months of the year versus what you did in the first quarter on a constant currency basis? Thanks. Matthew R. Mercier: Hey, Mike, thanks. First off, we have put ourselves in a great position coming out of an exceptional start to the year—record zero to one, and the second-highest signings in greater-than-a-megawatt—really putting us in place to improve our guidance this early in the year. As you noted, we are expecting a step down in the second quarter, starting to rebound in the third and ending on a high note, putting us in position to continue overall growth into 2027 and beyond. A couple of reasons. On same-store, our OpEx is expected to ramp in the second and third quarters. Second, we expect to continue our investments tied to our increase in development spend, as well as the potential for other land to continue our growth runway. We also have capital recycling planned, which is in our guidance. All of those impact the quarterly trend for core FFO. The punch line is we have increased guidance and expect close to 9% growth for the year. Andrew P. Power: On the diversity of demand, we put up total signings just shy of our prior record, north of 700 million, and that total is about 70% higher than our next-highest quarter. We were pleased to sign the largest lease in company history with a AA-rated hyperscaler for AI inference. Right behind that, we signed 10-plus megawatt leases in Dallas, São Paulo, and Tokyo, speaking to the diversity of demand. On the other end of the spectrum, we had a record zero to one megawatt plus interconnection quarter off a record prior quarter. Within that, AI contribution stepped up to, call it, 21%. So you are seeing AI in the tens to hundreds of megawatts, and you are seeing AI in the less-than-a-megawatt category. We are rapidly filling capacity in both vacant and under-construction sites. Not only did our development pipeline step up dramatically to 16.5 billion, but the preleasing remained roughly constant, which is quite a feat. Looking at the largest vacancy pockets in our stabilized portfolio, much of that vacancy is already preleased and has not commenced yet, hence it has not showed up in the reported occupancy just north of 90%. We are attacking this on both ends of the spectrum—raising the bar in 2026 and building that record backlog, now 1.8 billion, that will deliver in 2027 and even in 2028. Operator: Thank you. One moment for our next question. Our next question will come from the line of Irvin Liu from Evercore ISI. Your line is open. Irvin Liu: Hi, thank you for the question. I would also like to extend my congrats on the strong bookings. Andy, you brought up a second 200 megawatt building in Charlotte and another 200 megawatt facility in Atlanta. With these developments in mind, can you give us a sense of how you think your greater-than-one-megawatt bookings will trend for the balance of the year? Andrew P. Power: Thanks, Irvin. We are really excited about everything going on in Charlotte. It is a strategic move because we have long operated the interconnection hub supporting enterprise customers in Uptown Charlotte, and we have been expanding that. Astonishingly, 18 months ago or less, we announced what we just leased—200 megawatts in the first half of that campus, abutting the Charlotte airport. We have another 200 megawatts that I view as very attractive to customers under construction. In Atlanta, we have a larger project, but before that, we have another 200 megawatts targeting 2028 delivery in a great location. That campus will have an extension of our colo footprint and be prized for hyperscale customers looking to grow cloud availability zones and AI inference in that market. Those are just two snapshots. To the left of that development cycle—shells or land—there are numerous other markets where we are well positioned for incremental demand, even for large hyperscale use cases. As noted in prepared remarks—Northern Virginia (this was a light Northern Virginia leasing quarter; you can see that in the weighted average rates), with roughly 275 megawatts priced in the 2027–2028 timeframe—Dallas is a similar story. Outside the U.S.: Frankfurt, Paris, Amsterdam, Tokyo, Osaka, São Paulo, and Johannesburg—numerous markets with larger capacity blocks illustrated on the map in our slide deck. We think we will continue to build upon the record pipeline and continue to de-risk that growth algorithm for years to come. Thank you. Operator: One moment for our next question. Our next question will come from the line of Timothy Horan from Oppenheimer. Your line is open. Timothy Horan: Thanks, guys. A lot of moving parts. Can you give us what you think your total inventory of space and power is, both leased and what is under development? What do you think you can grow that at, or do you have a target where it will be five, ten years from now? Thank you. Andrew P. Power: Sure. Speaking in gigawatts, we are roughly at three gigawatts operating today. On top of that—not operating—we have another six gigawatts that we own today. Within that six gigawatts, under construction—from moving dirt to opening doors and commissioning—there is 1.2 gigawatts. That means, fairly near term, that is a 40% expansion (1.2 over three gigawatts) to our installed base today. That 1.2 just went up; it is highly preleased—around 60%. We are leasing to that and activating more development as we speak. There is a pretty good runway, and our investment team is busy adding along the way. Operator: Thank you. One moment for our next question. Our next question will come from the line of Ari Klein from BMO Capital Markets. Your line is open. Ari Klein: Thanks and good afternoon. It looks like the cost per megawatt in the Americas development pipeline increased to about 14 million from 12.5 million per megawatt. Can you talk about that? And there seems to be a lot more NIMBYism and local pushback. When you look at the six gigawatts of future capacity, is any of that in markets that may be tougher to deliver in? Or, in general, how are you approaching dealing with that? Andrew P. Power: Thanks, Ari. On cost per megawatt, you are seeing inflation in build costs—a product of rising land values, significant construction activity and tight supply chains—and design moving more toward higher-priced designs with more liquid cooling infrastructure. Those all influence the basis per megawatt. The good thing is, given the demand and supply backdrop, market rates exceed those inflationary pressures to at least maintain returns. You can see that even at a record level under development, we still have close to 11% unlevered returns on our investment. On broader community reaction to digital infrastructure and what Digital Realty Trust, Inc. is doing: it is a reality of the times. The burden is on us, as an industry leader, to make sure our value proposition to all stakeholders is well articulated, advanced, and that our doors are open to communities. I am proud of Digital Realty Trust, Inc.'s history as dedicated community members. We invest our own dollars to make the grid more reliable and sustainable—and on hot summer nights, we switch to backup generation to take pressure off the grid. We are long-time real estate taxpayers, contributing to strong local services. The new news is we are a big job driver too. As an industry, permanent jobs exceed those of the top 15 automakers in the U.S., plus the engineers and electricians building today’s facilities. Lastly, Digital Realty Trust, Inc. supports mission-critical workloads—keeping devices running, financial systems flowing, healthcare systems operating, research happening, and cloud computing and AI inference. We will continue to be a leading voice on this topic everywhere we operate. Operator: Thank you. That concludes the Q&A portion of today's call. I would now like to turn the call back over to President and CEO, Andrew P. Power, for closing remarks. Andrew, please go ahead. Andrew P. Power: Thank you, operator. Digital Realty Trust, Inc. saw a record start to 2026, with core FFO coming in better than we expected and translating into a full-year guidance raise. We posted record zero to one megawatt plus interconnection bookings combined with stronger greater-than-a-megawatt leasing, including our largest lease to date. This activity pushed our backlog to a new all-time high, improving our visibility for long-term growth. At the same time, we grew our footprint of highly connected assets in the Mediterranean and APAC regions while adding land for hyperscale development, underscoring our commitment to serve our customers' needs across our global, full-spectrum platform. We also scaled our development pipeline to new heights, and we have done all this while bringing our leverage down to multiyear lows. These outstanding results are a team effort, and I am incredibly proud of our talented and dedicated colleagues who continue to execute at a high level. I am excited by the opportunities that lie ahead, yet remain focused on delivering for our customers and shareholders. Thank you all for joining us today. Operator: The conference has now concluded. Thank you for joining today's presentation. You may now disconnect. Everyone, have a great day.
Operator: Good day, and thank you for standing by. Welcome to the SS&C Technologies Holdings, Inc. First Quarter 2026 Earnings Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speakers' presentation, there will be a question-and-answer session. To ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. I would now like to hand the conference over to your speaker today, Justine Stone, Head of Investor Relations. Justine Stone: Welcome, and thank you for joining us for our Q1 2026 earnings call. I am Investor Relations for SS&C Technologies Holdings, Inc. With me today are William C. Stone, Chairman and Chief Executive Officer; Rahul Kanwar, President and Chief Operating Officer; and Brian Norman Schell, our Chief Financial Officer. Before we get started, we need to review the Safe Harbor statement. Please note, various remarks we make today about future expectations, plans, and prospects, including the financial outlook we provide, constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors of our most recent Annual Report on Form 10-K, which is on file with the SEC and can also be accessed on our website. These forward-looking statements represent our expectations only as of today, 04/23/2026. While the company may elect to update these forward-looking statements, it specifically disclaims any obligation to do so. During today's call, we will be referring to certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to comparable GAAP financial measures is included in today's earnings release, which is located in the Investor Relations section of our website at www.ssctech.com. I will now turn the call over to William C. Stone. William C. Stone: Justine, and welcome, everyone. The 2026 environment included a war in Iran, tariffs galore, spiking oil prices, and other macro headwinds. Nevertheless, we delivered strong first quarter results underscoring SS&C Technologies Holdings, Inc.'s resilience. Based on our performance and visibility today, we are raising 2026 guidance. We recently rang the Nasdaq closing bell to celebrate SS&C Technologies Holdings, Inc.'s 40-year anniversary of powering mission-critical systems our financial services and health care clients rely on every day. Our business is built on deep domain expertise, strong trusted client relations, and constant innovation guided by what we call our customer zero strategies. These strengths position us well as our industry enters the next phase of technology transformation driven by AI. We are updating the name of our largest revenue line item to better reflect the deeply embedded technology framework powering our services business. Technology-enabled services encompasses our proprietary data streams, domain expertise, software, private cloud, data center infrastructure with ISO and SOC certifications, and the redundancy and multilayered cybersecurity measures required by our sophisticated client base. First quarter results were adjusted revenue of $1.648 billion, up 9%, and adjusted diluted earnings per share of $1.69, a 14% increase. We delivered adjusted consolidated EBITDA of $651 million, up 10%, and an adjusted consolidated EBITDA margin of 39.5%. The dollar figures I just said are all Q1 records. Adjusted organic revenue growth was 5%, with performance driven by GIDS, which grew 10.4%, GlobeOp, which grew 6.7%, and our recent acquisitions are executing ahead of expectation, strengthening our global capabilities and expanding our addressable markets. Intralinks grew 3.2% with positive leading indicators and increasing adoption of its next-generation AI-enabled DealCentre platform. The resilience of our business is highlighted by the $581 billion of assets under administration we have added to our fund administration business since 2024. Across SS&C Technologies Holdings, Inc., we are leveraging AI to enhance software development, increase our speed to market, accelerate implementations, improve customer experience, and drive efficiency. These initiatives support both revenue opportunities and cost leverage over time. All of our teams are partnering closely with Blue Prism to scale our AI operations in a governed and secure manner. For the three months ended 03/31/2026, cash from operating activities was $300 million, up 10% year over year. In Q1, we returned $233 million to shareholders, which included 2.3 million shares repurchased for $168 million at an average price of $72.60 and $65 million in common stock dividends. Through share repurchases and our dividend policy, 98% of our allocated capital in Q1 was returned directly to our shareholders. At current levels, our conviction around share repurchase has strengthened, and we are prioritizing repurchases absent high-quality accretive acquisitions. We remain bullish on our opportunities and continue to see AI as a structural tailwind for our business. Our platforms are deeply embedded in our clients' day-to-day operations, serving as systems of record and execution. That positioning makes SS&C Technologies Holdings, Inc. a natural partner as clients look to advance their AI strategies. I will now turn it over to Rahul. Rahul Kanwar: Bill, we had a strong first quarter. GIDS and GlobeOp built on last year's sales performance with additional new logo wins and continued upsell and cross-sell activity. Across the business, disciplined attention to our clients is generating new opportunities. SS&C Technologies Holdings, Inc.'s pipelines are robust, and as always, execution remains the priority. Our AI capabilities, including agents and workflow orchestration, are accelerating how services are delivered. Our customer zero strategy is working as intended. Internal adoption of AgenTek capabilities is driving product maturity, credibility, and faster time to market. Deep product expertise is the prerequisite for harnessing these tools, and we are well positioned. We serve the largest and most sophisticated firms in the world, and as their businesses grow more complex, our platforms grow with them. We sit at the center of their operating models with deeply embedded workflows. These workflows form the natural foundation for further innovation. As Bill mentioned, we have renamed our largest revenue line to technology-enabled services. Our clients are buying services such as NAV computations, tax returns, regulatory filings, investor interactions, risk calculations, and hundreds of others. These services are usually tied to contracts for services rather than software license agreements. Delivery requires deep domain knowledge, expertise operating complex workflows refined over decades, the networks we operate across counterparties, and secure, resilient infrastructure. We estimate that software, largely in the form of subscriptions, represents 11% of this category. With that, I will turn it over to Brian to walk through the financials. Brian Norman Schell: Thanks, Rahul. Good day, everyone. Unless noted otherwise, the quarterly comparisons are to Q1 2025. As disclosed in our press release, our Q1 2026 GAAP results reflect revenues of $1.647 billion, net income of $226 million, and diluted earnings per share of $0.91. Our adjusted non-GAAP results include revenues of $1.648 billion, an increase of 0.8%, and adjusted diluted EPS of $1.69, a 14.2% increase. The adjusted revenue increase of $133 million was primarily driven by incremental revenue contributions from GIDS of $38 million, GlobeOp of $29 million, and a favorable impact from foreign exchange of $22 million. As a result, adjusted organic revenue growth on a constant currency basis was 5%, and our core expenses increased 2.9%, or $27 million, which also excludes acquisition impact and FX. Adjusted consolidated EBITDA was a first quarter record of $651 million, reflecting an increase of $59 million, or 10%, and a margin of 39.5%, a 40 basis point expansion. Net interest expense for the quarter was $105 million, flat year over year. Adjusted net income was $418 million, up 11.1%. Our effective non-GAAP tax rate was 22.5% this quarter. Note for comparison purposes, we have recast the 2025 adjusted net income and EPS to reflect the full-year effective tax rate of 22%. Also note, the Q1 diluted share count is down to 247.6 million from 254.9 million year over year, primarily due to lower dilutive shares and the continued impact of treasury share activity. Cash flow from operating activities growth of 10% was driven by growth in earnings. SS&C Technologies Holdings, Inc. ended the first quarter with $421 million in cash and cash equivalents and $7.5 billion in gross debt. Net debt was $7.1 billion, and our last twelve months consolidated EBITDA was $2.6 billion. The resulting net leverage ratio was 2.76 times. As we look forward to the second quarter and full year 2026, with respect to guidance, we will continue to focus on client service and assume retention rates to be in the range of our most recent results. We will continue to manage our business to support our long-term growth, and manage our expenses by controlling and aligning variable expenses, increasing productivity, leveraging technology to improve our operating margins, and effectively investing in the business, especially with respect to R&D, sales, and marketing. Specifically, we have assumed short-term interest rates remain at current levels, an effective tax rate of approximately 22.5% on an adjusted basis, capital expenditures to be 4.4% to 4.8% of revenues, and a stronger weighting to share repurchases versus debt reduction. For Q2 2026, we expect revenue to be in the range of $1.64 billion to $1.68 billion and 5.6% organic revenue growth at the midpoint, adjusted net income in the range of $408 million to $424 million, interest expense excluding amortization of deferred financing costs and original issue discount in the range of $102 million to $104 million, and adjusted diluted EPS in the range of $1.64 to $1.70. For the full year 2026, we increased our expectations to revenue in the range of $6.664 billion to $6.824 billion and 5.3% organic revenue growth at the midpoint, adjusted net income in the range of $1.665 billion to $1.765 billion, and adjusted diluted EPS in the range of $6.74 to $7.06, reflecting approximately 12% growth at the midpoint, and maintaining our targeted annual EBITDA expansion of 50 basis points, with a goal of a 40% margin in Q4. And now back to Bill. William C. Stone: Thanks, Brian. Next week, SS&C Technologies Holdings, Inc. will launch [inaudible]. It is also available at blueprism.com or by reaching out to Justine. We will now open the call for questions. Operator: Thank you. As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please limit yourself to one question and one follow-up. One moment for questions. Our first question comes from Kevin Damien McVeigh with UBS. You may proceed. Kevin Damien McVeigh: Great, thanks so much, and really just exceptional results given the environment we are in. Bill, you beat on everything. Would the results have been even stronger if not for the environment that we are in? I know the business is pretty predictable, but is there anything that kind of held it back just given the environment? William C. Stone: Well, you know, you get hesitancy, Kevin, as you well know, when you have tariffs come flying out, and then you have war, and then you have spiking oil prices, which generally is going to increase inflation. So there are a lot of macro headwinds. At the same time, people need to have the technology to run their businesses. We just had the GAIN conference, which is a big hedge fund conference in the Cayman Islands, and we had a bunch of our clients there. It was a spectacular event for us. They were happy, they were investing in us, and buying more services and products. We are pretty bullish on 2026. Kevin Damien McVeigh: The results speak to that. And then maybe remind us, because the one question we get a lot is on the AUA growth in different market environments. It obviously continues to grow. Is that just client balances increasing or the way they are running their asset allocation? It has been another terrific part of the story. William C. Stone: As we said in our comments, we grew AUA by $581 billion since 2024. I do not know where $581 billion would put you in the league tables—probably pretty high—and that is just our growth. There is market appreciation as well. The Nasdaq and the S&P 500 hit new records this past week, and the equity markets have been pretty robust. We also have almost all of the large global macro funds, and they have been getting increasing allocations from allocators and large-scale pensions to insurance companies. They are investing in hedge fund solutions, and hedge funds have been stronger over the past couple of quarters than they had been over the past couple of years. Operator: Thank you. Our next question comes from Daniel Rock Perlin with RBC Capital Markets. You may proceed. Daniel Rock Perlin: Thanks, and good evening, everyone. I had a question around private credit. Obviously, it is incredibly topical these days. I think that falls into your GlobeOp operations. From what you can tell and what you see and hear, specifically around potential redemptions, how does that impact your business? Do you see that as any kind of perceived risk, and to the extent the assets do get redeemed, what kind of recapture rate do you historically see in other areas of your portfolio? And then on GIDS, another really strong performance here—how should we think about the cadence throughout the year, given tougher comps in the back half and developments in Australia? Rahul Kanwar: Like a lot of things in the news, some of these fears might be a little bit overblown, but we have structural things that protect us. The primary one is that the vast majority of our private credit funds are closed-end fund structures, which generally means our fees are predicated on things that are fairly static—committed capital or volume-based metrics like number of investments or investors. So we are pretty immune from day-to-day fluctuations. Most of our big clients that are private credit managers still continue to grow with us. William C. Stone: On GIDS, we are making great strides. You mentioned Australia—we are up to over 3 thousand people there, and we signed Insignia, which has about $321 billion in assets. The superannuation market in Australia is about $4 trillion, so there is a lot of room to grow. We are the new kid on the block, and we are working hard to satisfy our clients there and grow our market share. We also have tremendous opportunities in North America and Europe. If I was a betting man, I would guess that GIDS is going to do very well in 2026. Operator: Thank you. Our next question comes from Jeffrey Paul Schmitt with William Blair. You may proceed. Jeffrey Paul Schmitt: Hi, good afternoon. What segments do you think have the most risk from AI, and what segments do you feel most confident are protected against disintermediation? And then, share buybacks were lower than they have been since 2023 or 2024. Is there potential for you to get more aggressive there with the stock down so much over the last few months? William C. Stone: We have some very pointed software businesses that are not large—altogether maybe about $100 million in revenue. We are so embedded in the things that we do that we do not really look at AI as a threat. Yes, there can be disruption—the Internet had disruption, client-server had disruption—but people still have to get their work done. They still have to file tax returns, quarterly and annual statements, and not just in the United States; it is everywhere around the world. We do that everywhere—whether it is the Australian Stock Exchange with rules about short sales, the Ministry of Finance in Tokyo, OSFI in Ottawa, and several regulatory bodies here in the United States as well. We are very steeped in that. It is detailed and arcane, and regulators can change it whenever they want. On buybacks, however much cash we generate tends to be our favorite investment. We bought $168 million in Q1. Q1 has bonuses and taxes, so we have other uses for our cash, but we are quite bullish. Operator: Thank you. Our next question comes from Surinder Singh Thind with Jefferies. You may proceed. Surinder Singh Thind: Thank you. Bill, can you expand upon the Blue Prism offering and the new platform? Is this a game-changer where we might begin to see a material inflection in growth in that segment? How should we think about rollout, cadence, and initial feedback? And then on expenses—you talked about investments in R&D and sales. Can you provide more color on the scale of those investments and potential margin impact versus your 50 basis points expansion target? William C. Stone: We are very vertical as a company. When we talk with large-scale firms like Jefferies and others, everyone is studying how to implement AI with governance. My talks at conferences always say AI is not just a gas pedal—somebody better have a brake. You better understand what you are doing, or you can get hurt. We are primarily a bunch of accountants and systems people. We understand controls. We are a little nerdy when it comes to internal controls. We think they are important. We reconcile all of our customers’ checking accounts. AI will be used for things that are primarily mundane first; it will get increasingly sophisticated over time, but it is very difficult to replace human judgment, human trust, years of delivery, and the ability to attack problems and solve them. On investments, there are a lot of opportunities for us to drive margin. Over the last number of years, we have plowed money back into our infrastructure and our ability to deliver new services and products quickly and efficiently, and that is expensive. We have been able to maintain our margins really close to 40%. If we want to move it up to 41% or 42%, that is within our grasp. But we are not going to take away from R&D or other initiatives we have going on. We have a lot of flexibility. Last year, we generated about $7 per share in cash. We have flexibility with buying back shares, looking at acquisitions, and paying down debt. It is nice to have plenty of cash. Operator: Thank you. Our next question comes from Peter James Heckmann with D.A. Davidson. You may proceed. Peter James Heckmann: Good afternoon. Thanks for taking the question. I wanted to talk about the emerging developments around tokenization of different asset classes. Where do you see the pain points for your customers, and how do you view SS&C Technologies Holdings, Inc.'s preparedness to have some portion of asset classes being tokenized and processed versus some of your competitors? And then, acquired revenue was a little higher than we were thinking. Did Calastone outperform in the quarter, or is there seasonality to the first quarter? Rahul Kanwar: Like a lot of these things, we view the technology as an enabler. We want to make sure it helps us get whatever our clients are looking to have happen, happen faster. We are fully prepared. We have customers that are tokenized today and customers in the process of becoming tokenized. We are helping them get on the right digital platforms and chains. We are maintaining the IDs and doing all the associated work. The primary impact we have seen—in a still limited subset of examples—is that onboarding for investors is simpler. The rest of the work stays exactly the same. We are fully prepared to be part of the process and help them any way we can, and Calastone is a big part of that for us. William C. Stone: We spent $1 billion acquiring Calastone. As usual with things we believe in, we do not dabble. We go get it and deliver it to our clients. We have several very happy clients already with our Calastone acquisition. Brian Norman Schell: They continue to perform well, and it was a strong quarter for them. There is some seasonality, but they also outperformed. Operator: Thank you. Our next question comes from Analyst on for Alexei Mihaylovich Gogolev with J.P. Morgan. You may proceed. Analyst: This is Bella Panaj on for Alexei. Thanks for taking our questions. Looking at Intralinks’ sequential improvement—would you say that was driven more by the market or by share gains? Are there any metrics such as win rates, room volumes, or retention that best evidence that? And then on health care, that segment posted a nice turnaround this quarter. How sustainable do you view this growth throughout 2026, and what are the largest points of excitement that give you optimism this year? Rahul Kanwar: It is a bit of both. The market has come back a little and is helping, and you are starting to see that show up in the numbers. We are seeing it even more in early indicators of what it might be a quarter or two from now. We have also invested a fair amount in the product itself—building out services capability around data rooms and adding more AI-enabled modules within the data room. That has helped us gain some market share. William C. Stone: On health care, the market is enormous. As more medicines and therapies come out, more people will use those. GLP-1s are obviously a big deal, and the government, I think, is going to use Humana—which is one of our great clients—to administer that program. We are excited about that. We have Domani making some inroads at big health care places. Health care does not move with extreme rapidity—they are very testing-oriented and detailed. At the same time, there are tremendous opportunities, similar to financial technology. A lot of what runs Wall Street is decades old. If you can get people to take the leap to change, there is real opportunity. We think we can be a winner. Operator: Thank you. Our next question comes from James Faucette with Morgan Stanley. You may proceed. James Faucette: Thanks very much. A lot of our questions have been answered, but I wanted to quickly touch on the wealth business. Can you help unpack what drove growth there, and going into Q2, is there any deal slippage or tough license comps we should be aware of from Q1? And then, on AI efforts specifically, how do you think about what you are doing that is aimed at revenue generation versus internal productivity? Are you getting much internal benefit today versus what you may be able to monetize later? William C. Stone: Our wealth business primarily is Black Diamond and other products embedded around that, whether that is Advent or Tier1 or InnoTrust. We have made great strides with Black Diamond Trust Suite. A lot of RIAs, as their customers get older, will move assets to their kids, often through trusts. You have to be able to do trust accounting or you will lose your best customer. That has been a nice tailwind. We also did the Morningstar Transact deal a little more than a year ago, and that gave us 600 to 700 more RIAs. Black Diamond continues to execute. It has a lot of very strong and satisfied clients, and we would guess it is going to continue to grow in excess of double digits. On AI, in 2022, we bought Blue Prism, which got us deep into robotic process automation, machine learning, and natural language processing. We have deployed close to 4 thousand digital workers, and now we are improving them by turning them into AI agents. We feel like the deployment of these digital workers has maybe saved us a couple hundred million dollars a year. Why is that not all dropping into margin improvement? Compute and large data infrastructure are not cheap. Even with that, we have maintained our margins and built MontyRx and a number of other new systems we are rolling out. Rahul is running a number of projects in the AI space. Rahul Kanwar: It is the speed of software development—we are seeing a positive impact. We also have deep domain expertise—40 years of processing in very complicated, very regulated ways. We are deeply embedded in our customers and their operating models. Taking that knowledge and turning it into skills that AI agents can run is a massive opportunity. Without giving too much away from our event week, we will preview some of what we have built already in a very short period of time. We are excited about what else we will be able to do. William C. Stone: There is a lot of enthusiasm from the earliest adopters we have rolled this out to. There is real opportunity here, and it is about orchestrating delivery, pricing, and having the right teams install it and train our clients. We are excited about it. Operator: Thank you. Our next question comes from Patrick O'Shaughnessy with Raymond James. You may proceed. Patrick O'Shaughnessy: Good evening. How are you thinking about the application of blockchain technology from the perspective of services that your GIDS business provides, such as transfer agency? Is there any disintermediation risk? Rahul Kanwar: I think it is mostly an opportunity. The number of examples of folks interested in blockchain and tokenization is still fairly small. We have a few up and running and a few in process. In the examples we have, not only are we a big part of enabling them—which is a revenue stream for us—but it simplifies our work, which is a cost opportunity for us. The rest of our work—probably 95%—stays exactly the same or grows a little. Net-net, we think it is beneficial. Patrick O'Shaughnessy: Got it, that is helpful. And GlobeOp organic growth was 6.7% in the quarter, down from 9.6% last quarter. Anything to read into that, or just natural ebbs and flows? William C. Stone: It depends on timing. When you win some very large global macros, you have to get those assets onboarded. We get paid when they are not live, but at a lower rate; when they go live, the revenue steps up materially. It just depends on timing. Sometimes there are renewals where GlobeOp might get a pickup in a particular quarter based on a renewal. Operator: Thank you. I would now like to turn the call back over to William C. Stone for any closing remarks. William C. Stone: We believe we had a strong quarter. We have a lot of momentum and are bringing out offerings that will give us more momentum. We look forward to talking to you at the end of the second quarter. Thanks for dialing in, and thanks for your questions. We will talk to you in about 90 days. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
Operator: Hello and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the SES AI Corporation First Quarter 2026 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. If you would like to ask a question during that time, simply press star, then the number one on your telephone keypad. I would now like to turn the call over to Kyle Pilkington. Kyle, please go ahead. Kyle Pilkington: Hello, everyone, and welcome to our conference call covering our first quarter 2026 results. Joining me today are Qichao Hu, Founder and Chief Executive Officer, and Jing Nealis, Chief Financial Officer. We issued our shareholder letter just after 4 PM today, which provides a business update as well as our financial results. You will find a press release with a link to our shareholder letter in today’s conference call webcast in the Investor Relations section of our website at scs.ai. Before we get started, this is a reminder that the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation. These statements are based on our predictions and expectations as of today. Such statements involve certain risks, assumptions, and uncertainties, which may cause our actual or future results and performance to be materially different from those expressed or implied in these statements. Risks and uncertainties that could cause our results to differ materially from our current expectations include, but are not limited to, those detailed in our latest earnings release and in our SEC filings. On this call, we will discuss non-GAAP financial measures as a supplement to our GAAP results. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles but are intended to illustrate alternative measures of the company’s operating performance that may be useful. These non-GAAP measures should not be considered in isolation or as a substitute for any GAAP measure; our definitions may differ from those used by other companies reporting similarly titled measures. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in our latest earnings release. With that, I will pass it over to Qichao Hu. Qichao Hu: Thanks, Kyle. Thanks, everyone, for joining today. We had a strong start for 2026. The first quarter revenue came in at $6.7 million, a 47% increase over the fourth quarter and well above published consensus estimates. We are reaffirming our full-year 2026 revenue guidance of $30 million to $35 million, with contributions expected from all three of our revenue-generating business units. We are executing on plan, and we like the momentum we have heading into the rest of the year. Before I get into the business update, I want to take a moment to acknowledge Jing Nealis, who is on this call with us today. As we announced today, Jing will be transitioning from her role as Chief Financial Officer effective April 27. On behalf of the entire team and our board, I want to thank her for her contributions and wish her well. We have appointed Ray Liu as our new CFO, effective April 27. Ray is a seasoned finance executive with over 20 years of experience in FP&A, strategic finance, and SEC reporting at companies including AIG and MetLife Investment Management. He is a CFA charterholder and CPA. We are confident he will be an excellent partner as we scale the business. More details on this transition are in the separate press release we issued today. Now let me walk through each of our business units. Starting with energy storage systems. ESS remains our largest near-term revenue driver and was responsible for the majority of our first quarter revenue through UZ Energy. We continue to see growing demand for our commercial and industrial energy storage solutions, and our global footprint has expanded. Earlier this month, we provided a business update that highlighted our strong start to the year. Today, I want to add some additional context on the commercial traction we are seeing. We have now entered the North American market through our multiyear distribution agreement with ATGE Power, a leading North American distributor of renewable energy and energy storage solutions that has been operating in the clean energy sector since 2001. This contract, valued at approximately $20 million over three years, gives us immediate access to ATGE Power’s established distribution network across residential, commercial, and industrial customer segments. This new contract builds on UZ Energy’s existing customer base in Australia, the Middle East, and Europe, and reflects our strategy to grow the ESS business both geographically and through the on-premise integration of our Molecular Universe predictive capabilities into the hardware offering, an Edgebox. Energy storage systems are financial assets for our customers. The value depends on delivering consistent, long-term performance. Our ability to provide both the hardware and an intelligent operating system that predicts battery health and reduces maintenance cost is a key differentiator. Turning to drones. We made progress in our drone cell business during the first quarter that I want to walk through. I am pleased to report that we have completed the conversion of our manufacturing line at our Jeongju, South Korea facility from EV pouch cells to drone-format power cells. This facility, which produced the world’s first 100 m-power lithium metal cell back in 2021, has been NDA-compliant since 2021. Our plans are for the converted line to gradually ramp up to an annual capacity of over 1 million drone cells and incorporate our AI for manufacturing capabilities to ensure quality and cost effectiveness. Early this month, we began shipping NDA-compliant cells produced in our Chengdu factory to prospective defense and commercial drone customers for evaluation and qualification testing. Customer interest has been strong, and we are encouraged by the engagement we are seeing. The U.S. defense drone market in particular continues to be where we see the most consequential near-term opportunity, and our NDA-compliant manufacturing capability in Korea positions us well relative to competitors who lack NDA-compliant supply chains. We continue to explore additional NDA-compliant capacity in Southeast Asia and expect to have an update on this front later this year. On materials, our pipeline continues to build. Through the Molecular Universe platform, both SES AI Corporation and our customers have been discovering new electrolyte materials for applications beyond our current cell production. We now have approximately half a dozen customers who have progressed through second-phase testing of materials discovered through the platform, and the overall number of customers in our pipeline has increased. The progression of existing customers through the testing pipeline represents positive momentum. We remain on track with the Hyzon joint venture to leverage their 150 thousand-ton annual global capacity to produce these materials at commercial scale as demand materializes. And on the Molecular Universe, we recently introduced version 2.5 of the platform, which represents our fifth major iteration since we launched in 2024. Version 2.5 delivers upgraded capabilities across our six AI-powered workflows—search, formulate, design, predict, and manufacture—along with expanded enterprise on-premise deployment options and covering both lithium and our sodium chemistries. During the quarter, a major global battery manufacturer committed to a multiyear subscription of our Molecular Universe Search-in-a-Box product, which we view as a validation of the platform’s value to the world’s leading battery companies. While the direct on-premise revenue from the Molecular Universe continues to build and is expected to make a modest direct contribution in 2026, its biggest impact remains the IT and competitive advantages it drives across our ESS, drone, and materials businesses. We will continue to explore how best to demonstrate and unlock the Molecular Universe value over the course of the year. As we look to the remainder of 2026, our priorities remain clear: execute on the ESS opportunity through UZ Energy and our growing distribution network, advance our drone cell business to a commercial-scale customer engagement, deliver on the materials pipeline, and continue developing the Molecular Universe as both a revenue stream and a competitive advantage. I want to thank the team for their continued execution and thank all of you for your continued interest in SES AI Corporation. And now here is Jing for the financial update. Jing Nealis: Thank you, Qichao. I will walk through our financial results for 2026. Given that our current three-business-unit structure took shape in 2025 with the integration of UZ Energy and the launch of our drone cells and materials initiatives, we will present our first quarter results on a sequential basis compared to 2025, which we believe provides the most meaningful view of our operating trajectory. Revenue for 2026 was $6.7 million, representing a 47% increase over the $4.6 million in 2025. As a reminder, 2025 was impacted by approximately $1.5 million of revenue that was pushed into the first quarter, which benefited Q1 results. Our revenue growth reflects the continued growth from UZ Energy’s ESS product revenue, and early contributions from our drone cells and Molecular Universe subscription revenue. We are reaffirming our full-year 2026 revenue guidance of $30 million to $35 million. Our Q1 gross margin on a GAAP basis was 18.1%, compared to 11.3% in 2025. On a non-GAAP basis, which excludes stock-based compensation, as well as depreciation and amortization allocated to cost of revenue, our Q1 non-GAAP gross margin was 18.3%, compared to 11.7% in 2025. The sequential improvement from Q4 2025 reflects margin improvements from the UZ ESS business and higher margin from sample sales and Molecular Universe subscription revenue. Turning to operating expenses. Our GAAP operating expenses for 2026 were $19.1 million compared to $18.2 million for 2025. On a non-GAAP basis, which excludes stock-based compensation as well as depreciation and amortization, first quarter operating expenses were $14.3 million compared to $13.5 million for 2025. Our GAAP net loss for the first quarter was $12.1 million, a $0.04 loss per share, compared to a GAAP net loss of $17.0 million, or a $0.05 loss per share, in 2025. I want to remind everyone that our GAAP net loss in any given quarter can be meaningfully impacted by noncash mark-to-market movements in the fair value of our sponsor earn-out liabilities, which are required to be remeasured each reporting period under GAAP. In Q1 2026, we recorded a $4.2 million noncash gain related to these liabilities. These noncash gains or losses are not reflective of our underlying operating performance, and we believe excluding them provides a clearer picture of the progress we are making in the business. Excluding stock-based compensation, depreciation, and amortization, change in fair value of sponsor earn-out liabilities, and including interest income, our non-GAAP net loss for the first quarter was $11.1 million, or a $0.03 loss per share, compared to a non-GAAP net loss of $11.8 million, or a $0.04 loss per share, in 2025. Adjusted EBITDA for 2026 was a loss of $12.8 million compared to a loss of $13.8 million in 2025. We believe this continued progress reflects the positive operating leverage beginning to emerge in our business as revenue scales, combined with our sustained focus on financial discipline and cost management across the organization. We remain on track to deliver the approximately 15% reduction in full-year operating expenses that we guided on our last call. A detailed reconciliation of GAAP net loss to adjusted EBITDA and non-GAAP net loss per share is included in the financial tables at the end of the shareholder letter. We utilized approximately $20 million in cash for operations during the first quarter, consistent with our operating plan. We exited the first quarter with a strong liquidity position of approximately $178 million. Our CapEx-light business model remains a core financial discipline, and we are confident our current liquidity provides a strong runway to fund operations and execute on our 2026 growth initiatives. On a housekeeping note, we expect to file a new S-3 shelf registration statement concurrent with our October filing, as our current shelf expires on April 28. This is a routine administrative filing to maintain our financial flexibility. We believe the first quarter demonstrates steady execution against the plan we laid out. Revenue is on plan, costs are coming down, our multi–revenue stream platform is taking shape. We are well capitalized, financially disciplined, and positioned to deliver on our full-year outlook. Lastly, on a personal note, this is my last earnings call with SES AI Corporation. I am grateful for the opportunity to have helped build SES AI Corporation’s financial foundation during the past five transformative years of the company. SES AI Corporation is well positioned to capitalize on the momentum it has built, and I look forward to seeing the growth story unfold. Thank you to Qichao, my colleagues, our board, and our shareholders for the trust and support along the way. Thank you. With that, I will hand the call back to the operator. Operator: At this time, if you would like to ask a question, press star, then the number one on your telephone keypad. To withdraw your question, simply press star 1 again. Your first question comes from the line of Derek Soderberg with Cantor Fitzgerald. Please go ahead. Derek Soderberg: Yeah, hey, everyone. Thanks for taking the questions. And, Jing, it has been a pleasure working with you on this one. So just on the evaluation and qualification tests, can you talk about the typical timeline? How long might it take to transition those into firm purchase orders? Qichao Hu: Hey, Derek. Are you referring to drones qualification or electrolyte? Which one? Derek Soderberg: Drones. Qichao Hu: Drones. Drones qualification typically takes one to two quarters, and then we started those last year. So most of the qualifications actually have been completed, and now it is just making those in our Korea facility and having the customers come in and then do the supply chain audit, making sure all the cathode powder, the anode powder, the processing actually take place in Korea. Derek Soderberg: Got it. That is helpful. And then on the on-premise solution, I think you said you are going to have some contribution this year. Is there any chance you can quantify that for us at all? Qichao Hu: Probably in the next quarter. Until this last quarter, we did have one of the largest battery companies that actually signed up to the Molecular Universe Search-in-a-Box—so only one of the six features—and then we have a few more in the pipeline that are interested in Formulate-in-a-Box, Predict-in-a-Box, and also other features of the tool. Derek Soderberg: Got it. And then one final one for me. On the drones again, what is the split between defense and commercial interest? Can you maybe break that out for us at all? Thanks. Qichao Hu: It is mostly defense. Even though almost all the customers come to us and will say it is dual use—like, the same drones could be used for defense, police, commercial—in reality, the customers that come in, we focus a lot on customers that want NDA compliance, and then only the customers that actually want to get defense contracts would really push for NDA compliance. So we do not have a specific breakdown between defense and non-defense, and the customers do not tell us that, but we know it is predominantly defense. Derek Soderberg: Perfect. Thanks. Qichao Hu: Thanks. Operator: Your next question comes from the line of Winnie Dong with Deutsche Bank. Please go ahead. Winnie Dong: Hi. Thanks so much for taking my question. And, Jing, thank you so much. I mean, it was a great pleasure working with you. My first question is on the multiyear distribution agreement with ATGE Power. I was wondering if you can help us understand the relationship—if this is like a wholesale relationship—and of the $20 million order over three years, what kind of shipment cadence should we be thinking about? Qichao Hu: It is similar to what I just mentioned. It is a wholesale distribution, and then they help us bundle the UZ products with solar and then distribute that to their customers. Winnie Dong: Got it. So, essentially, once you ship it to them, you would be able to book revenue. That is how the setup is. Qichao Hu: In terms of revenue recognition, the timing—Jing, is that correct? Jing Nealis: Yes. So it is based on shipment. Yes. Once we ship it, based on the Incoterm, we will be able to recognize the product revenue. That is correct. Winnie Dong: Gotcha. Okay. And then on UZ, you know, you have achieved close to $7 million, and I think somewhere spilled over from Q4. What is the typical seasonality of this business? I understand that maybe it can be a little difficult since you are spreading across all different regions, but, holistically, is there a seasonality that we should be looking at for this business? Qichao Hu: Maybe I can address. I think overall, the energy storage business globally has some sort of seasonality depending on the region, and Q2, Q3 usually are higher than Q4. But it also depends on the local incentives available. Like, in Australia, everybody is trying to secure something to be installed before the incentives go away. And, in Europe, there are a lot of incentives going on before they go away. So there are certainly seasons based on the region. However, because UZ sells to many regions globally, it is not tied to a particular place. So I think for this year, at least, we see growth quarter over quarter, with some seasonality, but I would not put a lot of emphasis on that. Q2, Q3 are probably higher. Winnie Dong: Got it. And then maybe just a follow-up. I guess within the $30 million to $35 million, what is baked in in terms of contribution from materials and some of the other efforts that you guys have in place? Qichao Hu: What is the breakdown? Yeah. I think we expect this year to come predominantly from ESS, and then the rest split between drones and materials. Winnie Dong: Got it. Thank you. Operator: Your next question comes from the line of Dave Storms with Stonegate. Please go ahead. Dave Storms: Good evening, and thank you for taking my questions. I wanted to start maybe with ESS and your mention of the hardware offering Edgebox. Just hoping you could maybe take a little time to speak about how that plays into the sales cycle—maybe what some of the benefits are—or any updates. Qichao Hu: Can you ask the last part of the question again—the sales cycle and then the part after that? Dave Storms: Yeah, just maybe some of the benefits of adding Edgebox to your offerings, and how it may be helping the sales cycle. Qichao Hu: Yeah. So the hardware is pretty competitive, and it is basically you purchase cells, you integrate those into a container. And in the industry, the accuracy error is typically 7% or even as high as 10%, so not so accurate. As a result of that, for example, if your project only needs 10 kilowatt-hours, you will buy 14 kilowatt-hours to allow for the error. By having this Edgebox, it does two things. One is it can very accurately tell the state of charge, the state of health, safety, energy, power—basically, what we call SOX—there are six of them—and it can give a really accurate estimation of that. So instead of the error being 7% to 10%, now we are talking about 3% or even less. And then the other benefit is that instead of on the cloud, which a lot of customers do not like, it is totally secure. It is in a box we actually put on premise. So you also have data security. The main benefit is that now, instead of buying more capacity to allow for the inaccurate estimation, you can buy less. The customers can save cost. For some of the customers that want to participate in virtual power plants—basically, electricity trading and then sell electricity back to the grid—because you have a more accurate estimation than your peers, you can bid at a more competitive price. Also, when you make the decision of whether or not to participate and that trade-off versus sacrificing the battery health, you can have a more accurate estimation of that trade-off. Dave Storms: Understood. Very helpful. Thank you. And then maybe just turning to materials. It was mentioned that there are several companies completing their second phase. Maybe just thoughts around timing through this next step, this third phase, as they advance towards commercial-scale supply discussions. Qichao Hu: Typically, it is two to three rounds of testing, each round about one quarter. We are talking about six to nine months of testing. Towards the end of the last round of testing, the customer will go through what is called commercial qualification. Basically, they will check for the plant and also check for all the toxicity, the special chemical permits needed for any special materials inside this formulation, and then make sure it is compliant to all the necessary local environmental toxicity chemical regulations. Overall, the testing is six to nine months, and then another quarter for the commercial qualification. But, again, we started a lot of this last year, so now with a lot of these customers, we are towards the end of the second round of qualification. Dave Storms: Understood. And maybe just one more quick modeling one for me. You reiterated a 15% expense reduction throughout the year. Should we expect that to kind of go on a linear glide path throughout the year? Maybe just any thoughts around the cadence of those expense reductions? Jing Nealis: I will take that. So we are taking a lot of actions to further reduce our operating expenses starting from Q1. You should be able to see the full-quarter impact starting from Q3. There will be a little bit of a reduction in Q2, but not a full quarter. But starting Q3, the full-quarter impact should be coming in. Dave Storms: Understood. Thank you for all the commentary. Jing Nealis: Then Q4 may be slightly lower than Q3. Dave Storms: Thank you. Operator: Your next question comes from the line of Sean Milligan with Needham. Please go ahead. Sean Milligan: Hey. Thank you for taking the questions. In terms of the 1 million units that you are targeting for the drone cell business, can you talk to what that potentially represents from a revenue standpoint? And then the second question is you have mentioned that you have been testing or qualifying cells with potential customers there. Is there any context you can give us on the pipeline and maybe sizing of initial orders that you would expect to see? Qichao Hu: Sure. So the 1 million is still not the full capacity that the Korea factory could go up to—much higher. All that investment we made for EV, and then it turned out we accidentally built one of the largest drone power cell manufacturing factories outside of China. So we have a lot of customers that want NDA-compliant cells come to us. The market price for NDA-compliant cells—obviously depending on the specific cell format—ranges between $25 to $35 as the market price. So for 1 million units, it is about $25 million to $35 million. That is just at 1 million, and then we could, again, go much higher if needed. In terms of the qualification process, again, we started most of the testing last year. The performance and the product testing have been completed. Now a lot of that is actually supply chain audit and qualification. Sean Milligan: Okay. Is there any way to talk about the pipeline—like, number of customers that you are testing with? If you look at the revenue guidance this year, I think you said some of that comes from the drone business, but it obviously could be a much bigger piece of business. I am just trying to understand how the pipeline looks—number of customers—any stats that can help us gain some sense of potential momentum. Qichao Hu: We have a pipeline of a few dozen customers. Again, we focus on customers that want NDA-compliant cells. We actually had some shipment recently, so we expect revenue in Q2 for the NDA-compliant cells and then to start to pick up in Q3 and then Q4. Really, next year, 2027, is going to be a full year when we actually have the ability to deliver a full year of these NDA-compliant cells. Sean Milligan: Great. Thank you. Operator: There appear to be no further questions at this time. Ladies and gentlemen, this concludes the SES AI Corporation First Quarter 2026 Earnings Call. Thank you all for joining. You may now disconnect.
Operator: Hello, and welcome to Columbia Banking System, Inc.’s 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. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today’s conference is being recorded. I would now like to turn the conference over to Jacquelynne Bohlen, Investor Relations, to begin the call. You may begin. Jacquelynne Bohlen: Thank you, Didi. Good afternoon, everyone. Thank you for joining us as we review our first quarter results. The earnings release and corresponding presentation are available on our website at columbiabankingsystem.com. During today’s call, we will make forward-looking statements which are subject to risks and uncertainties and are intended to be covered by the safe harbor provisions of the federal securities laws. For a list of factors that may cause actual results to differ materially from expectations, please refer to the disclosures contained within our SEC filings. We will also reference non-GAAP financial measures and I encourage you to review the non-GAAP reconciliations provided in our earnings materials. We will now hand the call over to Columbia’s Chair, Chief Executive Officer and President, Clint E. Stein. Clint E. Stein: Thank you, Jackie. Good afternoon, everyone. Our first quarter results reflected continued execution against the same core priorities we have previously outlined: delivering consistent, repeatable results, optimizing our balance sheet, and returning excess capital to shareholders. We also completed the Pacific Premier systems conversion and consolidated nine branches during the quarter, putting us on track for full realization of all acquisition-related cost savings by the end of this quarter. I want to thank our highly experienced team of associates for their months of meticulous planning and the seamless execution of this key integration milestone. Our operating results for the first quarter reflect the continuation of momentum established late last year, as solid C&I production offset a decline in below-market-rate transactional loan balances. We also reduced our reliance on wholesale funding as customer deposit balances expanded despite seasonal pressure typical during the first quarter. The resulting mix shift in both assets and liabilities fortifies and positions our balance sheet for sustained attractive returns over time. Our bankers’ proven ability to generate balanced, relationship-centric growth in deposits, loans, and quality fee income is driving sustainable earnings growth. We do not need to produce net balance sheet growth to achieve our EPS and ROTCE objectives. Columbia’s cost-conscious culture further enhances our top-quartile profitability profile. Beyond savings associated with the Pacific Premier acquisition, our expense base reflects continuous fine-tuning. We remain disciplined in identifying offsets that create reinvestment dollars for initiatives that drive revenue and enhance efficiency. AI is becoming an important tool for driving efficiency across Columbia. During our Pacific Premier core systems conversion, we used AI to automate work that traditionally would be completed manually. Historically time-consuming conversion tasks, such as reviewing and validating thousands of data fields, were automated and completed in a fraction of the time historically required. Instead of relying on manual checks and custom coding, AI helped us move faster and reduce complexity with shortened review timelines and improved execution. More broadly, AI is helping our technology teams work more efficiently. It allows our developers to move faster, test changes more quickly, and write software that is more secure. The result is higher productivity and better outcomes without adding incremental resources. We also enhanced our customer support experience with an AI-powered assistant. Our ratio of human calls to AI-powered agent chats moved from two to one in favor of humans to three to one in favor of AI agents, as many routine administrative questions are now handled by the virtual assistant. Macroeconomic headlines continue to dominate industry narrative, often driving outsized stock price reactions and unilaterally treating all banks as the same. We are not all the same, and Columbia’s fundamentals warrant differentiation. Over my tenure at Columbia Bank, we have repeatedly demonstrated the ability to withstand industry stress as we consistently turn disruption into opportunity. During the global financial crisis, Columbia delivered strong credit performance while leveraging FDIC-assisted transactions to grow and strengthen our franchise. Since then, we have continued to expand our customer base through both organic growth and strategic acquisitions. Our best-in-class, low-cost core deposit franchise consistently ranks in the top quartile when measured on both cost and mix of noninterest-bearing balances. More recently, we successfully navigated the banking sector volatility of March 2023—again, another point in time where many regional banks were treated as one. The Columbia team navigated this volatility without a discernible adverse impact to our business while simultaneously executing a successful systems conversion just three weeks after closing the Umpqua acquisition. Our credit fundamentals remain sound. Our office portfolio continues to perform. A modest uptick in our CRE exposure, which is attributable to acquired portfolios, continues to decline. Turning to another closely watched area, our NDFI exposure is minimal, well below peer averages, and underwritten with the same conservative and consistent rigor we apply across our broader loan portfolio. Our first quarter results marked the beginning of our third consecutive year of stable operational performance and strong organic capital creation. Given our current capital position and strong forward outlook, we increased our pace of buybacks during the first quarter, returning $200 million to our shareholders, underscoring our belief that the best investment we can make at this time is in the stock of our own company. Looking forward, we will continue to execute on our established priorities—optimizing performance, driving new business growth, supporting the evolving needs of existing customers, and consistently delivering superior returns to our shareholders. I will now turn the call over to Ivan. Ivan Seda: Thank you, Clint, and good afternoon, everyone. As Clint highlighted, our first quarter results reflect continued execution of our strategic priorities. Turning to slide 10, we reported earnings per share of $0.66 and operating earnings per share of $0.72 for the first quarter. On an operating basis, which excludes merger expense and other items detailed in our non-GAAP disclosure, first quarter pre-provision net revenue and operating net income increased 45% and 50%, respectively, compared to 2025 due to the addition of Pacific Premier, continued progress on our balance sheet optimization targets, and disciplined expense management. Turning to slide 11, average earning assets were $60.8 billion during the first quarter, coming in at the midpoint of the range that I outlined in January, as continued balance sheet optimization contributed to modest contraction relative to the prior quarter. We modestly reduced cash as planned during the first quarter, utilizing excess balances to reduce wholesale funding sources, which declined by $560 million from December 31. Although wholesale funding declined as of March 31, balances were higher on an average basis during the first quarter due to typical seasonal customer deposit flows. Overall, the results were as anticipated, reflecting a stable balance sheet outlook and a remix in our loan portfolio out of transactional into relationship-based lending. Following the modest earning asset contraction during the first quarter, we expect the balance sheet size to remain relatively stable, with commercial loan growth offset by contraction in the transactional portfolio. Slide 12 outlines contributors to the sequential quarter change in net interest margin. Net interest margin was 3.96% for the first quarter, right at the top end of the range that I outlined in our last call. While the headline net interest margin is down from 4.06% last quarter, recall that our net interest margin in Q4 benefited from an 11 basis point impact of the amortization of a premium on acquired time deposits and an accelerated loan repayment. Pro forma for those factors, we were roughly flat quarter over quarter. Relative to 2025, net interest margin has expanded by 36 basis points, reflecting the impact of our balance sheet optimization strategy. We exited the first quarter with an improved funding mix relative to the fourth quarter and expect ongoing balance sheet optimization to drive net interest income growth and net interest margin expansion, with the first quarter setting the low watermark for 2026. As I outlined in our last call, we anticipate our net interest margin to grow modestly in Q2, crossing over 4% at some point in the quarter. Our latest interest rate modeling continues to show that our balance sheet remains neutrally positioned to interest rates on slide 13, and you will note that we have over $6 billion in fixed and adjustable loans set to reprice over the next twelve months. Noninterest income in the first quarter was $83 million on a GAAP basis and $81 million on an operating basis, as detailed on slide 14, within our guided $80 million to $85 million range. The sequential quarter decrease was driven by lower swap syndication and international banking revenues following the strong performance in the prior quarter. Despite that, operating noninterest income is up $25 million, or 44%, relative to 2025, from the impact of Pacific Premier alongside strong growth in fee income streams, as Tory will highlight later. We continue to expect noninterest revenues in the low- to mid-$80 million range for Q2. Slide 15 outlines noninterest expense, which was $369 million on an operating basis. Excluding intangible amortization of $41 million, the first quarter’s $328 million run rate was below our guided range due to the earlier realization of cost savings following January’s system conversion as well as some planned investments which fell back into Q2. As of March 31, we achieved $102 million of the targeted $127 million in synergies, although these savings were not fully run-rated in the first quarter’s results. Excluding CDI amortization, we expect noninterest expense in the $335 million to $345 million range for the second quarter before declining in the third quarter as we realize all cost savings related to the transaction by June 30. CDI amortization will average around $40 million per quarter. Moving on to slide 16, provision expense was $28 million for the first quarter, reflecting loan portfolio runoff, credit migration trends, and changes in the economic forecast used in the credit models. A relationship in the agricultural industry drove a modest increase in net charge-offs and nonperforming assets relative to the fourth quarter, with our overall credit metrics remaining stable and healthy. Slide 17 details our allowance for credit losses by portfolio, with coverage of total loans at 1% at quarter end, and 1.28% when credit discount on acquired loans is included. Turning to capital, slide 18 highlights our regulatory ratios at quarter end. Our CET1 and total risk-based capital ratios declined modestly to 11.5% and 13.3%, respectively, down approximately 30 basis points from the prior quarter end as our regular dividend and increased buyback activity outpaced capital generation during the quarter. During the first quarter, we repurchased 6.5 million common shares, returning $200 million to our shareholders. As of March 31, our capital ratios remain comfortably above well-capitalized regulatory minimums and our long-term target ratios. We have excess capital of approximately $500 million, and $400 million remains in our current repurchase authorization. Tangible book value declined slightly to $19.03 from $19.11 as of December 31, reflecting a higher accumulated other comprehensive loss on our securities portfolio given interest rate changes between periods. We expect share repurchases to remain in the $150 million to $200 million range per quarter for our current authorization. Overall, we are very pleased with the financial results for the first quarter, driving a 1.3% ROAA and over 15% ROTCE. We feel well positioned to drive strong profitability through the remainder of 2026 as our balance sheet optimization activity and continued share repurchases enhance long-term value creation. With that, I will hand the call over to Tory. Torran B. Nixon: Thank you, Ivan. Our teams had another strong quarter of business generation, as new loan origination volume of $1.2 billion was up 38% from the year-ago quarter. As a result, Columbia’s commercial loan portfolio, inclusive of owner-occupied commercial real estate, increased 6% on an annualized basis, contributing to the continued remix of our loan portfolio toward higher return, relationship-based lending as transactional loan balances continue to decline. Although payoff and prepayment activity in the first quarter slowed relative to the fourth quarter’s elevated level, declining balances in the transactional portfolio contributed to slight overall loan portfolio contraction to $47.7 billion from $47.8 billion as of December 31. We continue to expect relatively stable net loan portfolio balances in 2026 as we optimize our balance sheet for sustainable profitability improvement. Turning to customer deposits, our team’s ability to generate new business and strong quarter-end inflows offset seasonal deposit pressure during the first quarter, resulting in a $110 million increase in customer balances as of March 31. Our small business and retail deposit campaigns continue to bolster our deposit generation, and our current campaign has generated nearly $450 million in new balances to Columbia through mid-April. Further, the HOA business we acquired from Pacific Premier provided a countercyclical benefit during the first quarter, as balances seasonally expanded, increasing nearly $160 million since year-end. Customer balance growth and the cash deployment Ivan discussed contributed to a $760 million reduction in brokered deposit balances as of quarter end, accounting for the decline in total deposits to $53.5 billion from $54.2 billion as of December 31. Although customer fee income decreased following our strong fourth quarter performance, our results highlight the notable progress we have made over the past year, driven by the addition of Pacific Premier and our continued efforts to expand the contribution of core fee income to total revenue. As Ivan discussed, operating noninterest income increased significantly between 2025 and 2026, with exceptional growth in financial services and trust revenue, treasury management, commercial card, merchant income, and other recurring customer fee business. Our core fee income pipeline remains healthy, as do our loan and deposit pipelines, and we remain outwardly focused on generating business in a disciplined manner. We will now hand the call back over to Clint. Clint E. Stein: Thanks, Tory. I want to take a moment to thank our team of talented associates for their hard work and contribution to our ninth consecutive quarter of solid financial performance and consistent results. Relationship-driven loan and deposit growth, and our balance sheet optimization efforts, are creating tangible earnings results, as evidenced by our net interest margin expansion over the past year. This concludes our prepared remarks. Chris, Tory, Ivan, and Frank are with me. We are happy to take your questions now. Didi, please open the call for Q&A. Operator: Thank you. To withdraw your question, please press 11 again. Our first question comes from Jon Arfstrom of RBC Capital Markets. Your line is open. Jon Arfstrom: Thanks. Good afternoon, everyone. This all looks good, but maybe on loans and margin: can you talk a little bit about the $1.2 billion-plus in originations—where that is coming from and general trends? It seems maybe a little better than a typical first quarter, but just give us an idea of what you are seeing there and what the drivers are. And then, Ivan, can you give us a little more on what you are thinking on the margin? It seems like the trajectory is higher—maybe a little better than you thought—but can you talk about medium-term expectations and also touch on what you are seeing in terms of deposit pricing competition? Torran B. Nixon: Sure, Jon. I would say it is quite a bit better than year-over-year Q1 2025. Of the $1.2 billion, the commercial space is about $1 billion, roughly 35% growth from Q1 2025. There has been a lot of progress made in the company in an outbound effort to deploy our resources to bring new relationships into the bank. We have been very successful. We watch pipelines all the time. It is not coming from one particular part of the company; it is spread throughout the organization. We are seeing growth in our historical Pacific Northwest markets, growth out of California, and nice growth in our de novo markets. It is spread throughout the company, and it is a combination of a significant effort on the part of our bankers to tell the story of Columbia Banking System, Inc., and it is a great story. We are having a lot of success with it. Ivan Seda: That sounds great. I will start on margin and then look to Chris to talk about what we are seeing in the marketplace regarding deposits. This quarter, we landed right at the top end of the range we provided last quarter. There are two counteracting effects we saw in Q1. The headwind in Q1—every year—is seasonality, in which we see deposit outflows and a heavier reliance on wholesale funding channels. While our ending wholesale funding point-to-point was down, on average we had about a 7% increase in average reliance on brokered and FHLB relative to Q4. What counteracted that and allowed us to stay stable relative to past years is the tailwind from continued optimization of the balance sheet and specifically the loan portfolio: repricing of low-coupon, low-duration transactional loans. In Q1, we saw an additional $230 million of that portfolio run down. Those balances are coming off in the low- to mid-4% range, and we continue to replace them with core relationship lending with a six handle. That is a very positive, continued engine we expect to continue. Ninety days ago, I hedged and said sometime in the spring or summer we would cross over the 4% level. We will be roughly at that 4% marker in Q2 of this year, and then continue to step up from there and move north of 4% into the second half of the year. From a deposit perspective, there was a bit of noise in Q4 associated with some one-time tail-event items with the PPBI deal on acquired deposits. Adjusting for that, our Q4 cost of interest-bearing was 2.20%. For Q1, it was 2.04%—so 16 basis points down spot-to-spot, and we saw an additional eight basis point decrease during the quarter without any Fed funds actions. That continues to point to the discipline we bring to back-book CD pricing, as well as evaluating deposits on a relationship basis. I was really pleased to see continued momentum there as well. I will hand it over to Chris. Christopher M. Merrywell: Thanks, Ivan. Jon, that disciplined approach Ivan outlined has always been there. Tory and I constantly look through exception requests and work with our bankers on each of them, monitoring the competition for rack rates. We like where we are positioned and continue to look for opportunities to trim a few basis points where we can. Our bankers have really grabbed hold of that and are moving forward. If we do get a Fed cut later in the year, we have shown a solid playbook and a system to deal with that at large volume. Tory and I are looking at this every single day as items come due. I think the results are speaking for themselves. Jon Arfstrom: Okay. Alright. Thank you very much, guys. Operator: Thank you. Our next question comes from David Pipkin Feaster of Raymond James. Your line is open. Clint E. Stein: Hey, David. David Pipkin Feaster: I wanted to start by following up on Pacific Premier. It sounds like the deal has gone pretty well so far, but specifically on the conversion and integration: how did that go relative to expectations? How was feedback from clients? Have you seen any attrition? And post-conversion, how is the team doing, and has their go-to-market focus shifted now that we are integrated and heading in the right direction? And then on hiring, how active have you been, your appetite for additional hires, and what geographies or segments are you looking to add to or business lines to expand? Lastly, on capital, with proposed regulatory relief, especially treatment of MSRs, have you done work around what that could mean for you? Does that change capital priorities, or are buybacks still the focus? Clint E. Stein: Great questions, David. I have said since the first set of town halls a year ago with the team at Pacific Premier that their reaction was different. The enthusiasm they showed for the combination and becoming part of Columbia Banking System, Inc. and our market position throughout the West carried through all the way to the systems conversion. It went so smoothly that I almost forgot we did a conversion in the first quarter because there was no drama typically associated with it—no customer disruption. Out of all the ones we have done, it was the best we have ever had. That is attributed to the talent at Columbia and the talent and experience Pacific Premier brought to the table as well. Since the January conversion, it has been business as usual. If anybody thought we got distracted, look at our performance during what is typically our seasonally weakest quarter—the momentum we had on the C&I side and actually growing customer deposits during the first quarter. Chris and Tory live this every day, so I will let them add color at the customer level. Torran B. Nixon: I am incredibly impressed and proud of the Pacific Premier folks and how excited they have been from day one to be a part of Columbia. The conversion went extraordinarily well. We have a ton of momentum in Southern California. Teams have folded in to become one very unified, strong presence. We have not really lost anyone of note from an associate standpoint—high retention of people and very high retention of customers. We continue to find opportunity in the existing Pacific Premier book to grow relationships. Momentum is very strong and they feel very good about being part of our company and the opportunity in front of them. Christopher M. Merrywell: On client feedback, during the conversion people could leave comments after using the contact center. We had numerous comments raving about the conversion—many had been through others and said this was the best and that they loved the bank. There were so many that I joked with the contact center about planting them, but they were real customers and it was phenomenal. Happy customers lead to happy bankers. With capabilities from both organizations together, our bankers are taking advantage of that, and we are starting to see bankers in our markets reaching out, asking what it is like and whether they can come on board. On hiring, we are always active. You never know when the best bankers will decide to make a move, so we always have oars in the water and are ready. If it is the right bankers and they can bring value, we will create a position. We are looking at expanding our wealth management operation, building out Southern California with trust folks, financial advisers, private bankers, and focusing on health care as well. Torran B. Nixon: Over the last six months, we have hired commercial bankers in Scottsdale, Denver, three or four in Utah, Eastern Washington, Seattle, Portland, Los Angeles, and Orange County. Bankers in the marketplace really appreciate and understand the Columbia story and our success, and they want to be a part of it. We are bringing them in and putting them to work, hitting the ground running. It is spread across business lines and geographies. Clint E. Stein: On capital priorities, the short answer is no change. We still firmly believe the best investment we can make is in our own company stock. We announced a big buyback last fall and we are almost halfway through that allotment. We are very serious about executing on the full amount. Ivan can address MSR treatment and the capital ratio implications. Ivan Seda: Like everyone else, we are still evaluating and putting a finer point on the exact impacts of the proposed rulemaking, and it is still in a comment period. What is clear is meaningful capital benefit under the proposed rules. Our back-of-the-napkin analysis on the NPR shows a potential benefit of up to roughly 100 basis points of CET1, which would provide interesting optionality going forward. More work to be done to fully unpack that. Operator: Thank you. Our next question comes from Jeffrey Allen Rulis of D.A. Davidson. Your line is open. Jeffrey Allen Rulis: Maybe for Frank on the credit side, could you provide more color on the nonaccrual adds and some of the net charge-offs within the ag book? And is this systemic or isolated? Also, any linkage between the nonaccrual and charge-offs? Frank Namdar: It was really centered in one customer relationship—a casualty of what is going on in the ag industry right now with input costs being extremely high and margins extremely tight. Those with higher leverage have a more difficult time. Inevitably there will be a casualty, and this is one of them. It is not systemic. This particular one was in the hop industry. Hops and grapes—beer, wine, spirits—are going through what I would call a generational shift in demand, and that compounded what was going on in this situation. The nonaccrual and the charge-off are interrelated. Jeffrey Allen Rulis: Thank you. And on loan growth, you guided to flattish balances for the year as transactional runs off versus core growth. Is that straight-line over the year? And thinking about 2027, could the back half of 2026 see an uptick, and could 2027 get back to low single-digit growth? Ivan Seda: Any given quarter, we could see some movement up or down. This quarter, we had about a $100 million reduction. Our general expectation for the next three or four quarters is relatively flat. In the last two quarters, we have seen almost $500 million of the transactional portfolio run down. We are actively replacing that with strong growth in C&I and owner-occupied real estate portfolios. Throughout 2026, we are expecting roughly flat overall. Torran B. Nixon: On pipeline, our combined commercial pipeline as of the end of March was about $3.3 billion, up about $600 million from year-end, even with the production we had in the quarter. It is up about 50% from a year ago. Lots of activity and good momentum. We feel very optimistic about generating C&I loan growth, owner-occupied loan growth, and relationship growth. As momentum picks up, 2027 should be a good year for us. Ivan Seda: Over the course of a year, out of that transactional book, we are expecting $1.0 billion to $1.25 billion to run down. For us to stay flat, it requires 4% to 5% loan growth out of the core relationship portfolio. That is very real in terms of the core loan growth we are seeing just to stay even on total portfolio size. Operator: Thank you. Our next question comes from Matthew Timothy Clark of Piper Sandler. Your line is open. Matthew Timothy Clark: A few cleanup credit questions. The uptick in 30–89 days past due—small in percentage terms—what drove that? Where did Finpack delinquency stand at quarter-end versus the fourth quarter? And classified balances this quarter versus year-end? And then on expenses, you maintained the adjusted expense run-rate guide of $335 million to $345 million for Q2 ex-CDI. With additional cost saves from PPBI, how should we think about core expenses for the year given Q1 tracked below? Frank Namdar: On the 31–89 day delinquencies, the uptick was centered in one commercial real estate loan that is in the process of being paid off. That accounted for the entire difference between fourth quarter and first quarter. Finpack is exactly where we thought they would be. Delinquencies and charge-offs are down from the fourth quarter. Looking forward, they have been bouncing along the bottom in terms of charge-offs at about a 3.4% to 3.45% net charge-off clip, which is a great number for that business. Nonperforming levels at quarter-end are where we expected; next quarter could be pretty close, maybe a little higher, but we will see. As mentioned on previous calls, about 80% of nonaccruals typically roll to net charge-offs. Classifieds held pretty flat quarter over quarter. Special mention improved significantly due to favorable resolutions and a couple of payoffs. Ivan Seda: On expenses, Q1 came in lower than planned. There are always a few smaller one-off items—business-as-usual—which amounted to $1 million or $2 million of benefit. Strategically, strong execution on synergies happened a little earlier than anticipated and was a meaningful factor. We also have investments you will see in future quarters—bankers across the footprint and expansion in markets like Colorado, Utah, and Nevada, as well as in our legacy markets. There is reinvestment happening over the next two quarters. All that said, we expect to come within the $1.5 billion full-year expense guide due to continued expense discipline as we execute on those items. Operator: Thank you. Our next question comes from Christopher Edward McGratty of KBW. Your line is open. Christopher Edward McGratty: Going back to Matt’s question on expenses: ex-CDI, $335 million to $345 million in Q2—do you stay in that range in Q3, or can you get below that once everything is fully in the run-rate? And then on capital, you do not have an official public target on CET1, but how important is the TCE ratio, and how do you balance the right levels as you consider buybacks after this authorization? Ivan Seda: We will come in below that range in the second half of the year. In Q3 and Q4, as we execute the remaining synergies, it is in the ballpark of $330 million to potentially $335 million. We are at $102 million executed out of the $127 million fully identified synergies. There is no question mark around timing, impact, or sizing of the remaining cost synergies—they are fully documented. That will start to flow through in Q3 and you will see a step-down into that range in the second half. Clint E. Stein: From a TCE standpoint, we want to be in the neighborhood of 8%. The reason is it gives us flexibility and comfort. Historically, when we back out current AOCI impacts of bond portfolios, 8% for our balance sheet ties to roughly 12% total risk-based capital, and that continues to be our binding constraint in terms of capital deployment. Christopher Edward McGratty: Two housekeeping items: tax rate to use, and on the ag loan that drove charge-offs and nonaccruals—has that been fully addressed provision-wise? Ivan Seda: Same as last quarter, use a 25% all-in effective tax rate. On the ag relationship, yes—we feel very comfortable with the level of allowance we have at 1%. Our process factors in a baseline economic scenario and incorporates elements of an S2 downside scenario. We have 100 basis points of loss content—over three and a half years of charge-off content on a run-rate basis relative to the last few quarters—and an additional 28 basis points of coverage from the credit discounts on the acquired portfolio. Fully contemplated. Operator: Thank you. Our next question comes from an Analyst of Jefferies. Your line is open. Analyst: On the deposit outlook, you had good success with roughly $450 million in new deposits from your recent small business and retail campaign. Do you have similar campaigns planned for spring or summer to continue the deposit momentum? And on noninterest-bearing deposits, period-end was up modestly sequentially while averages were down a bit. With fewer cuts in the forward curve, to what extent could that be a headwind on noninterest-bearing deposit growth? Christopher M. Merrywell: The current campaign will end in the next two weeks. We always take a brief break for cleanup and client follow-up, then relaunch. We will relaunch in June and then have another that goes into the fall—typically three per year. There are no special products or special pricing—this is all off-the-shelf. It is really a campaign around focusing our retail branches on going out and deepening and winning business. Ivan Seda: I do not think we will see a big headwind in terms of noninterest-bearing deposit growth relative to 90 or 180 days ago when we expected two rate cuts. It has been a competitive market since March 2023 and will continue to be. Our relationship-based strategies on the commercial side and the retail campaigns should continue to drive positive growth in the core deposit portfolio. More broadly, our balance sheet is positioned for interest rate neutrality by design. Whether we get one cut late in the year or not does not move the needle as much as our execution against strategy. Operator: Thank you. Our next question comes from Janet Lee of TD Cowen. Your line is open. Janet Lee: For the second quarter, on NII, can we assume flattish average earning assets and, with NIM getting to about 4%, roughly $605 million of NII for Q2? And on slide 12, you noted NIM outside of the two one-off impacts in Q4 was fairly stable. If you strip out the entire PAA on a core basis, how has that trended, and any change in PAA forecast? Ivan Seda: You are thinking about it correctly on NII given flattish average earning assets and the NIM crossover to 4% during Q2. Regarding PAA, we view the discount accretion on acquired loans, as well as on regular bond purchases, to be core. In unique circumstances, like in Q4 when a large credit with a large mark pays off early, there can be short-term volatility. We do not break out PAA separately. Operator: Thank you. Our next question comes from Anthony Elian of JPMorgan. Your line is open. Anthony Elian: You saw deposits contract in Q1 as expected. Can you give us some color on what you expect for Q2 deposits and the magnitude of the headwind from tax payments in April? And on slide 17, does the 1% ACL feel like a good level given your expectation for stable loan balances for the rest of this year? Ivan Seda: Generally, deposit contraction begins in the latter part of Q4 as we enter the holiday season—we disclosed that last quarter. That Q4 contraction resulted in about $500 million of FHLB draws in the latter days of December. As we go through tax season in April, we typically reach a low point in mid-to-late April and then rebound through May and June—so Q2 is often a bit of a V pattern. Q3 tends to be strong; Q4 reflects the usual holiday seasonality again. On the ACL, we feel very comfortable with 1% on loans, and when you include the credit discount on the acquired components, we are at almost 1.3%. We have reviewed it thoroughly and feel well reserved for the portfolio’s risk and the macroeconomic outlook. Operator: Thank you. Our next question comes from an Analyst of UBS. Your line is open. Analyst: Turning back to loan growth, payoffs in the traditional relationship-oriented portfolio still seem relatively elevated. Looking conceptually into 2027, do you need to see these payoffs moderate to start producing loan growth, or is production volume on its own able to push balances higher without payoff moderation? And do you have the retention rate on transactional loans that came due this quarter and stayed on balance sheet? Torran B. Nixon: Payoffs and paydowns in the commercial book are about where they would normally land. We had C&I production that far exceeded that, so we posted nice C&I growth this quarter. We feel really good about the pipeline and C&I growth in Q2 and beyond through 2026. On real estate, much of the payoffs are transactional loans we are letting roll off because they are not going to be full relationships. Where we can bring in deposits and core operating accounts and make them relationships, we are doing that. As we get into 2027 and 2028, you will likely see less transactional runoff and continued production-driven growth. Ivan Seda: We remain laser-focused on the transactional portfolio. As disclosed on slide 24, we have nearly $3 billion of transactional loans priced in the mid-4% range that will either mature or reprice over the next twelve months, and that volume slows meaningfully by mid-2027. That creates potential for elevated prepayments as those loans come back to the market at markedly different rates. Whether or not we fully replace 100% of that volume, we are confident in our ability to drive positive operating leverage and top-line revenue growth. As Clint mentioned earlier, we do not need net loan or balance sheet growth to drive positive operating leverage. Plan A is to replace with relationship-based volume. If we do not fully replace it, we have opportunity to continue optimizing our funding stack, which is also accretive to NIM. Torran B. Nixon: We do not have the precise retention number in front of us. With rates elevated, we are having a lot of success retaining loans that are moving from fixed to floating at a reprice, which is positive for the bank, and we are generating deposits and operating accounts from those transactional loans—turning them into full relationship customers. Operator: Thank you. I am showing no further questions at this time. I would now like to turn it back to Jacquelynne Bohlen for closing remarks. Jacquelynne Bohlen: Thank you, Didi. Thank you for joining this afternoon’s call. Please contact me if you have any questions or would like to schedule a follow-up discussion with members of management. Have a good rest of the day. Operator: This concludes today’s conference call. Thank you for participating and you may now disconnect.
Operator: Thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the SkyWest, Inc. First Quarter 2026 Results Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, please press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the conference over to Rob Simmons, Chief Financial Officer. You may begin. Robert J. Simmons: Thanks, Abby, and thanks, everyone, for joining us on the call today. As Abby indicated, this is Rob Simmons, SkyWest’s Chief Financial Officer. On the call with me today are Russell A. Childs, President and Chief Executive Officer; Wade Steele, Chief Commercial Officer; and Eric J. Woodward, Chief Accounting Officer. I would like to start today by asking Eric to read the safe harbor, then I will turn the time over to Russell A. Childs for some comments. Following Russell A. Childs, I will take us through the financial results, then Wade will discuss the fleet and related flying arrangements. Following Wade, we will have the customary Q&A session with our sell-side analysts. Eric? Eric J. Woodward: We assume no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise. Actual results will likely vary and may vary materially from those anticipated, estimated, or projected for a number of reasons. Some of the factors that may cause such differences are included in our most recent Form 10-K and other reports and filings with the Securities and Exchange Commission. I will now turn the call over to Russell A. Childs. Russell A. Childs: Thank you, Rob and Eric. Good afternoon, everyone. Thank you for joining us on the call today. Today, SkyWest reported net income of $102 million or $2.50 per diluted share for 2026. This is slightly better than the same quarter last year and reflects increased production and fleet utilization. During the quarter, we received delivery of one E175, with eight more expected this year. We are also excited to share a prototype of the new CRJ450 product, a reimagined premium 41-seat CRJ200. This aircraft will include first class, overhead bins large enough for all roll-aboard luggage, and Starlink Wi-Fi. SkyWest is very excited to launch this new product for United this fall, and we look forward to ultimately operating an all dual-class fleet. The first quarter is always difficult with winter weather. Our people rose to the challenge despite two back-to-back storms in March affecting several of our hubs. During the first quarter, the Department of Transportation shared their full-year 2025 on-time performance statistics with SkyWest Airlines placing third in on-time performance. That is outstanding, and I want to thank our people for working together to deliver such an exceptional product. The industry is extremely dynamic, and our model is built for durability. With uncertainty impacting fuel costs and production, we still anticipate 2026 will be more profitable than 2025. SkyWest’s strategic business decisions have kept us strong and agile to the industry’s volatility, and the steps we have taken in the past several years have only enhanced the strength and stability of our model. Our ongoing investments in the diversity of our fleet ensure we are well positioned to adapt to market demands. We continue executing our fleet initiatives and advancing our unparalleled fleet flexibility. That flexibility has never been more important. And while our E175 flying agreements are further solidified, we continue to leverage our extensive CRJ assets. The contract extensions we announced with United and Delta last quarter deliver ongoing revenue stability. And with our dual-class fleet, both CRJ and ERJ now under contract, we have no major E175 contract expirations until late 2028. We continue accepting delivery of new E175s and CRJ700s to CRJ550s for United and are proud to be launching the CRJ450 with United this fall. Additionally, we continue to reduce our debt; we now have $1 billion less debt than we did at the end of 2022. The free cash flow that we continue to generate is still being directed toward fleet growth initiatives, debt reduction, and share repurchase. Our steadfast commitment to maintaining a strong balance sheet and liquidity benefits our employees, our partners, and our shareholders. All of this work sets us up well for 2027 and places us in a solid position of long-term strength. SkyWest continues to lead our industry in service and in the value of our diverse assets. We remain disciplined and steady as we execute on our growth by delivering on significant prorate demand, investing in and fully utilizing our existing fleet, and preparing to receive our deliveries in the coming years for a total of nearly 300 E175 by 2028. SkyWest is built to perform through the industry’s cycles. Disciplined strategic choices and continued execution in recent years have strengthened our model, and we remain well positioned to adapt quickly and to respond to market demands better than anyone else in the industry. Rob will now take us through the financial information. Robert J. Simmons: Today, we reported a first-quarter GAAP net income of $102 million, or $2.50 earnings per share. Q1 pretax income was $108 million. Our weighted average share count for Q1 was 40.7 million, and our effective tax rate was 6%. This GAAP EPS included a $0.29 impact from this unusually low effective tax rate from a discrete benefit in the quarter compared to the Q1 rate last year. Let us start with revenue. Total Q1 revenue of $101.01 billion is down slightly from $1.02 billion in Q4 2025, and up 7% from $948 million in Q1 2025. Q1 revenue includes contract revenue of $810 million, up from $803 million in Q4 2025, and up from $785 million in Q1 2025. Prorate and charter revenue was $168 million in Q1, up $1 million from Q4 2025 and up $37 million from Q1 2025. Leasing and other revenue was $35 million in Q1, down from $54 million and up from $32 million in Q1 2025. The sequential decrease in leasing and other revenue from Q4 related to discrete maintenance services provided to third parties in Q4 that was not expected to repeat in Q1. Additionally, these Q1 GAAP results include the effect of $24 million of previously deferred revenue this quarter, up from the $5 million recognized in Q4 2025, and $13 million recognized in Q1 2025. As of the end of Q1, we have $241 million of cumulative deferred revenue that will be recognized in future periods. Now let us discuss the balance sheet. We ended the quarter with cash of $627 million, down from $707 million last quarter and down from $751 million at Q1 2025. The ending cash balance for the quarter included the effects from repaying $116 million in debt, issuing $118 million of new debt, investing $102 million in CapEx, including the purchase of one E175, and buying back 783 thousand shares of SkyWest stock in Q1 for $75 million. As of March 31, we had $138 million remaining under our current share repurchase authorization. Cash flow is obviously an important driver of our capital deployment strategy. Over the last two years, we generated nearly $1 billion in free cash flow and deployed it primarily to delever and de-risk the balance sheet to the benefit of our partners, our employees, and our shareholders. We expect to continue to deploy our ongoing generation of free cash flow by investing in our fleet, including financing the addition of 28 new E175s by 2028, reducing our debt, and executing opportunistically on our share repurchase program as you saw us do in Q1. As we remain focused on improving our return on invested capital, we would like to highlight the following. Both our debt net of cash and leverage ratios continue at favorable levels and are at their lowest point in over a decade. Our total debt level is $1 billion lower today than it was in 2022, in spite of acquiring and debt financing 15 E175s during that time. The total 2025 capital expenditures funding our growth initiatives was approximately $580 million, including the purchase of seven new E175s, CRJ900 airframes, and aircraft and engines supporting our CRJ550 opportunity. We expect to take nine new E175s during 2026 and anticipate our total CapEx in 2026 will be about flat with 2025, including two incremental 175 deliveries. Consistent with our practice, let me update you on some commentary on 2026 that we gave last quarter. For 2026, we now expect to see block hour production slightly lower this summer than we modeled last quarter. We continue to work with our partners on production schedules over the rest of 2026. Wade will talk more about this in a minute. We also anticipate our GAAP EPS for 2026 will be in the $11 area, slightly down from the color we gave last quarter, reflecting our expectation of ongoing elevated fuel costs. Although the future cost of fuel is obviously uncertain, we are exposed to fuel costs only on roughly 10% of our flying, or 40 million gallons needed in our prorate business over the remainder of the year. We also believe, however, that higher fuel costs will come with some favorable prorate pricing offsets in that business, along with ongoing strength in our core model. In terms of how to think of quarterly EPS modeling for the rest of 2026, there are several potential puts and takes over the remaining quarters, including seasonality, fuel cost, production, and so on, that have various levels of uncertainty. But to keep it simple, on a GAAP EPS basis, we anticipate directionally that Q2 could be up slightly from Q1 GAAP results of $2.50. Q3, seasonally the strongest quarter of the year, could be up over Q2, and Q4 could be down modestly from Q3. For other modeling purposes, we anticipate our maintenance activity in 2026 will continue approximately at 2025 levels as we invest in bringing more aircraft back into service. We also anticipate our effective tax rate will be approximately 23% to 24% for the full year 2026, flat to slightly down from 2025, including the unusually low rate of 6% in Q1. This is expected to translate to an effective tax rate of approximately 27% to 28% for the remaining quarters of 2026. We are optimistic about our ongoing growth possibilities in 2026 and 2027, including the following three focus areas. First, growth in our ability to increase service to underserved communities, driven partially by the redeployment of approximately 20 dual-class CRJ aircraft expected for scheduled service later this year and strong utilization of the existing fleet. Second, good demand for our prorate product. And third, placing nine new E175s into service for United and Alaska by 2026 and sixteen new E175s for Delta in 2027 and 2028. We are also very pleased with the success of our CRJ550 and CRJ450 initiatives, and I will hand the mic to Wade, who will talk more about that next. We believe that we are positioned to drive long-term shareholder returns by deploying our strong balance sheet and free cash flow generation against a variety of accretive opportunities. Wade? Wade Steele: During the quarter, United announced the launch of the CRJ450, a reimagined CRJ200 featuring 41 seats. This aircraft will offer seven first-class seats and 34 economy seats, including Economy Plus. With a large luggage closet and no overhead bins in the first-class cabin, passengers will enjoy a premium experience. We are also excited to introduce Starlink connectivity onboard the CRJ450. Operations with United will begin this fall. Last year, we announced an extension covering 40 CRJ200s with United, and we are committed to retrofitting these aircraft into CRJ450s. We also plan to retrofit our prorate fleet and anticipate that our total CRJ450 fleet will reach approximately 100 aircraft. Turning to our E175 fleet, last quarter, we secured multiyear extensions for 40 E175s with United and 13 with Delta, further solidifying our partnerships through the end of the decade. We now have no contract expirations on E175s until 2028. During the quarter, we took delivery of a new E175 for Alaska and currently have 68 E175s on firm order with Embraer, including 16 for Delta and eight for United. We expect to receive eight additional E175s this year. Of the 68 aircraft on order, 24 are allocated to major partners, with 44 remaining unassigned, allowing flexibility in our long-term fleet strategy. Delivery slots are secured from 2027 to 2032, and the structure of the order allows us to terminate if we do not secure partners. Following the completion of the Delta deliveries expected in 2028, our E175 fleet will total nearly 300 aircraft, reinforcing SkyWest’s status as the world’s largest E175 operator. We recently acquired five E170s and reached an agreement with United to operate these as we expedite the conversion of our CRJ700s to CRJ550s. As previously discussed, we have a multiyear agreement to fly 50 CRJ550s with United. As of March 31, 29 CRJ550s are in service, and we expect the remaining 21 to enter service this year. We have also initiated a prorate agreement with American, currently operating six aircraft under this arrangement, with up to nine expected by year-end 2026. We look forward to expanding our relationship with American. Reviewing our production, Q1 2026 block hours increased 3% compared to Q1 2025. For 2026, we anticipate production slightly lower this summer than we modeled last quarter. This year, we expect to take delivery of nine new E175s, place 23 CRJ550s into service, capitalize on strong prorate demand, and increase fleet utilization. These gains are partially offset by the gradual return of approximately 19 Delta-owned CRJ900s to Delta over the next couple of years, at a slower pace than previously anticipated. Our revenue seasonality has normalized. With improved utilization during the strong summer months, we still have approximately 10 dual-class CRJ aircraft currently undergoing heavy maintenance after transitioning from long-term storage. These aircraft are set to return to service in 2026 under existing flying agreements. Additionally, there are over 30 parked CRJ200s that could potentially transition to the CRJ450 and further enhance our fleet flexibility. We have continued to face challenges in our third-party MRO network, including labor and part shortages. We expect maintenance expenses in 2026 to remain consistent with 2025 as we bring aircraft out of long-term storage and support growing production. As expected, maintenance expenses are incurred before aircraft return to service. Demand for our prorate business remains extremely strong, supported by great community engagement. We are seeing opportunities to restore SkyWest service to several communities, and we will continue to work with airports to expand our reach. As discussed last quarter, growth in our prorate business contributes to a more seasonal model. We remain confident in our ongoing efforts to reduce risk and enhance fleet flexibility, and we are committed to collaborating with our major partners to deliver innovative solutions that meet the continued demand for our products. Operator: Okay. We will now open the call for questions. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press 1 a second time. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your questions. Again, it is 1 to join the queue. Our first question comes from the line of Catherine O’Brien with Goldman Sachs. Your line is open. Catherine Maureen O'Brien: Hey. Good afternoon, everyone. Thanks for the time. So we have had a couple of capacity cutdowns in some of your partners this earnings season, and you just shared that your summer schedule is lower than you originally expected. Do you think those mainline carrier cuts are now fully reflected in your schedule? How far in advance are you typically warned about any potential schedule changes? Wade Steele: Yeah, Catherine, this is Wade. As I said on our call, we do expect our block hours to be slightly less than what we talked about last quarter. Our schedules—we have good schedules through the summertime for sure. We think those schedules will hold, and we anticipate a strong fall as well. So we do expect a little bit less than what we talked about last quarter, but we have pretty good visibility to what is going to happen over the next quarter for sure. Catherine Maureen O'Brien: And I apologize if I missed it. Did you give us—usually, you will give us some type of sequential compare on the block hours for the one quarter out versus the current quarter or year over year. Did you share that guidance? Wade Steele: We did not, but it will be seasonally high. If you compare it to Q1 2026, Q2 will be seasonally higher than what we just did in Q1. Catherine Maureen O'Brien: And maybe just—this might be another one for you, Wade. But last quarter, you spoke about having 60 CRJ200s going through maintenance to return to service. I think there were 20 of those that are already under contract. We now know you are going to be converting a number of those into CRJ450s to put into service with United starting as early as this fall. Can you help us understand what portion of those 60 CRJs you already had in maintenance were slated to become CRJ450s, and are there any incremental shells left from that pool still looking for homes that could potentially be incremental 2026 block hours? Wade Steele: Yeah, that is a great question. As I talked a little bit in my script, there are still about 30 CRJ200s that are parked, and we are working with our major partners to bring those back. As we look at it, if we do bring them back now, it would be late in 2026 and rolling into 2027. We are still working on those. We are optimistic that we will be able to find a home for those, so we are working through that right now. Operator: Great. Thanks so much for the time. Our next question comes from the line of Savi Syth with Raymond James. Your line is open. Savanthi Nipunika Prelis-Syth: Hey. Good afternoon, everyone. Just building on Katie’s questions on the CRJ450, what is the conversion time around that and how are the cost and the CapEx handled in terms of what you spend versus what your partner might cover? Wade Steele: Yeah, Savi, this is Wade. That is a great question. We anticipate starting to transition these in the fall. The transition time will be a couple of weeks to convert from a CRJ200 to a CRJ450. We anticipate doing a couple of lines at a time. All of the economics are included in the rates with our major partner, and so they will be included in the economics that we receive from the partner. Savanthi Nipunika Prelis-Syth: Got it. And, Wade, just to clarify—I think you mentioned this, but I am not sure. I know the E175 by year-end ’28 wording went from “nearly 300” to “more than 300.” Is that a reflection that the rest before year-end ’28 have been extended, or what was the reason for that wording change? Wade Steele: No. We still anticipate around 300 airplanes. We continue to take delivery of those. We have eight more for United and 16 more for Delta, and so it is still right around that 300 number. It is pretty consistent with last quarter. We did take a delivery for Alaska in Q1, but we are continuing to work to place the remainder of those airplanes, and we are having very interesting conversations. Savanthi Nipunika Prelis-Syth: Got it. And just lastly, I am not sure if I missed it, but did you say what the prorate revenue was this quarter? Wade Steele: We did not, but it is $168 million—our prorate and SkyWest Charter business. Operator: Perfect. Thank you. Our next question comes from the line of Mike Linenberg with Deutsche Bank. Your line is open. Michael Linenberg: Yes. Hey, Chip, I know you talked about these airplanes—these CRJ450s—being great airplanes for these underserved communities. What is the status on—I know out of Chicago, you are going to launch a whole bunch of service to a lot of underserved cities. What is the status on that? And are you going to have to—because of the FAA order—are you going to have to withdraw that service? Russell A. Childs: Mike, that is a great question. From our perspective, nothing has necessarily changed in our intent. The cities Wade mentioned in the script all take a long time to get to the timeframe where they are open to go back to. I can tell you that sometimes it is up to even a year process. So the timing of most of what you are talking about does not necessarily perfectly correlate to some of the things happening in Chicago for the remainder of 2026. And some of the cities—if it does not work in Chicago—the bids could go to one of our other hubs. It does not change the interest of us going back to these communities. If there is a network problem between some of our partners in some of these locations, we have some flexibility that DOT is willing to work with to go to a different hub to make sure that we ensure that service. From that perspective, our intent is still to do what we do best, and that is to serve and develop these small communities like we have done for 53 years. There is still a very good market for that, and we will be flexible, as we mentioned in our script before, on how we do that with these communities and with our partners. Michael Linenberg: Okay. Great. And just to Wade—I apologize if you said this number; I did get on late. Just the new block hour rate for the year, because I think you said you were planning to fly a little bit less this summer. What should we be modeling for block hours for the full year? Wade Steele: Last quarter, we talked about low- or mid-single digits. It is slightly less than that from what we anticipate. We are still finalizing all of our block hours through the back end, but we still do expect to be up year over year; we are just working through that at the moment. Michael Linenberg: Okay. And then in that regard, though, you are still up, and the reason for the reduction—is it because of the higher fuel prices and a cut to prorate, or is it Chicago? Is it both? How do we parse that out? Wade Steele: It really has nothing to do with our prorate. We are still very optimistic with our prorate. The demand—just like our major partners talk about—the pricing is still there. The demand is still really strong. So we have not cut any of our prorate flying. There is a little bit in Chicago, like you talked about, and then some of our other CPAs just have some cleanups with utilization. Those are the main drivers. Michael Linenberg: Okay. And then just my last point. If fuel prices stay high, in the past there was always this arbitrage between mainline and regional—in the sense that if the majors had to cut but wanted to maintain frequency and maintain the integrity of their hubs with the number of banks—that parking an inefficient 25-year-old A319 or A320, or maybe utilizing it less and backfilling it with one of your airplanes, was far more profitable for the full ecosystem. Does that still hold? And does that potentially create opportunities if—I do not know—the Strait of Hormuz remains closed for longer than what we thought? Robert J. Simmons: Michael, that is a fantastic question. We evaluate that data—you can go back several decades and look at some of these events from 9/11 to the financial crisis to oil at $150 and COVID and all that stuff. The data is actually pretty clear. Each partner might look at it a little differently depending upon where their fleet is. To the extent that we own the less seats and can be cost competitive, there is a very strong trend of network preservation and even predatorial initiatives that can happen with a smaller fleet in somewhat difficult times, particularly if you try to estimate how long this may last and what the net effect of this is, which we are not going to speculate on. To the extent that we have a good model and can take care of the right dynamics of the industry, we are pretty comfortable where we are and are going to be very fluid with the needs of what our partners want. Russell A. Childs: Have we had any conversations along those lines? Our conversations with our partners—our conversations are a little bit more, I would not say dynamic, maybe even simplistic. We continue to have conversations about the network supply that we provide, the economics at which we do it, and what long-term initiatives are. The good news you have seen throughout the script is all of our conversations are sort of wait and see. Depending upon how this plays out, we are extremely well prepared for however turn this takes. Outside of the global issue you talked about, our relationships with our partners are extremely good, and our fleet flexibility gives us an enormous amount of ability to help meet their demand. We talk more about fleet flexibility, performance, and all that kind of stuff that really helps drive more of that conversation. If this goes on for a very long time and things get worse, there is no doubt that we will have conversations with them for sure. Michael Linenberg: Great. Thanks, Chip. Thanks, everyone. Wade Steele: Thanks, Mike. Operator: Our next question comes from the line of Tom Fitzgerald with TD Cowen. Your line is open. Thomas John Fitzgerald: Hi, everyone. Thanks very much for the time. I am just kind of curious on unit cost and how you are thinking about—to the extent that you are making cuts in the rest of the year—how much you can variabilize and how we should think about maybe unit labor costs moving around from here? Wade Steele: There are a lot of our costs where we do have some flexibility, especially when you look at direct labor costs. We have some levers on training and hiring—some of those things we can definitely make more variable. On the maintenance side, a lot of our maintenance costs are variable based on the number of cycles or hours that we do fly. There is a nice chunk of maintenance costs that are also variable. Our revenue models reflect that, and so do our cost models. Thomas John Fitzgerald: Okay. That is really helpful. And then just an accounting question on the discrete tax benefit. Should we think about it stacking on top of the benefit from 1Q ’25—so the $0.29 plus the $0.24? Or was that just a one-off, so it goes from $2.50 GAAP to $2.21? I just want to make sure I was following that correctly. Robert J. Simmons: Yeah, Tom, you have got it. It is typically a Q1 thing. I would just again point out that for the full year, the 2026 tax rate is basically flat to maybe slightly down from where we were last year. The quarters are just spread out a little bit. Thomas John Fitzgerald: Okay. Then a question—more of a broader risk. To the extent one of your partners were to be able to operate their own regional subsidiary, how do you think about managing through the pricing risk? You have a very unique fleet and attractive assets, and you have been proven to be good stewards and adapt quickly. How are you thinking about the competitive landscape and maybe longer-term pricing power? Wade Steele: That is a great question. Obviously, our major partners—many have wholly owned subsidiaries. We have been able to work with them very closely, and we are fine competing with them as well. SkyWest has a very competitive structure. We are very nimble. A lot of how we do business is unique. We have great relationships with our labor group, which makes it such that we bring a very unique proposition to each of our partners. We will continue to work with them. We are aware of what could possibly happen in the industry, and we are happy to work with our major partners. Operator: Our next question comes from the line of Duane Pfennigwerth with Evercore ISI. Your line is open. Duane Thomas Pfennigwerth: Hey. Thank you. With this slight change in utilization, I wonder—are your pilot hiring plans changing at all? Are you dialing that down? And if so, is there an opportunity to maybe better match the new production with your staffing in the second half? Or is it just too early to make that call? Robert J. Simmons: Duane, that is a great question. To be candid, we are very sophisticated and very attentive in how we manage that. Part of our labor cost increase this year compared to last year has been more attrition and more hiring and training costs that we have had in ’26 than ’25. It is going to be very dependent upon what our partners are doing with their hiring. That is the number one driver. We have seen some slowdown in some hiring, particularly since the first quarter and even April. Major carriers are getting ready for the summer schedule and hiring, but that is tapering off. Some of the most sophisticated analysis we do is managing flight attendants and pilots and mechanics given the production timeline. We are seeing very good things throughout the rest of the year—stuff that is very easily managed. As of today, the overall model—we are proceeding full steam ahead with the deliveries we have and with the demand that is out there for our product. We also can pivot relatively quickly and do that evaluation relative to what may happen, and we will be prepared to do that. We are seeing a very stable process and environment for pilot hiring today. The pipeline is extremely full. There are a lot of employees that want to work at SkyWest at all levels. We continue to monitor that, especially during times like this when you could have some variables go one way or the other within the next couple of months. Duane Thomas Pfennigwerth: Maybe just to put a finer point on it—the investment that you were planning to make this year to support the growth, it sounds like that investment has not changed. Is that fair? Wade Steele: That is absolutely correct. Yes. Duane Thomas Pfennigwerth: And then just for my follow-up on the buyback—the pacing of the buyback—it stepped up in the first quarter. How do you think about that pacing going forward, accelerating it or dialing it back? What are the circumstances where you might maintain this? Thank you for taking the questions. Robert J. Simmons: Thanks, Duane. The buyback for the quarter of $75 million was again something that falls well within what we have always said—that we like to be opportunistic about the way that we do that—and we were very comfortable buying a little more stock this quarter at the price we were able to get given the volatility. Going forward, we will continue to do the same thing. We will continue to be opportunistic, and we will continue to have a balanced approach to how we deploy our capital across our fleet, strengthening our balance sheet, and share repurchase. Operator: Our next question comes from the line of John with Citigroup. Analyst: First, I would like to get your perspective on Essential Air Service. The proposed budget came out not long ago, and there were some jitters about Essential Air Service. I know that can happen regularly and it does not normally get cut, but I would love to get your perspective on things or historical perspective and how you think about planning for what the budget is requesting. Robert J. Simmons: That is a great question, and we appreciate it. In 53 years of SkyWest’s history, this has been something that has been discussed a lot. From the perspective of small community service, we are the very best at it. From the perspective of Essential Air Service, we are the best steward of the program. We have seen—certainly with the captain shortage—a lot of abuse from other carriers within this program that has caused people to ask about the validity and strength of what the program actually does. I can assure you that this is a program that is very well managed by the Department of Transportation. We take it very seriously, and our initiative is to make sure that it is efficient and works well not just for the communities, but also for the federal government as well. We take that very seriously and think that we are a very strong steward of this program. We have a tremendous amount of studies and economics that show these dollars massively support a very strong tax base and development of a tax base within these small communities, and we can have our folks share some of those studies with you. We are very comfortable about how we handle the program. We take it very seriously, making sure we do it the right way and serve the communities the right way, and think that it has a good future moving forward. We are happy to help work in ways that can evolve it if need be, but the program is fantastic and delivers a very strong economic tax base wherever we do it. Analyst: Got it. And can you remind us of your exposure to the program—just help us think through SkyWest’s exposure? Wade Steele: That is a great question. We serve currently about 40 different communities. We work with these communities over the long term, and as Russell said, we take the responsibility very seriously and will continue to serve those markets. Analyst: Got it. If I could ask a completely different topic—consolidation has been a theme in the industry in the news the last few months and very recently. Maybe use this opportunity to remind us what opportunities and risks consolidation could present. On the opportunity side, I could see a situation where if capacity is cut under certain scenarios, that might be an opportunity for you or for some of the airlines who are your major customers. On the other hand, I could see a situation where certain pairings might impact your business negatively. Maybe remind us historically how consolidation has affected you, how you think about it, and if there are any protections in contracts worth thinking through? Russell A. Childs: That is a great question. Let me start by saying we have no interest in acquiring anybody, so you can take us off the table from that. We fundamentally believe for our purposes that organic growth is best for our shareholders as well as our employees, which is why we never really consider those things. We do have several offers for us to be involved in this stuff; we are not interested in it for sure at this time. To the extent that our partners participate in it, we are probably in a position where we should not have any comment on that. But I will give you some feedback relative to what has happened—we have a history with the Continental-United combination and those types of things. To the extent that there are opportunities for us to support any of our partners that go through that or want to go through that, we tend to become a very dynamic participant and stakeholder in those things. It has in the past worked out pretty well for us, but that does not mean it would work out well for us in the future. It does make for an interesting conversation we have with our partners. Again, we continue to beat the drum of financial stability and fleet flexibility. If anything ever starts to get any type of legs, then I would remember just what our capacities are in those situations, and obviously top priority is taking care of our partners. Operator: Our next question comes from the line of Catherine O’Brien with Goldman Sachs. Your line is open. Catherine Maureen O'Brien: Just two quick ones, if I may. When you introduced the mid-$11 EPS guidance last quarter, were you incorporating the $0.29 tax benefit in 1Q or not? I am trying to get a sense of the quantum of the change in your outlook driven by block hours. If that is mid-$11 back in January plus $0.29, and then less the block hour hit to get to the $11 range—just trying to understand what the block hours thing is in there. Robert J. Simmons: Yeah, Katie, this is Rob. No. I would tell you that the change in our color—our EPS color—had nothing to do with tax rate. Year over year, we would expect that the full year ’26 is going to be very similar to ’25, maybe flat to slightly down. The unusual benefit in the first quarter was just deduction timing differences that are generated from various comp models that we have. But overall, the tax rate for the year is flat and had nothing to do with our color guide. The guide in our color was almost entirely related to prorate fuel. That is why we tried to be helpful by giving you that we have 40 million gallons that are exposed to fuel price over the next three quarters. We wanted to be as helpful as we could for your models. Catherine Maureen O'Brien: That is very clear. Thanks for that. And then just a final question. If your partners were to cut your schedule this summer, could you pivot aircraft into charter operations? I know you said there is more demand than you can fill. Or are there logistical challenges to moving planes and people back and forth? If it is possible, how do the margins on charter flying compare to scheduled service? Russell A. Childs: Thanks. This is Chip. Real quick on that dynamic—look, we treat both of those certificates completely separately. It is not like you could, in a very fluid basis, go back and forth. I would also reiterate we are clearly not seeing anything that would warrant that. It would take a pretty big lift of an issue for us before we started to do something dramatic like that. Plus, the timing—our charter operation does very well in the winter months with college sports, and it is very slow in the summer months. Some of that timing does not necessarily work out. Overall, the margin on a charter flight is certainly better than what a normal commercial flight is, but you have the seasonality and all the other stuff that weighs against that significantly when the airplane is not flying. We are very comfortable with what the summer schedules are today. I think there is some expectation out there that this could last longer than anticipated, which is also driving those schedules, and we will continue to monitor the situation very carefully. Operator: With no further questions, we will conclude our question-and-answer session. I will now turn the call back over to Russell A. Childs for closing remarks. Russell A. Childs: Thank you, Abby. And again, thanks, everybody, for joining us on the call today. I think the quarter was very good for us, particularly under the circumstances. I really appreciate how amazing our 15 thousand professionals have been this last quarter. Together, we have built a model that is built for interesting times, with stability and flexibility in the coming months. We look forward to our second-quarter call in about three months from now. Thank you. Operator: Ladies and gentlemen, this concludes today’s call, and we thank you for your participation. You may now disconnect.
Operator: Thank you for standing by. My name is Pryla, and I will be your conference operator today. At this time, I would like to welcome everyone to the Knowles Corporation Q1 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the star one again. Thank you. I would now like to turn the conference over to Sarah Cook. You may begin. Sarah Cook: Thank you, and welcome to our first quarter 2026 earnings call. I am Sarah Cook, Vice President of Investor Relations, and presenting with me today are Jeffrey Niew, our President and CEO, and John Anderson, our Senior Vice President and CFO. Our call today will include remarks about future expectations, plans, and prospects for Knowles Corporation, which constitute forward-looking statements for purposes of the safe harbor provisions under applicable federal securities laws. Forward-looking statements on this call will include comments about demand for company products, anticipated trends in company sales, expenses and profits, and involve a number of risks and uncertainties that could cause actual results to differ materially from current expectations. The company urges investors to review the risks and uncertainties in the company’s SEC filings, including, but not limited to, the Annual Report on Form 10-K for the fiscal year ended December 31, 2025, periodic reports filed from time to time with the SEC, and the risks and uncertainties identified in today’s earnings release. All forward-looking statements are made as of the date of this call and Knowles Corporation disclaims any duty to update such statements except as required by law. In addition, pursuant to Reg G, any non-GAAP financial measures referenced during today’s conference call can be found in our press release posted on our website at knowles.com and in our current report on Form 8-K filed today with the SEC. This will include a reconciliation to the most directly comparable GAAP measure. All financial references on this call will be on a non-GAAP continuing operations basis, with the exception of cash from operations, unless otherwise indicated. We have made select financial information available in webcast slides that can be found in the Investor Relations section of our website. With that, let me turn the call over to Jeff, who will provide details on our results. Jeff? Jeffrey Niew: Thanks, Sarah, and thanks to all of you for joining us today. We started 2026 with solid financial results in Q1 and great momentum entering the rest of the year. Our strategy of leveraging our unique technologies to design custom engineered solutions and then delivering them at scale for blue chip customers in high growth markets that value our solutions is proving to be a powerful combination. We had strong organic growth in the first quarter. We delivered revenue of $153 million, up 16% year over year, at the high end of our guided range. EPS of $0.27, up 50% year over year, exceeded the high end of our guided range, and cash utilized in operations of $1 million was within our guided range. Now on to our segment results. In Q1, MedTech and Specialty Audio revenue was $68 million, up 14% year over year. Our customers’ new product introductions, coupled with our position on these platforms, have led to stronger than expected growth in the first quarter. Knowles Corporation continues to demonstrate our ability to deliver unique solutions with superior technology and reliability our customers have come to depend on. MSA’s first quarter revenue grew well above our annual organic growth target of 2% to 4%. However, the hearing health end market is expected to continue to grow at normal historical rates in 2026. Therefore, we are projecting MedTech and Specialty Audio will grow within the 2% to 4% range for the full year 2026. Beyond 2026, we are positioned well to win next-generation designs for MEMS microphones and balanced armature speakers. As I said during our year-end call, we also see the prospect to increase our content per device in next-generation hearing health products and expand our reach with our microsolutions group, which provides the opportunity in the future to increase growth rates above the historical rates. In the Precision Devices segment, Q1 revenue was $85 million, up 17% year over year, with all our end markets we serve—medtech, defense, industrial, and electrification—growing on a year over year basis. Let me share a couple of highlights driving growth in our end markets this quarter. We saw strength in the defense market across our product families. Our capacitors were in demand supporting ongoing OEM and defense programs, new products starting production, and share gains. We also saw broad-based orders for our RF microwave products as we continue to be a sole supplier on a number of key defense programs. Additionally, we do expect increasing demand in 2027 and beyond driven by the replenishment of stocks in connection with the Iran conflict. In the industrial market, demand continued to grow with strong order activity across a wide range of our capacitor products supporting a multitude of applications and industries at both our distribution partners and OEMs. As an example, our ceramic capacitors were in high demand in the semiconductor equipment market and also for use in downhole applications. Additionally, with inventory challenges we saw last year behind us, we believe our distributor partners’ orders are aligned with end market demand. In addition to the strong shipments we saw in the first quarter, our book to bill in Precision Devices was very strong at 1.19. This ordering pattern was broad based, and this marked the sixth consecutive quarter where the book to bill was greater than one. We see ordering strength across all our end markets both at OEMs and with our distribution partners. A robust pipeline of new design wins coupled with favorable secular trends gives me confidence in our ability to continue to grow revenue above the high end of the organic growth target of 6% to 8% for Precision Devices in 2026. I continue to be excited by the strength of our business and the momentum we exited the first quarter with. We are well positioned for continued strong organic revenue growth and margin expansion through 2026. We believe this momentum is sustainable for two key reasons: First, our portfolio of businesses are well positioned in markets with strong secular growth trends. Whether it be defense, medical, industrial, or electrification, the secular drivers of growth in these markets are forecasted to be positive for the foreseeable future. Second, we design high performance customized solutions for our customers that have demanding applications, and we have the manufacturing capabilities that allow us to ramp up these solutions quickly and efficiently. This combination differentiates us, allowing us to garner premium margins for the products we produce. This is proving to be a winning combination. Before I turn the call over to John to cover our financial results and provide our guidance, I would like to reiterate what I have said on previous calls. I believe Knowles Corporation has entered a period of accelerated organic growth. With a very healthy backlog of existing orders, we now expect our revenue growth in 2026 to be above the high end of our target organic revenue range of 4% to 6% that we provided at our Investor Day in May. Our strategy of leveraging our unique technologies to design custom engineered solutions, then deliver them at scale for blue chip customers in high growth markets that value our solutions, is proving to be a powerful combination for driving revenue growth, expanding margins, and strong cash flow to drive shareholder value. Now let me turn the call over to John for our financial results and our Q2 guidance. John Anderson: Thanks, Jeff. We reported first quarter revenues of $153 million, up 16% from the year-ago period and at the high end of our guidance range. EPS was $0.27 in the quarter, up $0.09 or 50% from the year-ago period and above the midpoint of our guidance range. Cash utilized by operating activities was $1 million, within our guidance range. In the MedTech and Specialty Audio segment, Q1 revenue was $68 million, up 14% compared with the year-ago period, driven by increased hearing health shipments associated with our customers’ successful new product introductions. Q1 gross margins were 53.5%, up 480 basis points from the year-ago period, driven by both increased factory capacity utilization and favorable mix. For full year 2026, we expect MSA gross margins to be in line with 2025 margins of 51%. The Precision Devices segment delivered first quarter revenues of $85 million, up 17% from the year-ago period, driven by broad-based strength across medtech, defense, and industrial end markets. Segment gross margins were 39.2%, up 350 basis points from 2025, as improved pricing and higher end market demand is driving increased factory capacity utilization. These improvements were partially offset by higher factory costs in our specialty film product line as we ramp up production capacity to support our $75 million-plus energy order. While we delivered significant year-over-year margin improvement in the first quarter, I am confident in our ability to further improve Precision Devices gross margins in 2026 as we increase production volume in our specialty film line. On a total company basis, R&D expense in the quarter was $10 million, up $1.4 million compared to Q1 2025 on higher project spending in both MSA and PD segments. SG&A expenses were $28 million, up $3 million from prior year levels, driven primarily by higher sales commission, timing of expenses, and additional headcount within the Precision Devices segment to support future revenue growth, including new product initiatives. Interest expense for the quarter was $2 million, $1 million lower than last year due to lower average debt balances. Now I will turn to our balance sheet and cash flow. In the first quarter, we utilized $1 million in cash from operating activities, and capital spending was $11 million. Cash from operations includes $8 million in outflows related to the CMM business, which was divested at the end of 2024. Payments related to the CMM business are now substantially complete. During the first quarter, we repurchased 276 thousand shares at a total cost of $7.5 million. We exited the quarter with cash of $41 million and $131 million of borrowings under our revolving credit facility. Lastly, our net leverage ratio, based on trailing twelve months adjusted EBITDA, was 0.6 times, and we have liquidity of more than $310 million as measured by cash plus unused capacity under our revolving credit facilities. Moving to our Q2 guidance. For Q2 2026, revenues are expected to be between $152 million and $162 million, up 8% year over year at the midpoint. R&D expenses are expected to be between $9 million and $11 million. Selling and administrative expenses are expected to be within the range of $26 million to $28 million. We are projecting adjusted EBIT margin for the quarter to be within the range of 20% to 22%. Interest expense in Q2 is estimated at $2 million, and we expect an effective tax rate of 15% to 19%. We are projecting EPS to be within a range of $0.28 to $0.32 per share, up $0.06 or 25% year over year at the midpoint. This assumes weighted average shares outstanding during the quarter of 87 million on a fully diluted basis. We are projecting cash from operating activities to be within the range of $20 million to $30 million. Capital spending is expected to be $8 million. We expect full year capital spending to be approximately 4% to 5% of revenues as we continue to make investments in the first half of this year associated with capacity expansion related to the large energy order we received in 2025. We started 2026 with significant year-over-year revenue and earnings growth, and we have positive momentum entering the remainder of the year. Our first quarter performance, combined with a robust backlog and increased order activity throughout the first four months of the year, give me confidence in our ability to deliver an increase in 2026 adjusted EBITDA above our cumulative annual growth target of 10% to 14%. I will now turn the call back over to the operator for the Q&A portion of our call. Operator? Operator: Thank you. We will now open the call for questions. We will now begin the question and answer session. If you have dialed in and would like to ask a question, simply press star followed by the number one on your telephone keypad to raise your hand and join the queue. And if you would like to withdraw your question, simply press the star one again. Your first question comes from the line of Christopher Rolland with Susquehanna. Please go ahead. Christopher Rolland: Hey, guys. Thanks for the question, and congrats on the results. In your press release, I think you mentioned numerous design wins across multiple end markets. And, Jeff, you might have addressed this fully in your prepared remarks, so I am not sure. But if you did not, if you could highlight perhaps those products, the applications, how you view the lifetime value of these sockets—any color would be appreciated. Jeffrey Niew: Yeah. I mean, Chris, I wish I could sit there and point to one specific one. The one obviously that we continue to ramp up or work on is the energy order, which will be fully ramped up by the end of Q2, so that is not a significant contributor in Q1. But it is very broad based. In medical, we have a lot of applications relative to wearable-type devices. In industrial, we have a lot of things going on in downhole applications—a lot of good stuff going on there. Defense, I would characterize just briefly—orders are up. There is no doubt orders are up. But the level of activity relative to everything that is going on in the globe is really high. We think in defense there is strength in 2026 that is probably stronger than we expected, and 2027 looks to be shaping up to be even better for defense. Overall, I think we are executing on this concept that we built out an engineering team that can customize to solve really hard problems across these applications, and then we can scale the production very quickly on these customized solutions. It is just very broad based what we are seeing. Christopher Rolland: Excellent. And then maybe, John, a question for you. You talked about gross margin expansion and favorable pricing. Maybe if you can talk about pricing increases—whether you put them on or whether you have an ability to increase price from here—and then just more broadly, the drivers of gross margin beyond pricing. I think you talked about ramping the specialty film line, which is great. Any other things to think about on gross margin and drivers there would be great. Jeffrey Niew: Let me take the pricing question, and I will let John cover the other drivers of gross margin expansion. More and more, Chris, what we are starting to realize as we go through this journey is that we have a lot of very strong positions, and we are looking at this on a regular basis. I would say it is more specific to the PD business, where we have a lot of different applications and a lot of different customers. Pricing strategy is becoming a big part of our opportunity every single year. The things that we have done should lead us in the 2% to 4% range in the PD business on price per year, somewhere in that range, and we should be able to garner that. It is a little different in the MSA business. We have a very limited customer base, and we have very strong margins in that business, so we are not really seeing pricing increases there—hence why we are saying that gross margins are not expected to expand. But pricing is one piece; there are other things as well. John Anderson: Chris, I talked in my prepared remarks about the MSA gross margins. We expect that to be flat around the 51% level for the full year. They were above that in Q1; we were operating near maximum capacity, and we also had some favorable mix. But for MSA, think year-over-year flattish at a very attractive 51%. For PD, that is where we think there is margin expansion opportunity. We delivered 39.2% this quarter, and as we look, Q2 will be in that range. But as we enter the back half of 2026, we see increasing capacity utilization in both the specialty film line as we ramp up production—we will be ramped up as we exit Q2, as Jeff mentioned—and we should see some really good improvement in capacity utilization in the back half. Also, in our ceramic capacitor line and our RF filters, as demand is increasing, there is opportunity. Our variable margins are very strong in all of our businesses. We will probably need to hire more direct labor as this continues to ramp, but there is not a tremendous amount of overhead needed to support increased volume. Christopher Rolland: That is great. Thank you, guys. Jeffrey Niew: Sure. Thanks, Chris. Operator: And your next question comes from the line of Robert Labick with CJS Securities. Please go ahead. Analyst: Hi. This is Will on for Bob. Looking at specialty film pilot programs—you have discussed downhole fracking and energy transmission pilots—can you give us an update on how they are progressing? When do you know if they may convert to larger programs? And did you win any new pilots in the quarter? Jeffrey Niew: There is a list we review on a very regular basis of the pilots. I would say we are due to deliver pilots to 20 different customers over the next quarter or so—just figure every quarter we are delivering pilots. Again, my base is up in downhole. I would add a little bit more specific on the energy order: we are on track from a ramp standpoint, we are on track from a yield standpoint, and we feel very strongly about that $25 million-plus at pretty good gross margins for the rest of the year, especially in the back half as it is fully ramped. Bottom line is, everything is heading in the right direction here for the specialty film line. We see the opportunity, as John laid out, that within Precision Devices—especially on a year-over-year and sequential basis—it is going to help drive improved gross margin. I will be surprised if for the full year we do not improve gross margins within the PD segment by 100 basis points, and it is really driven in the back half of 2026. Analyst: That is super helpful. Thank you. And you talked about the tailwinds from the war in defense. Are there any headwinds from the war that you are evaluating? John Anderson: Just a little bit on input cost. Transportation costs are fairly low. Think of the size of our components—they are very small—and we manufacture in a lot of the regions where we are selling, so the impacts are fairly minimal. Maybe some resin-based products have seen modest increases, but not significant. Jeffrey Niew: And on costs that we are looking at, if transportation were to become more substantial, a lot of our customers take possession at our dock—we are not paying for the shipping anyway. For input costs like resins, it does not seem to be a big portion of our bill of materials. Analyst: Thank you very much. Operator: Thank you. And once again, if you would like to ask a question, simply press star 1 on your telephone keypad. Your next question comes from the line of Anthony Stoss with Craig-Hallum. Please go ahead. Anthony Stoss: Thank you very much. Jeff, getting back to pricing power—maybe I was not following it correctly. It seems like there is a ton of activity, especially on the military defense side, and maybe there are puts and takes in each of the different divisions. Given the nature of activity, do you think it is fair to say that gross margins and pricing in 2027 on average are going to be higher than 2026? Jeffrey Niew: No. I would say we have a pretty strong cadence of how we do pricing at this point. I would not say we are going to see outsized pricing. If I say it is in PD, 2% to 4% per year—maybe it gets toward the higher end of that range. I am not seeing more than that. You are right, the demand—more than defense, the demand across the board—is pretty high. We talked about the book to bill being 1.19; that is on top of 16% growth. So that book to bill represents a fair amount of orders. I just got off the phone with our sales team—the order rate in April is already strong again. We are looking at another strong month of bookings in April. We are spending more time analyzing pricing and things like that. But we do not have huge amounts of cost in order to get these units out; they are very profitable already in the PD segment. We are going to continue to follow our playbook of increasing price on a somewhat regular basis—by market, by product, by customer—to cover any input costs that increase and add some more where we can. John Anderson: I would add, Tony, from a gross margin standpoint, there is some opportunity in 2027 to be above 2026 just because of the trajectory through 2026. We are increasing gross margins, and 2027 margins should be similar to what we exit 2026 at, which will be higher than what we are delivering right now. Anthony Stoss: Yep. Got it. That makes sense. And then two last questions on the energy ramp. Are there any technical hurdles or production setup hurdles that you still need to overcome before the end of Q2, or is it pretty much blocking and tackling at this point? Jeffrey Niew: It is a lot of blocking and tackling. All the equipment is on site; it is a matter of bringing it up, fully qualifying it, and then running high volume through it. We are not waiting for a piece of equipment that may not arrive on time—everything is in place. In Q1, they were slightly ahead of what they had projected in terms of output and getting things qualified. I am not committing that we are going to be ahead for the first half, but everything seems to be on track. I was just down there a week and a half ago at the facility—everything looks great. We are in pretty good shape. Anthony Stoss: Okay. Last question. Your RF group that you do not talk about that often—quite a few of the RF power amp folks are talking about huge orders in satellite. Do you have any products that are exposed to satellite, or can you tweak anything to gain exposure to those huge satellite orders? Jeffrey Niew: We do have some satellite business. I would not say it is a huge driver. What we provide are super high-performance RF filters, which is why we can garner great gross margins and make good money in this space. There is more of a mix in the satellite business of using more commercially available RF filters versus specialized stuff. To the extent we can be differentiated, we will sell into that market. But when they come to us and say they want something really low cost at a very low price, we tend to say there are other guys willing to do that. So we do have some exposure, but it is usually when they need something very unique and special, and we can garner very good gross margins. John Anderson: And I would add, we talked about 17% year-over-year revenue growth in Q1 in the Precision Devices segment. RF was a big contributor to that. It is smaller as a percent of the total, but their growth rate was in the double digits. Jeffrey Niew: My point is we are not going to deviate from that. We do not want to be in the commoditized portions of the market, and there are some commoditized portions. My take is satellite is a bit more mixed in terms of what they are looking for. Anthony Stoss: Got it. Thanks for all the color, guys. Operator: Thank you. And the next question comes from the line of Tristan Gerra with Baird. Please go ahead. Tristan Gerra: Hi. Good afternoon. In Precision Devices, could you give us a sense of where your front-end utilization rates are? And as utilization rates go to full utilization—above 90%—what type of gross margin would that imply? And are you able to quantify the impact on gross margin currently from the energy order production ramp, and when does that headwind go away? Jeffrey Niew: First, on capacity utilization—it is different from product to product. We have our filters, ceramic capacitors, and film capacitors (from the Cornell acquisition). It is a little different by product. Generally speaking, we have done a lot of capacity planning for the mid to longer term in the last quarter. With the growth rate we are having—at least within 2026 and likely into 2027—we are going to need more direct labor. We are not going to need a lot more equipment; there may be some selective places we need equipment. We are probably running on average in the 80% range right now across the PD business, and we have some room to bring up output without adding a lot of expensive capacity. Our variable margins are very strong, so we expect to drop a lot of this revenue growth to the bottom line. As far as the energy order, it is definitely weighing on the PD segment. We have not quantified it precisely, but it is going to be a driver of margin expansion in the back half. Directionally, think of maybe 200 to 250 basis points better than we are doing today as it relates to the PD segment, and that is driven heavily by this energy order. Tristan Gerra: Okay, great. That is very useful. And then, given lead times expanding and all types of shortages happening in the industry, are you seeing appetite from customers to try to secure capacity into 2027? Have you done LTSAs in the past? Is that the type of discussion that customers are coming to you with, or is it mostly short lead-time orders? Jeffrey Niew: In our distribution business, for the most part it has been short lead-time orders. In our OEM business, there is a lot more discussion—specifically in defense—about larger orders. We are starting to see more people come to us saying they want to place an order for three or five years instead of a year, which would be more typical for defense. There is a lot of negotiation and discussion going on about that right now. In industrial and medical, we have very long-term customers; we get regular forecasts from them, and we are prepared to meet their requirements. Defense is the area where we are starting to see more discussions about bigger orders. But I will add, that book to bill of 1.19 did not include any big orders scheduled out more than a year. There is nothing in that book to bill that would be an anomaly that drove it up to 1.19. I would say 97% of that book to bill will be shipped within twelve months. Tristan Gerra: Great. That is very useful. Thank you. Operator: Thank you. And there are no further questions at this time. Ladies and gentlemen, this now concludes today’s conference call. You may now disconnect.
Operator: Good afternoon, participants. We will be starting at 2:01 Pacific Time as our speakers are still preparing for the conference. Thank you for your patience. Good afternoon. David Straub: And welcome to Boyd Gaming Corporation First Quarter 2026 Earnings Conference Call. This is David Straub, Vice President of Corporate Communications for Boyd Gaming Corporation. I will be the moderator for today's call, which we are hosting on Thursday, April 23, 2026. At this time, all lines are in listen-only mode. Following our remarks, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star then 0 for the operator. Our speakers for today's call are Keith Smith, President and Chief Executive Officer, and Josh Hirsberg, Chief Financial Officer. Comments today will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act. All forward-looking statements in our comments are as of today's date, and we undertake no obligation to update or revise the forward-looking statements. Actual results may differ materially from those projected in any forward-looking statement. There are certain risks and uncertainties, including those disclosed in our filings with the SEC, that may impact our results. During our call today, we will make reference to non-GAAP financial measures. For a complete reconciliation of historical non-GAAP to GAAP financial measures, please refer to our earnings press release and our Form 8-Ks furnished to the SEC today, both of which are available at investors.boydgaming.com. We do not provide a reconciliation of forward-looking non-GAAP financial measures due to our inability to project special charges and certain expenses. Today's call is being webcast live at boygaming.com, and will be available for replay in the Investor Relations section of our website shortly after the completion of this call. With that, I would now like to turn the call over to Keith Smith. Keith? Keith Smith: Thank you, David, and good afternoon, everyone. Our first quarter results once again demonstrated the benefits of our diversified business, our continued focus on operating efficiencies, and our ongoing capital investment program. Overall, company-wide revenues reached nearly $1 billion while EBITDAR was $317 million. On a property-level basis, first quarter revenues and EBITDAR grew year over year, led by continued growth in gaming revenues. We successfully maintained operating efficiencies throughout our business, with property margins again exceeding 39%. These results were driven by broad-based strength in our Midwest and South segment, partially offset by the continued impact of softer destination business in Las Vegas and construction disruption at Suncoast. On a company-wide basis, play from both core customers and retail customers continued to grow during the first quarter, consistent with the trends we saw in 2025, and we are encouraged that the customer trends from the first quarter have continued into April. Now turning to segment results. Starting with our largest segment, our Midwest and South business achieved broad-based revenue and EBITDAR growth during the quarter. Overall, revenues grew 4% in the quarter, while EBITDAR grew 5%, and margins improved to nearly 37%. We also delivered continued growth in gaming revenues in the quarter, driven by increased play from both core and retail customers. These positive results were supported by the ongoing trend of customers staying closer to home, as well as benefits from milder winter weather this year and strong returns from our capital investments throughout the segment. These investments include our recent hotel remodels at IP Biloxi and Valley Forge, our new convention space at Ameristar St. Charles, and additional food and beverage enhancements across the segment. In addition, our Treasure Chest property continues to deliver year-over-year growth. We plan to build on this strong performance with the addition of a new high limit room, which we expect to open early next year. Moving to our Nevada operations, results in our Las Vegas Locals segment reflected continued softness in destination business, with the largest impact at the Orleans. We also experienced more significant construction disruption at the Suncoast during the quarter related to the modernization project currently underway. While the Suncoast management team has done a great job mitigating construction disruption thus far, our renovation work moved into the most popular part of our casino floor during the quarter, creating a more material impact from disruption. We anticipate this disruption will continue until we complete our renovation project late in the third quarter. Excluding Orleans and Suncoast, revenues and EBITDAR for the remainder of the segment were in line with the prior year and operating margins exceeded 50%. Even with the impacts from Orleans and Suncoast, play from our core customers during the quarter was in line with the prior year in our Las Vegas Locals segment. Similar to our Midwest and South segment, we are actively investing in our Las Vegas Locals portfolio to drive continued growth. These investments include the recent opening of our newest Locals property, Cadence Crossing Casino, on March 25. While it is still early, this property has received an enthusiastic response from our guests. Another example of our investments is the modernization of our Suncoast property. This project includes a complete transformation of our casino floor, enhanced food and beverage offerings, and updated meeting and public spaces, and remains on track for completion towards the end of the third quarter. We are also continuing to enhance our non-gaming amenities throughout the Las Vegas Valley. Our hotel room renovation at the Orleans is on track for completion later this year, and we plan to begin a similar project at the Suncoast Hotel this summer. Additionally, we opened several new restaurant concepts at the Gold Coast during the first quarter, with additional restaurant concepts now under development at Fremont, Aliante, and Sam's Town. In 2027, we plan to begin a modernization project at the Orleans similar to our current project at the Suncoast. Given the strong response from our guests to our recent enhancements, we are confident these capital investments will contribute to long-term growth in our Locals segment. Additionally, we remain confident in the underlying strength of the Las Vegas economy. Last year, Southern Nevada's population reached 2.4 million people, up 16% over the last decade, a growth rate of more than twice the national average. At the same time, the local economy is more diversified, with approximately 90% of the jobs created in Southern Nevada over the last ten years coming from outside the hospitality industry. Over the same ten-year period, per capita income has grown more than 5% on an average annual basis, and total personal income in Southern Nevada has nearly doubled. Southern Nevada's cost of living remains below the national average, ranking among the most affordable of the nation's 30 largest metro areas. All in all, the long-term fundamentals of the Southern Nevada economy remain strong. Moving next to Downtown Las Vegas. Trends were similar to recent quarters, with play from our Hawaiian guests and our core customers remaining stable during the quarter. Similar to the fourth quarter, these trends were offset by weaker destination business throughout Las Vegas, as illustrated by an 11% year-over-year decline in pedestrian traffic on the Fremont Street Experience during the quarter. Next, in our online segment, Boyd Interactive continued to grow, while contribution from our third-party market access agreements was consistent with the second half of last year. As a result, we reiterate our previous guidance of $30 million to $35 million in EBITDAR for the online segment this year. Finally, our Managed and Other segment achieved another quarter of revenue and EBITDAR growth. Sky River Casino opened its casino floor expansion in late February, followed by the opening of a 1,600-space parking garage in March, and we are encouraged by Sky River's continued growth since the opening of this expansion. With the first phase now complete, we are underway with the development of a 300-room hotel, three new food and beverage outlets, a full-service spa, and an entertainment and event center. Once complete in early 2028, we are confident this expansion will further strengthen Sky River's position as one of Northern California's most popular and successful gaming resorts. With a solid start to the year, we continue to expect our Managed and Other business to generate $110 million to $114 million in EBITDAR for the full year. In all, our first quarter performance is driven by our diversified portfolio, our strong operating efficiencies, and contributions from our capital investments throughout our portfolio. In addition to the property investments we are making to enhance our operations, we are continuing to build our development pipeline. Most significant of our development projects is our $750 million resort in Virginia, which remains on track for a late 2027 opening. With foundation work now complete, work has begun on the resort's first floor and construction is starting to go vertical. Once complete, this upscale resort will be a true market leader with a 65,000-square-foot casino, a 200-room hotel, eight food and beverage outlets, live entertainment, and an outdoor amenity deck. We will also offer the most convenient gaming destination for much of the 1.8 million residents of the Hampton Roads region, as well as the 15 million tourists who visit nearby Virginia Beach each year. Next, in late February, we received final approval from the Illinois Gaming Board for a proposed expansion and modernization of the Paradise Casino. Once complete in late 2028, this project will transform Paradise into a single-level entertainment facility with a modern casino floor and enhanced amenities, positioning this property for growth well into the future. In Southern Nevada, we have additional growth opportunities at Cadence Crossing where we have significant land still available for development. Directly adjacent to our property is the master-planned community of Cadence, one of the fastest growing master-planned communities in the country with plans for more than 12,000 homes upon full build-out. Our Cadence Crossing property is designed to capitalize on the growing demand in the area, with plans for a future hotel, additional casino space, and more non-gaming amenities. As we continue to invest in our properties and build our development pipeline, we are successfully balancing these investments with a robust program of returning capital to our shareholders. We returned nearly $170 million to our shareholders during the first quarter: $155 million in share repurchases and $14 million in dividends. Going forward, we intend to continue repurchases at a $150 million per quarter pace, supplemented by our quarterly dividend. With our strong balance sheet, diversified property portfolio, balanced approach to capital allocation, and experienced management team, we remain confident in our ability to continue creating long-term value for our shareholders. I would like to thank our team members for their contributions to our company. Their dedication to delivering memorable service is at the heart of our entertainment experience and drives our continued success. Thank you for your time this afternoon. I would now like to turn the call over to Josh. Josh Hirsberg: Thank you, Keith. During the first quarter, we continued to deliver consistent results supported by growth in property-level revenues and EBITDAR. This growth, along with our continued focus on operating efficiencies, resulted in property-level margins of more than 39%. Gaming revenue also continued to grow, with increased play from both our core and retail customers. Strength in property results during the quarter was driven by our Midwest and South segment, and as Keith mentioned, our online and managed segments also contributed to our results during the quarter, with both segments continuing to show growth on a comparable year-over-year basis. We are also maintaining a balanced approach to capital allocation as we invest in our properties, pursue attractive growth opportunities, and return capital to shareholders, all while maintaining a very strong balance sheet. In terms of capital expenditures, during the quarter, we invested $155 million and expect to spend $650 million to $700 million in capital expenditures for the full year. This amount includes approximately $250 million in recurring maintenance capital, $75 million in incremental hotel capital focused on the Orleans hotel remodel, which is expected to be completed by the end of this year, $50 million in growth capital primarily related to completing Cadence Crossing as well as the design and preconstruction activities for the Paradise modernization project, and finally, $300 million related to our Virginia project. We are continuing to balance our capital investments with returning substantial capital to our shareholders. During the first quarter, we paid $14 million in dividends and repurchased $155 million in stock, representing 1.8 million shares at an average price of $83.94 per share. Our actual share count at the end of the first quarter was 74.8 million shares. We currently have approximately $700 million under our share repurchase authorizations, which includes an additional $500 million authorized by our board earlier this month. Over the last four and a half years, we have returned $2.9 billion to our shareholders, reducing our share count by more than 33%. We expect to maintain repurchases of $150 million per quarter, supplemented by our regular quarterly dividend. This equates to more than $650 million per year, or approximately $9 per share in value for our shareholders in 2026. We have the strongest balance sheet in our company's history. We finished the first quarter with traditional leverage of 1.8x and lease-adjusted leverage of 2.4x. We also have ample available capacity under our credit facility. Our next debt maturity is in December 2027, which we intend to refinance later this year or in 2027. In terms of our debt balances, you may recall from our last earnings call that we had expected to pay approximately $340 million during the first quarter for tax credits related to the FanDuel transaction. We paid for a portion of these credits in the first quarter, and we now expect to pay the remaining $290 million during the second quarter. During the first quarter, corporate expense was higher than usual due to one-time items, including the timing of charitable contributions. In conclusion, our first quarter results demonstrated the benefits of our business, our continued focus on operating efficiencies, and our ongoing capital investment program. We remain confident in our ability to drive growth in play from our core customers while making investments that elevate our product offerings and enhance our growth prospects. Our strong balance sheet, coupled with our consistent operating performance and robust free cash flow, position us well to continue creating long-term value for our shareholders. This concludes our remarks, and we are now ready to take any questions you may have. Operator: Thank you, Josh. We will now begin our question and answer session. If you would like to ask a question, please press star then 1 on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to withdraw your request, please press star then 2. If you are using a speakerphone, please use your handset when asking your question. We will pause for a moment while we compile our list of questioners. Our first question comes from Steve Wieczynski of Stifel. Steve, please go ahead. Steve Wieczynski: Hey, guys. Good afternoon. So, Keith or Josh, I know this might be a tough question to answer, but with the destination traffic still somewhat soft in the Locals market as well as Downtown, I am wondering when you think that might inflect, given we now have a pretty significant headwind as well with fuel prices, which can impact whether that is driving traffic or flying traffic. How are you thinking about the destination business and when we might see that start to bottom out? Thanks. Keith Smith: Sure. As we think about the destination business, a couple of things. One, the primary impact is at the Orleans, where we have almost 1,900 hotel rooms. That is the single biggest impact in our Locals portfolio. Two, with respect to the increase in gas prices, trends we saw in the first quarter, as we highlighted, were in line with last year. It is hard to discern the impact of gas prices when you have higher tax refunds coming out through the last several months and probably over the next several months. When does it turn? When we get to the second half of this year, we start to run into easier comparisons because this impact of destination travel to Las Vegas started to occur in the second half of last year in a big way. So we get to easier comparisons. When does it fully turn back up? Hard to tell. Those are the high-level comments on the topic. I will see if Josh has anything he would like to add. Josh Hirsberg: Yes. The only thing I would add is, as Keith alluded to, we started to see the visible impact of destination business on our performance in Q3 of last year. Since then, it has been a pretty consistent level of impact. It has been about $5 million to $6 million of EBITDAR each quarter since then. It was that way in Q3, Q4, and then again this quarter as well. We are expecting a similar impact in Q2. Then, as we anniversary it, I do not think we expect it to flip on a dime and start to become positive all of a sudden, but we think it would continue to be down, less bad but down, year over year in Q3, gradually improve in Q4, and then maybe in the first half of next year start to see some overall growth out of that segment. That is based on what we are seeing today and the fact that it has been so consistent to date. Steve Wieczynski: Okay. Got it. Thanks for that. If we flip to the Midwest and South, those results looked really solid and probably better than what we were looking for. For that whole portfolio, were the trends broad-based, or were there markets or pockets of strength versus other markets that you might call out? Keith Smith: They generally were broad-based across the Midwest as well as the South and the East. We are very pleased with the level of performance, the growth in revenues, the level of flow-through, and, in particular, the margins. We had a very strong quarter there. We saw growth across all the demographics and all the ADT segments. In most places where numbers are published and you can discern the numbers, we gained market share. The business continues to grow. The capital investments we are making are having an impact and providing a return. It was a very strong quarter in the Midwest and South for us. Steve Wieczynski: Okay. Got it. Thanks, guys. Appreciate it. Operator: Yep. Operator: Thank you. Our next question comes from Barry Jonas of Truist. Barry, please go ahead. Barry Jonas: Hey, guys. Josh, I think I missed this. Did you talk about why corporate was up so meaningfully? If you could isolate if there is a one-timer? And then maybe how to think about that line item going forward? Josh Hirsberg: Yes. There was about $6 million of one-time items and, by their nature, they will not continue going forward. One of them, the most prominent one, had to do with charitable contributions. Last year, and this is a timing difference, we accounted for it spread out over the entire year. This year, it was recorded in the period we actually made the contribution. That is the standout largely. Barry Jonas: Got it. And then, you clearly have development projects in the pipeline, but I am curious to get your thoughts on M&A. There is plenty of speculation all around about M&A in the space. I am curious to get your thoughts on opportunities for Boyd. Thank you. Keith Smith: Our comments on M&A are consistent with what we have said in the past. We have grown a lot through M&A. We are always looking at things. We have our eyes open and understand what is going on in the market and what is available or may be becoming available. We have a disciplined process and set of filters to work through. We will continue to look. If the right opportunity presents itself that is strategic and has the right return profile, you would see us execute. Absent that, we have a great company, a strong balance sheet, and good earnings, producing great EBITDA, and we will continue to stick to our knitting until we find the right opportunity. Josh Hirsberg: And, Barry, jumping back to your first question, I looked at consensus for corporate expense for Q2, Q3, and Q4, and that is generally a good expectation of what to expect for the remaining quarters of the year. Barry Jonas: I got you, Josh. Thank you so much, guys. Operator: Thank you. Our next question comes from Shaun Kelley of Bank of America. Shaun, please go ahead. Shaun Kelley: Hi, good afternoon, everyone. Thanks for taking my questions. Josh or Keith, two questions, one macro and then one detailed. On a detailed question, I think I caught in the prepared remarks you said foot traffic on the Fremont Street Experience was down 11%. If I caught that correctly, and if not, please correct it. I feel like we saw a bit of an inflection on Strip visitation that we get from broader LVCVA data, and that actually looked a lot closer to flat, and it was down a lot last year. In Q1, it looked a lot closer to flat. Any thoughts as to why that might be a slightly different pattern than the broader Strip? Keith Smith: We did quote that it was down 11%. That number represents traffic under the canopy, under the Fremont Street Experience itself. It was down a similar amount in Q4. I cannot comment on foot traffic on the Strip. I do know the convention calendar was stronger in the first quarter, with CONEXPO in town that was not there last year. I am sure that drove some of the increased traffic on the Strip. We did not see it make its way Downtown. The good news is the decline in visitation is similar; it did not accelerate. It was stable. No other explanation as to why some of that increased visitation did not make its way Downtown. We are not overly concerned at this point. Las Vegas has a long history of seeing roughly 50% to 55% of all visitors to Las Vegas making their way Downtown, and I suspect that will continue over time. Shaun Kelley: Got it. Thanks for that, Keith. Maybe just another high-level one. If we zoom out, it feels like the macro backdrop, plus tax refunds and no tax on tips, should be a great setup for Las Vegas Locals. Even if we strip out destination, which is a little idiosyncratic, it feels like Locals are flat and Regionals are up. Conceptually, any KPI you are pointing to as to why the Locals may not be participating quite the same way the Regions are? Keith Smith: When we think about our out-of-state or non-Nevada properties, we commented that for several quarters now people are simply staying closer to home and spending their money closer to home. We are a beneficiary of that, having properties spread across 10 states. In Nevada, our Locals properties are not 100% Locals; there is a certain amount of destination and regional business that is part of that. We have commented in the past that our pure Local business—people with ZIP codes in and around our properties—is actually quite good, mostly for the same reason. They are staying close to home and spending money closer to home. When you dig into the weeds, the pure Locals are actually performing well. Shaun Kelley: Perfect. Thank you. Operator: Thank you. Next question comes from Benjamin Nicolas Chaiken of Mizuho. Ben, please go ahead. Benjamin Nicolas Chaiken: Hey, thanks for taking my questions. Josh, back to some of the earlier Q&A regarding your back-half expectations in Vegas. If the impact from the destination customer has been constant, which you quoted at around $5 million or $6 million, how do I bridge that with your response to an earlier question suggesting that 2H would be down, juxtaposed against Keith's comments earlier where you said that ex-Orleans and Suncoast things were flat? Maybe I misheard you, but could you clarify the moving parts in the back half and how you are thinking about it? Josh Hirsberg: I will try to give you an answer. From the perspective of destination, assuming no change in consumer behavior, we would expect destination to have a similar level of impact in the first half and then just get less bad. If it was down five, maybe it is down a little bit less in Q3 and a little bit less in Q4, maybe approaching flat. You then have to recognize the two other factors we spoke about. One is Suncoast disruption. We only had a partial first-quarter impact from that disruption, so that will be a full quarter in Q2 and a full quarter in Q3 before that project is complete. You will start to see some benefit from Suncoast’s complete renovation and modernization of its floor beginning in Q4. The other element is Cadence. Cadence opened with great top-line performance. Like any other new opening, we have to let it settle in at a revenue level and then adjust the expense structure. Q1 had only a couple of days, so we did not get any EBITDA contribution, but a lot of revenue from it. We expect it to trend up and start hitting full stride maybe later in Q3, certainly by Q4. In Q3, you are going to have two pressures: destination and Suncoast disruption still going on, with Cadence not yet hitting full stride. In Q4, you should have much less destination impact, Suncoast in the rearview mirror, and Cadence hitting full stride. Hopefully, that triangulates to what you interpreted from our comments. Benjamin Nicolas Chaiken: Very helpful. I appreciate it. One other quick one. In Virginia, you have been clear that the temporary casino in Norfolk is more of a placeholder with little or no expected profit. However, there is a temporary casino out there that recently opened that is generating around $10 million to $15 million a month. Is this something you would consider doing—i.e., increasing the size and scale of your temporary asset after seeing that response? Keith Smith: The size and scale of our temporary asset is based on the limitations of the site that we are building on. There is no ability to make it any larger. We certainly would have done that from day one. It was not a cost or capital allocation issue. To build a permanent project on that site, we did not have the square footage to allow for anything larger. It is a breakeven and it is what it is for the next year and a half until we open in November 2027. It is not about desire; it is about constraints. Josh Hirsberg: We have to get the permanent open in a certain time frame, and we have limited space for a temporary. Benjamin Nicolas Chaiken: Yep. Appreciate it. Josh Hirsberg: Thank you. Operator: Thank you. Our next question comes from Daniel Brian Politzer of JPMorgan. Dan, please go ahead. Daniel Brian Politzer: Hey, good afternoon. Thanks for taking my question. In terms of the fundamentals and cadence of the quarter, can you talk about how you see it come in? The beginning of the quarter looked very strong. March looked a little soft. It sounds like April has stabilized. Any way to unpack how the quarter progressed? Keith Smith: In the Locals market or overall? Daniel Brian Politzer: Both—Locals and Midwest and South. I think. Keith Smith: Thank you. On the cadence of the quarter—January, February, March—January had milder weather this year versus last year, as well as a better calendar. February was pretty normal, and March was a calendar issue, but nothing unusual we would call out. In Nevada, it is largely the same. We saw some benefits from the large convention in Las Vegas earlier in the quarter. January had an extra weekend day. February was pretty normal. March was maybe a little soft, but nothing unusual we would call out. Josh Hirsberg: What was unique for us in March was that it was when we started to see the largest impact on Suncoast from disruption. That is the only difference really. Daniel Brian Politzer: Got it. Thanks. More of a housekeeping follow-up. In terms of cash taxes, can you remind us what the expectation is for 2026 and if there is a benefit from the one big bill? Josh Hirsberg: We are currently estimating a tax benefit of about $45 million to $50 million. Daniel Brian Politzer: Got it. Thanks so much. Operator: Thank you. Our next question comes from David Brian Katz of Jefferies. David, please go ahead. David Brian Katz: Appreciate all the commentary so far. I wanted to ask a different question, not an M&A are-you-or-aren’t-you, but can you talk about the boundaries you have set for yourself, which I imagine are likely the same? Are there any changes in the kinds of things you are seeing or in the credit support for things that may come up, or any difference in what that market brings in front of you on a regular basis? Keith Smith: I will try to address it. Over the last three to five years post-COVID, we have a strong balance sheet and a large, strong business. Anything we look at has to be significant and able to move the needle. It has to be in stable tax and regulatory environments, and it has to be an asset that strategically makes sense to add to the portfolio. There are things out there that make sense. We are not afraid, because of our strong balance sheet and strong cash flow profile, to do larger transactions. We look at small, medium, and large transactions. We look at a lot of things over the course of a year and will continue to do that until something makes sense to us. We have been fairly consistent. I do not think much has changed in how we view it. Josh, anything you would like to add? Josh Hirsberg: A couple of thoughts. We are in the best position we have ever been in to make an acquisition, but that does not mean we will find one that makes sense to execute upon. Ultimately, it is basic capital allocation—where can we get the best returns versus buying back our own stock or making investments internally in our own portfolio. That is working quite well at this point. Whenever an opportunity comes along, we have to evaluate it in the context of what we are doing today. That is a fundamental philosophy of how we think about transactions and growing the company. David Brian Katz: Perfect. If I can lay out one more hypothetical. Virginia was gesturing at the notion of iGaming this year, and if one day it gets there, how would you envision your participation? Would you participate? Keith Smith: You could envision us participating. Through Boyd Interactive, we have a small online gaming business that has grown nicely. We are live in New Jersey and Pennsylvania. We are supportive of iGaming rollout across the U.S. If it happens in Virginia, we will be supportive there, and you will see us participate. We think it is additive and complementary to what we do, and we would be supportive if and when that opportunity presents itself. Operator: Thank you. Our next question comes from John G. DeCree of CBRE. John, please go ahead. John G. DeCree: Hey, guys. I know we have not talked too much about Cadence Crossing yet—it has been a little less than a month. Could you give us any anecdotes from the opening and first couple of weeks—visitation levels, new customer sign-ups—anything you could share? Keith Smith: I do not have specific data in front of me, John, but we had a great opening. The place was full and continued to have great customer response through the first couple of weeks. I am sure it has leveled off a little bit. As Josh indicated earlier, you open these buildings and you focus on driving revenues, and over the next several months we will focus on refining the cost structure. We are very happy with the opening, the level of participation, and new customer sign-ups. I just do not have the data sitting here today. John G. DeCree: That is fair. Thanks, Keith. Maybe broader promotional environment in Las Vegas—true Locals versus Orleans, which is more destination. As that market lacks some visitation, have you seen any material change in the promotional competitiveness in the last quarter as it relates to Locals and destination? Keith Smith: In the traditional Locals market, it remains fairly rational. Those properties or companies that have tended to be a little aggressive continue to be aggressive, and those of us who have remained more rational have maintained that profile. Nothing much has changed in the traditional Locals environment. At the Orleans and the destination market, the Strip is getting a little more aggressive, whether in room pricing, room products, or some all-inclusive packages trying to entice people into their buildings. We have not seen any impact from that, but from our vantage point they have probably gotten a little more aggressive. Operator: Thanks, everyone. Keith Smith: Yep. Operator: Our next question comes from Brandt Antoine Montour of Barclays. Brandt, please go ahead. Brandt Antoine Montour: Hi, everybody. I think we have covered a lot of ground. One question on the Locals business. Some of the things that you called out, Josh, on how to think about impacts throughout the year—setting those aside and looking at the underlying business—seasonality from the first quarter to second quarter has been a little different over the last couple of years. Consensus is looking for stronger Q2 versus Q1 seasonality, but if you go back a couple years, it was maybe more flat to down. Can you help us think about, before the impacts, what the underlying business typically looks like from the first to second quarter, all else equal? Josh Hirsberg: You bring up a good point. Early coming out of 2020, there was limited seasonality given the strength of the consumer and stimulus. As we moved through time—around 2023, I believe—seasonality started to return. Q2 tends to be a little better than Q1 in the Locals business. Q4 really depends on how the holidays fall, in particular New Year’s. Typically, Q4 will be as strong, if not better, than Q1. Despite the challenges with destination business and the Suncoast disruption, we look through those to some extent because we can see the end of Suncoast disruption, and destination will not always be a pressure point. When we separate those impacts and look at the fundamental Las Vegas Locals business, it continues to be a good business that is just temporarily affected by these items. Keith Smith: It is important to note that the Suncoast renovation and modernization project has been going on for more than a year. Through the first year, the management team did a great job managing through the disruption. It is only in the last several months, as we moved into a more impactful area, that we have seen some real disruption. Operator: Thanks, everyone. Keith Smith: Yep. Operator: Our next question comes from Chad C. Beynon of Macquarie. Chad, please go ahead. Chad C. Beynon: Good afternoon. Thanks for taking my question. Really good results in the Midwest and South, your biggest business. I wanted to ask about the flow-through. That was pretty strong, almost close to 50%. If you are generating the revenues you put up in this quarter, can you continue to see flow-through that high, or is there anything else we should think about—like inflation on OpEx or other expenses—that would dampen that a bit? Thank you. Josh Hirsberg: The challenge for us last year was really driven by benefits. We did not talk a lot about it at the time, but it impacted results. We have tried to address that coming into 2026. It is still early. We think we have it under control, but we will not know until we see participation and usage of the programs as we move throughout the year. Looking at our expense structure last year versus this year, the biggest categories are what you would expect. Marketing as a percent of revenue is essentially the same. Wages are going up 2% to 2.5%, but the bigger increase was around benefits last year. So far this year, we have not seen that level of increase. It is early, and we have taken steps to mitigate it. This is how the segment should perform generally. Chad C. Beynon: Okay. Thank you. Then on the Downtown business, can you talk about forward bookings or longer-haul flight prices? Are there ways to package in more perks to help when flight prices are higher? Keith Smith: A large part of our Hawaiian business comes through packages. It has been a standard part of the Downtown product for decades. We have seen airline prices start to go up recently. Hawaiian business in the first quarter was stable, and the first couple of weeks of April remained stable. We are monitoring airfares coming out of Hawaii because we know that could impact our customers, but to date everything is stable. We have a 50-year history with our customers coming out of the Hawaiian Islands, as well as local Hawaiians from California and those that live here in Las Vegas. We will continue to treat them right and do what we have to do to maintain their loyalty. Josh Hirsberg: Keith, I think you covered it. Chad C. Beynon: Sounds great. Thanks, guys. Operator: Yep. Operator: Next question comes from Analyst of Wells Fargo. Please go ahead. Analyst: Hey, guys. Thanks for the question. A lot of what I would ask has already been asked, so a bigger-picture one. There is lots of disruption right now between you and your peers in the Locals market. Once we come out the other side and look out for the next few years, what would you deem a healthy level of Las Vegas Locals gaming revenue growth—both at GGR and post-promotional levels—to think about continuing to add additional assets into the market as well? Josh Hirsberg: Traditionally, the Locals market has grown at 3% to 5%, a little higher than what we have seen in traditional regional riverboat markets or Midwest and South markets. Coming out of COVID, the customer we are catering to is a much higher quality core customer, and there is potential for higher growth as we invest more and upgrade our products. But that is theoretical at this point. I would be more comfortable relying on that 3% to 5% growth out of the Locals business, and that is what we would expect. Analyst: Would you say 2027 would be a good year to really look for that—a clearing event for the amount of disruption happening in the market? Josh Hirsberg: I think our disruption is really isolated. You will be able to see that. For us to hit those numbers, it is more about having destination business come back. We are being thoughtful about not having too many properties disrupted at once. We need a stable operating environment in Las Vegas, similar to what you are seeing in the Midwest and South. That segment is performing like we would expect it to perform. Customers are staying close to home and not traveling. We just need a clearing, stable operating environment in Las Vegas. In our case, it is not as much driven by our CapEx and disruption. Analyst: Okay. Thanks so much. Operator: Our next question comes from Jordan Maxwell Bender of Citizen. Jordan, please go ahead. Jordan Maxwell Bender: Hey. Good afternoon. We have not seen a ton of M&A post-COVID to give us evidence, but after properties have run much more efficiently, when you look at M&A are you finding it harder to underwrite synergies with a lot of the costs stripped out compared to prior to 2020? Keith Smith: Post-COVID, it is probably more the expectation of the sellers than our ability to underwrite synergies. Sellers now have a very high expectation of getting a part of those synergies as part of any purchase price, even though we have to do all the work to achieve them and take the risk. That is the bigger dynamic. It is less about operations being more efficient today. That would be my answer. Jordan Maxwell Bender: Okay. And then on Sam's Town—you mentioned it was a small property. What was the rationale behind that sale? Looking across your entire portfolio, are there assets that fit similar criteria that you could look to divest? Keith Smith: You are referencing Sam’s Town Tunica or the sale of Shreveport? Jordan Maxwell Bender: The sale of Shreveport. Keith Smith: The Sam’s Town Tunica and Shreveport properties are in the same general category. They are very small properties from an EBITDA production standpoint and no longer critical to the success of the portfolio. There was a point in time when Sam’s Town Tunica, being our first property outside Nevada, and Shreveport were important as we had our early growth spurt. Given the profile today, the competitive landscape, and where we are going as a company, they did not make sense for us to continue. Are there more? I do not think so. We are pretty happy with the portfolio absent those two properties. They were very small, not significant producers to the overall EBITDA of the company. Jordan Maxwell Bender: Great. Thank you very much. Operator: Our next question comes from Analyst of Citi. Please go ahead. Analyst: Hey, good afternoon, evening at this point. Thanks for fitting me in. Is there any way to quantify the Suncoast disruption to the Locals market in the first quarter and for the year? As I think about the roughly $7 million shortfall versus a year ago in the Locals market, that was bigger than where the Street was. Is the Suncoast disruption bigger than previously thought or just earlier than previously thought? Ultimately, what portion of that delta was Suncoast versus the destination shortfall, which you have outlined at $5 million to $6 million, and then the underlying Locals customer? Josh Hirsberg: The Locals business was off year over year by about $6.5 million. I would attribute probably $5 million to destination and about $1.5 million to Suncoast disruption, recognizing that it was not a full quarter. We will get a full quarter impact in Q2 and part of Q3 as well. We have been very pleased with the management team at Suncoast in terms of how they have managed through construction disruption, to the point where we did not really see it before. The property was performing on par with prior year, in some cases exceeding prior year. We basically said we would let you know when we see it, and now we are seeing it. It became a big bite in terms of the area of the casino being affected. Keith Smith: We will continue to see this in Q2 and partway through Q3 until we get open. It is temporary. It is a combination of fewer slot devices on the floor and having hit our most popular area of the floor as part of the process. Analyst: Got it. Two clarifications. The $1.5 million impact in the first quarter—what does a full quarter look like? Is that a $3 million impact for both Q2 and Q3? And cutting to the chase, whereas previously we were holding out hope that the Locals segment could eke out a little bit of growth this year, it does not sound like we should be assuming that anymore. Is it still possible, likely, or unlikely that Locals can eke out a little bit of growth based on that fourth-quarter improvement? Josh Hirsberg: We have given you enough information to take your own projections and figure it out. For your first part, Suncoast’s impact of $1.5 million implies $2.5 million to $3 million for Q2 and $2 million to $2.5 million for Q3 is a reasonable expectation. Then Suncoast should start contributing to results. As I said earlier, you will get benefit from Cadence. Keith Smith: Then some easier comparisons as we get through the second half of the year. We do not typically provide guidance. We are getting close to the line. As Josh said, I think there is enough information out there to figure it out from there. Analyst: That is helpful color. Thank you. Operator: The last question comes from Steven Donald Pizzella of Deutsche Bank. Steve, please go ahead. Steven Donald Pizzella: Hey, good afternoon and thanks for taking my question. On Paradise, post the approval of the expansion and modernization, given the success you have had at Treasure Chest, how would you compare the build and returns of this project to Treasure Chest? Keith Smith: It is not a fair comparison. We are confident we will get a return on the investment; otherwise, we would not proceed. But Treasure Chest is a completely different market than New Orleans, and different than East Peoria. East Peoria has a significant number of VGTs, which are legal in Illinois—six at every bar/tavern in the area—a significant quantity that compete with our product. That is not the case in the New Orleans market. We will get a reasonable return on our investment, but I would not compare it to Treasure Chest. Josh Hirsberg: You have to realize the Treasure Chest returns after tax are probably over 25%. It was a good investment. Steven Donald Pizzella: Okay. Thanks. And on the cash taxes, did you say a $45 million to $50 million benefit for this year? Josh Hirsberg: Not a refund; it is a timing difference. We get accelerated depreciation that makes you depreciate quicker and then end up owing taxes on it three years from now instead of five years from now. The benefit of the accelerated depreciation yields about a $45 million to $50 million incremental tax benefit to us for this year. Steven Donald Pizzella: Okay. Thank you. Operator: This concludes our question and answer session. I would now like to turn the call over to Josh for concluding remarks. Josh Hirsberg: Thanks, and thanks to everyone joining the call today. Should you have any follow-up questions or need any clarifications, feel free to give us a call. Thank you.
Operator: Good morning, and welcome to the Origin Bancorp, Inc. First Quarter Earnings Conference Call. My name is Jen, and I will be your Evercall coordinator. [Operator Instructions] Please note this event is being recorded. I would now like to turn the call over to Chris Reigelman, Director of Investor Relations. Please go ahead. Chris Reigelman: Good morning, and thank you for joining us today. We issued our earnings press release yesterday afternoon, a copy of which is available on our website, along with a slide presentation that we will refer to during this call. Please refer to Page 2 of our slide presentation, which includes our safe harbor statements regarding forward-looking statements and the use of non-GAAP financial measures. For those joining by phone, please note the slide presentation is available on our website at ir.origin.bank. Please also note that our safe harbor statements are available on Page 6 of our earnings release filed with the SEC yesterday. All comments made during today's call are subject to safe harbor statements in our slide presentation and our earnings release. I'm joined this morning by Origin Bancorp's Chairman, President and CEO, Drake Mills; President and CEO of Origin Bank, Lance Hall; our Chief Financial Officer, Wally Wallace; Chief Risk Officer, Jim Crotwell; our Chief Accounting Officer, Steve Brolly; and our Chief Credit and Banking Officer, Preston Moore. After the presentation, we'll be happy to address any questions you may have. Drake, the call is yours. Drake Mills: Thanks, Chris, and thanks for being with us this morning. While I'm pleased with the results of this quarter, I'm even more encouraged by the momentum we're building as we focus on developing a high-performing organization through Optimize Origin. Our ROA in the past 2 quarters highlights the level of focus we have in strategically improving performance for all of our stakeholders. In Q1, our ROA was 1.11%, and we are on pace to achieve our target run rate by year-end. The momentum we spoke about last quarter has only accelerated as we've started the new year. We saw very positive loan and deposit growth for the quarter, which has been disciplined and strategic. I remain encouraged with what I'm seeing and hearing throughout our markets. The growth we saw in Texas and in the Southeast is a reflection of both the strength within those dynamic markets and the generational dislocation that is occurring. This dislocation is creating valuable opportunities to add new relationships, expand on existing ones and add new bankers to our already impressive team. Lance will provide more detail on this, but we are receiving calls from bankers within our current markets as well as in new markets who have an interest in joining our team. The volume of activity being created by disruption is even greater than we anticipated. Momentum is strong at Origin and is based on our award-winning culture and our drive for elite financial performance through Optimize Origin. Again, I'm proud of our results this quarter, and I'm optimistic about what we can accomplish. Now I'll turn it over to Lance and the team. Martin Hall: Thanks, Drake, and good morning. It's an exciting time for Origin. Across our company, Optimize Origin has clearly become the operating system driving more consistent, higher-quality performance. We are seeing Optimize translate into stronger execution, disciplined growth and increased operating leverage. In Q1, we delivered strong loan and deposit growth. Loans held for investment, excluding mortgage warehouse, increased $200 million or 2.8% quarter-over-quarter. Total deposits, adjusting for deposits sold at the end of 2025 grew $234 million or 2.8%. As expected, this production is being driven out of our Houston, DFW and the Southeast markets. This growth reflects disciplined execution, not opportunistic volume. We remain fully focused on full relationship profitability, balancing loan growth with core deposit generation, pricing discipline and long-term client value. This consistency is critical as we continue to build a more durable and high-performing balance sheet. As Drake mentioned, the interest we are receiving from high-quality bankers who desire stability, opportunity and a vision for the future has been exceptional. Since the beginning of this year, we have added 15 bankers to our production teams. While our loan growth in the first quarter was strong, it doesn't capture what our new bankers will add throughout the remainder of the year. I'm confident that we will continue to strategically enhance our teams across our footprint during this time of disruption. Our footprint, geographic model and talented bankers create an environment where I feel confident we will capture our desired growth without needing to take any unreasonable credit or interest rate risk. We have the luxury of not needing to stretch or deviate from our standards or credit culture in any way. At the same time, we are continuing to invest in the capabilities that will define our next phase of performance. During the first quarter, we hired Brad Waldhoff as Chief Technology and Innovation Officer. Brad has more than 20 years of success leading digital innovation for high-growth companies. He is already partnering with our teams across the organization to align technology, data and AI more directly with business outcomes. This focus on enterprise architecture and innovation strategy is directly connected to driving measurable improvements in productivity, decision speed and quality and enhanced client experiences. Over time, we expect this alignment to enhance our ability to scale effectively, strengthen revenue and risk management and drive better overall returns. As we continue to Optimize Origin, we are hyper-focused on revenue creation, process improvement, speed of delivery, scaling with discipline and driving elite financial performance. This unique position of a dynamic footprint and ability to take advantage of market disruption through talent acquisition and award-winning culture as well as a commitment to AI, technology and automation is why we are so confident and optimistic on Origin's strategic path. As other financial institutions are consolidating, we are investing in our independent future. Now I'll turn it over to Jim. Jim Crotwell: Thanks, Lance. I'm pleased to report continued sound credit metrics for the first quarter of 2026. Total past dues 30 to 89 days increased to 0.22% and compared favorably to an average of 0.25% over the previous 4 quarters. Net charge-offs for the quarter were $2.8 million, down from $3.2 million, and represent an annualized charge-off rate of 0.15% for the quarter. Nonperforming assets increased $6.4 million, increasing moderately from 1.07% of loans to 1.12% and remain below the level of 1.18% reported at Q3 2025. Classified assets also increased moderately from 1.93% of total loans to 1.97%, an increase of $6.3 million, driven primarily by the downgrade of 9 relationships, partially offset by balance reductions in 6 relationships. For the quarter, our allowance for credit losses increased $2.2 million to $99 million. On a percentage basis, our allowance remained stable at 1.34% of total loans net of mortgage warehouse. As in recent quarters, we did not experience any significant changes in our CECL model assumptions. As to total ADC and CRE and as we have shared on previous calls, we continue to have ample capacity to meet the needs of our clients and grow this segment of our portfolio, reflecting funding to total risk-based capital of 48% for ADC and 233% for CRE. We continue to be pleased with the sound credit performance of our portfolio. I'll now turn it over to Wally. William Wallace: Thanks, Jim, and good morning, everyone. Turning to the financial highlights. In Q1, we reported diluted earnings per share of $0.89. As you can see on Slide 25, the combined financial impact of notable items during the quarter equated to net expense of $577,000, equivalent to $0.01 of EPS pressure. On a pretax pre-provision basis, we reported $40.2 million in Q1. Excluding notable items, pretax pre-provision earnings were $40.8 million and annualized pretax pre-provision ROA was 1.61%. On the balance sheet side, loans grew 2.5% sequentially and 2.8% when excluding mortgage warehouse. Total deposits grew 5.4% during the quarter. However, on the last day of the year, we sold $215 million in interest-bearing deposits. These deposits were repurchased 2 days later. Excluding this sale, deposits would have increased 2.8% during the quarter. Noninterest-bearing deposits grew 4.2% sequentially and ended the quarter at 23.6% of total deposits. Moving forward, we continue to target loan and deposit growth in the mid- to high single digits for the year, though we are clearly tracking towards the higher end after Q1. Turning to the income statement. Net interest margin contracted 2 basis points during the quarter to 3.71%, in line with our guidance of slight compression. Moving forward, we expect margin will bounce back in Q2 by about 10 basis points, plus or minus, as excess liquidity from seasonal balances in our public funds customer accounts runs back off, leaving average earning asset balances roughly flat. By Q4, we continue to anticipate NIM in the 3.7% to 3.8% range with current bias remaining at the higher end. Our outlook now includes 25 basis point Fed rate cuts in July and December. Combined with our balance sheet growth expectations, we continue to expect net interest income growth in the mid- to high single digits for both the full year and Q4 over Q4. Shifting to noninterest income. We reported $16.8 million in Q1. Excluding $438,000 in net benefits from notable items in Q1 and $483,000 in net benefits in Q4, noninterest income increased slightly to $16.4 million from $16.3 million in Q4 as $3.3 million in net losses on limited partnership investments offset the seasonal strength in our insurance business. We are maintaining our outlook for full year noninterest income growth in the mid- to high single digits with Q4-over-Q4 growth in the low to mid-single digits when excluding notable items, though we are currently tracking on the lower end. We reported noninterest expense of $63.8 million in Q1. Excluding $1 million in expense from notable items in Q1 and $1.3 million in Q4, noninterest expense increased to $62.8 million from $61.5 million in Q4. Our expense growth outlook remains for mid-single-digit growth for both the full year and on a Q4-over-Q4 basis after excluding notable items. Notably, we are maintaining our run rate ROA expectation of at least 1.15% in Q4 and a pretax pre-provision run rate ROA in excess of 1.72%. Lastly, turning to capital. We note that Q1 tangible book value grew sequentially to $35.61, the 14th consecutive quarter of growth, and the TCE ratio ended the quarter at 11%. During Q1, we repurchased 165,500 shares while maintaining all regulatory capital ratios above levels considered well capitalized, as shown on Slide 24 of our investor presentation. Furthermore, we announced yesterday the Board's approval of an increase in our quarterly dividend from $0.15 to $0.25. We believe this decision, combined with our continued share repurchases is a reflection of both the strength in our capital levels and a more consistent earnings stream to support dividend payout levels closer to peers. With that, I'll now turn it back to Drake. Drake Mills: Wally, thank you. Optimize Origin continues to shape how we operate, how we allocate capital and how we think about long-term value creation. Over the past few years, we've invested in top-tier talent, infrastructure, technology while strengthening our culture. My optimism is based on our focus and our ability to execute. We will remain strategic and deliberate in how we drive value for our stakeholders. Thanks for being on the call today. We'll open it up for questions. Operator: Thank you, Drake. [Operator Instructions] Our first question is from Matt at Stephens. Matt Olney: I have a few questions around loan growth. Just looking for more color around the drivers of what we saw in the first quarter. It looks like it was a lot of CNI, I think, mostly in Texas. Just any more color on what you saw there and kind of how the pipelines look today? And then secondly, we've heard a few of your peers in Texas mentioned that loan pricing continues to tighten for a handful of the CNI segments in Texas. Just would love to know kind of what you're seeing there. Martin Hall: This is Lance. Thanks for the question. Really excited about what we produced in the first quarter and what we see from a pipeline and a forecast perspective for the rest of the year and going forward. You were right. It's exactly what we would hope it would be. I think $184 million of the growth was in CNI, Texas and the Southeast, where we've been making our big investments, were the huge drivers of that. Houston did a great job. We're really seeing the increase now from Nate and his team in the Southeast as well as that's really coming through. We are seeing competitive pressures on pricing. I will say, for the first quarter, I thought we did a really good job of being disciplined. We were seeing new loan pricing come in between about 6.3% and 6.5%, which I feel is really good. As I said in our commentary, I feel like our footprint, our investment in bankers, gives us a little bit of luxury that we don't have to reach as much. So I'm proud of our teams. I'm proud of our credit officers for the discipline that they're driving. The mix of the loans as far as industries was really spread out, pretty granular, pretty typical to what you would see from us. There were some industrial services, transportation, construction, construction equipment, a little bit of clean energy, renewable stuff that we saw, so a little bit across the board that we feel good about. I think we had talked about $190 million pipeline in Q1. So we were kind of right at that level. We're seeing about $150 million to $160 million pipeline for Q2. We've had good success kind of through the first part of the quarter, and I think that, that's really going to pay dividends. And as we talked about, I'm going to say that the growth that we've seen so far is organic completely, not a function of new hires or disruption yet. And so that investment for us is going to really pay dividends in the back half of the year and for the next couple of years, as that investment continues to pay off. Matt Olney: Okay. I appreciate the color there, Lance. And if I could switch gears over to the capital side. I think Drake noted some good capital actions during the quarter, the Board approved the dividend that we'll see here and also bought back some shares in the first quarter. Just would love to hear updated thoughts around capital priorities. Are there certain capital levels you're targeting? And at what point does M&A come back into play? Drake Mills: Yes, Matt, thank you. Our capital deployment outlook is pretty much as it has been. I mean we are -- we feel like we're first in a position of luxury from the standpoint of strength of capital. But obviously, growth is our major emphasis on capital deployment. But on the second -- on the other hand, we have to become more peer-like in how we utilize capital, especially excess capital. We're very pleased with the approval, the increase of dividend. That will give us an opportunity to continue in the next several years to be peer plus like in how we manage capital return. But from a buyback activity standpoint, we are focused on, as we always have been, not just ROA, but ROE and how do we manage capital from a perspective of shareholder return, but yet at the same time, get this ROE number up. And so our deployment is going to be the same. We're very pleased with the levels of growth that we're seeing in all markets, and we'll continue to focus on that. But at this point, we're in a, like I said, a position of strength. We have significant confidence in our earnings durability, which gives us the opportunity to move forward with increased dividends. And ultimately, as I said, there's going to be a desire to continue to deploy this through organic growth, and we're seeing some significant opportunities on markets. Martin Hall: And Drake, the last part of that, can you address M&A for the bank? Drake Mills: Yes. For us, I think the best plan is for us to grow -- we've got a nice opportunity to grow organically. M&A is just not on the table at this point. We've got too much opportunity to maintain awesome culture, strong credit quality. The growth we're seeing is high quality. So we're going to take advantage of this organic growth, this lift-out opportunity, really do the things that we've done for years that's made us who we are, but focus on a disciplined approach of return and profitable growth. And I think that's going to be the driver that keeps us out of the M&A game. Operator: Our next question is from Michael at Raymond James. Michael Rose: I was trying to write down some of the commentary, Wally, that you provided around NII and fees. I think what I'm hearing is that the margin should maybe be towards the upper end. Does that imply that the NII should also be kind of towards the upper end of the range? And then I think I heard that fee income would maybe be tracking towards the lower end of the range, but the full year revenue should kind of balance out. Is that broadly kind of the way to think about it? William Wallace: Generally, I would say, yes, Michael. The NII would certainly be tracking towards the higher end, especially if loan growth and NIM is tracking towards the higher end of guidance. On the fee income side or the total revenue side, NII is obviously going to be the biggest driver of our total revenue growth. So even with our fee income tracking towards the lower end, primarily a result of the losses on the LP investments in the first quarter, that's still -- the total revenue still looks stronger due to the NII strength. Michael Rose: Okay. Helpful. I appreciate that clarification. And then Drake, maybe for you, obviously, the Optimize Origin efforts, I know it's been a lot of work to kind of get where you are, but it seems like the momentum is really beginning to build here, and I think you'll have more progress as you move into next year. Just as you think about some of those efforts and maybe finishing kind of the job, kind of where do you see the company over the next 2 to 3 years? I know you've talked about prior getting back to kind of a top quartile performance. What needs to happen from here to really kind of get there because it does seem like the bar has certainly moved higher? So just trying to balance what you've laid out already with kind of what's to come and how we get back to that top quartile profitability. Drake Mills: Well, thanks to Lance and his team, Optimize Origin, and I love how Lance refers to it as our operating system. And it's not a project. It's not a point in time. It is literally how we look at this company moving forward. And I think to answer the bulk of your question, organic growth at the levels we're seeing today, maybe a little less, have to continue for us to be able to get to the point of a top quartile performer, and we are very confident in that. That's why we're seeing a significant balance in the opportunities we have at this point for teams that are contacting us. We are looking at what is the impact to our financial model and our ability to hit these targets from an ROA standpoint in the next couple of years, but yet balance bringing these teams in. And so we're looking at teams that have significant CNI focus, that have funding capabilities themselves, that have longevity in their relationships with significant credit quality because ultimately, a derailer, if we have the growth is the credit quality aspect of it. So we are so focused on high-quality growth. We're focused, as Lance said, on discipline, pricing and profitability. And so if we can continue managing Optimize Origin as, say, our operating system and our entire organization buys into that, then we'll see high credit quality. We'll see pricing discipline that will allow us to stay in the game, and we'll see growth that matters. So I would rather take a 6%, 7% growth that's high quality, high profit versus just throwing up a 10%, 12% growth. So I see a company that's growing at this 8% to 10% level in the next couple of years with significant discipline, high-quality credit and earnings power that continues to grow. So with those factors, I've got a lot of confidence in our ability to be an upper quartile earner in the next 3 years and continue with being a disciplined performance company. Martin Hall: Yes. I might want to add to that. That was a great answer, Drake. The back end of it, through the lens of Optimize, is really trying to continue to identify lower returning sections, markets, bankers, clients, products, understanding where our expenses are, how we can take advantage of the market and move expenses into what I'm going to call future revenue streams. And so right now, with the emphasis on artificial intelligence, we have taken advantage of a window to really dig into contract renegotiations with technology vendors and are having a tremendous amount of success. And that in the moment, not just for the -- not just to cut costs, but then to be able to reinvest those dollars into future automation as well as future investments in banking teams that are going to drive revenue. They're going to push us forward. I mean the hire of our new Chief Technology and Innovation Officer points to that, the real emphasis on data and how decisions are made through automation, through speed of delivery, process improvement. We are doing a deep dive inside the organization on all things along this journey and personalization for the clients so that we're delivering in a cheaper manner and we're driving this that's really pushing ROA significantly. Operator: Our next question comes from Stephen at Piper Sandler. Stephen Scouten: I wanted to dig into some of the guide a little bit more, just particularly around the deposit growth. Does that kind of guidance account for the movement we saw around year-end and the beginning of the year, with managing around the $10 billion in assets? William Wallace: Yes. So just to kind of give you some thoughts around maybe how the deposit growth will trend, the first quarter is always a seasonally strong quarter for us. Our public funds customers, especially in Louisiana, have a lot of inflows from tax receipts. Those deposits then run off in the second quarter. So the second quarter is typically down slightly, and then we build back up in the third and fourth quarters. So yes, if you look at the guide, that mid-single -- mid- to high single-digit guide would be on the higher end if you don't add back the deposits that we sold at the end of 2025. Stephen Scouten: Got it. And then, Wally, I think I heard you say that the NIM guide currently assumes 2 cuts in July and December. Would there be any material change to the path for the NIM if we do not get any cuts this year? William Wallace: So we have about $350 million or so of loans that are maturing for the rest of this year. Those loans on average are priced around 5%. As Lance said, we're pricing -- in the first quarter, we were pricing new loans in the 630 to 650 range. So if the Fed doesn't cut and we don't see meaningful spread pressures, then we'll pick up an extra 25 basis points or so on those loans that are repricing. We've moved cuts from March and June to July and December. And so that's -- that would be in the guide. So the December cut is not going to impact the guide that much. So if the July cut comes out of our guidance, then we'd have a little bit of extra boost from those $350 million or so of loans that are repricing. Not hugely material. Stephen Scouten: Yes. Makes sense. Okay. And then just last thing for me. Obviously, Texas clearly represents the lion's share of loans today. And can you give us any kind of color into what you're seeing in DFW, Houston markets in terms of demand and maybe impacts from continued dislocation with deals in those markets and kind of how you would expect that concentration of loans to the Texas markets to continue as we move forward? Martin Hall: Yes, you're 100% right. Our teams are doing a great job. As we talked about, think $160 million of the CNI growth came out of the Texas market in Q1, and the pipeline would look very similar to that as far as the mix. But also on the deposit side, I mean, we grew $200 million in deposits in Texas. And the exciting part of that is because of the CNI focus we have in those markets with our operating companies, the NIB percentage in Dallas and Houston is clearly higher than other markets across our corporation. So they've actually worked and done a great job now that their total deposit costs in Dallas and Houston are the cheapest that we have, which is crazy to think about. They've done such a good job. A lot of TM revenue that's flowing through there. From a dislocation perspective, you're right. I think Drake used the term generational. I can tell you that we're feeling it in a significant way. A year ago, I was spending all of my time around Optimize and sort of resetting, thinking through cost reductions. I can tell you right now, I'm spending all my time recruiting. We're having significant and meaningful conversations across our footprint, literally in every market. Of the 15 new production hires that we had in Q1, I think it's lined out exactly like you would hope it would be. It was 6 in Houston and 6 in North Texas. The opportunities we're seeing, and think hopefully, we'll be announcing very soon, are going to really move this company forward. I would also say that we see significant opportunity in the Southeast market. That they're maturing and coming into their own, conversations that are being had. So while Texas clearly is the driver for us, the Southeast is going to pick up dramatically. Operator: [Operator Instructions] Our next question comes from Gary at D.A. Davidson. Gary Tenner: I had just another question about the CNI growth in the quarter. Do you have a sense of kind of how much was new customer generated versus increased utilization among your existing customer base? Is there any sense that there's a pickup in company investment to take advantage of the tax bill and accelerated depreciation or anything along those lines? Martin Hall: Yes. I don't have an exact number for you, but I will tell you kind of going through loan committee and going through pipelines, looking at that, I think you're right. I do think the vast majority of it was more business from existing customers. I mean we are actively working with our business development officers and TMOs and bankers to make calls and bring in new customers, and that will pick up even greater with these new hires that we're bringing on new clients. But the vast majority of this is additional business in Texas. And I think you're right. I think there's incentives to drive new business from this administration that's paying off. Gary Tenner: Okay. I appreciate that. And then just another kind of NIM-related question. In terms of the deposit cost side of things right now. You've got obviously some CDs repricing in the second quarter. Just hoping to get a sense of where you -- how much opportunity you think there still is in terms of deposit repricing, let's say, in the absence of rate cuts from here? Or are we pretty near a bottom? William Wallace: I would tell you that with the last cut that we got, our markets worked very hard to improve pricing. We looked at what we thought were opportunity with some higher cost deposits across the franchise. And I would tell you that absent another cut, I don't see that we have more opportunity to improve those costs. And our goal, part of our ethos, as Drake mentioned, was that to be disciplined around pricing. And as loan growth accelerates, we need to fund that loan growth with new deposit growth. So I would suspect that we are near bottom on deposits as we have to make sure that we're funding new loans with deposits. New deposits tend to come in a little bit more expensive than your existing deposit base. So yes, I don't think -- I wouldn't model that we have a lot of opportunity on the deposit side from a net interest margin perspective. The greater opportunity is really coming from the repricing of loans, where I mentioned, we're picking up today 125 to 150 basis points of spread. Gary Tenner: Appreciate that. And just kind of one more deposit-related question. Have you seen a significant shift in competition around deposit pricing, whether Louisiana or Texas or otherwise? Martin Hall: Yes, it's leaking in. As a matter of fact, I had -- I've got two mailers sitting on my desk right now from competitor banks here in North Louisiana. One was a 3.8% CD, and one was about a 3.55% money market. And so we're fortunate here that we have such a competitive advantage in North Louisiana. I mean obviously, the pricing does matter, but we're being very disciplined on that. We have long-term relationships with these clients. But you are right, as these banks are trying to get growth, they're going to have to fund it somehow. And so the competition is going to be fierce. Operator: And ladies and gentlemen, this concludes the Q&A session. Handing it back to Drake Mills for any final remarks. Drake Mills: Yes. As I mentioned earlier, we have just a deep commitment throughout our company to deliver on Optimize Origin. We have significant momentum in all of our markets, and we're seeing an acceleration of high-quality production, as I said earlier. As we're blessed to be a part of these dynamic markets that are truly experiencing generational dislocation, it has given us opportunities that I just didn't see it as an opportunity in my career. So as we move forward, we are going to be highly disciplined and not only our growth, our pricing, our quality and the decisions that we make that balance growth and earnings momentum. So I appreciate everybody being on the call. Appreciate your confidence in us, and look forward to seeing most of you on the road in the month of May. Thank you. Operator: Thank you. This concludes today's call. A replay will be made available shortly after today's call. Thank you, and have a great day.
Operator: Greetings, and welcome to the Gentherm First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Gregory Blanchette, Senior Director, Investor Relations. Thank you. You may begin. Gregory Blanchette: Thank you, and good morning, everyone. Thanks for joining us today. Gentherm's earnings results were released earlier this morning, and a copy of the release is available at gentherm.com. Additionally, a webcast replay of today's call will be available later today on the Investor Relations section of Gentherm's website. During this call, we will make forward-looking statements within the meaning of federal securities laws. These statements reflect our current views with respect to future events and financial performance and actual results may differ materially. We undertake no obligation to update them, except as required by law. Please see Gentherm's earnings release and its SEC filings, including the latest 10-K and subsequent reports for discussions of our risk factors and other significant assumptions, risks and uncertainties underlying such forward-looking statements. During the call, we will also discuss non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release and investor presentation. On the call with me today are Bill Presley, President and Chief Executive Officer; and Jon Douyard, Chief Financial Officer. During their comments, they will be referring to a presentation deck that we made available in the Investors section of Gentherm's website. After the prepared remarks, we'd be pleased to take your questions. Now I'd like to turn the call over to Bill. William Presley: Thank you, Greg, and good morning, everyone. Let's begin on Slide 3. I want to start by saying that the Gentherm team demonstrated strong execution in the first quarter. Over the last year, we spent a lot of time improving our operating system. We've been focused on fundamentals that are core to operating in an efficient, consistent manner in all aspects of the business. I visited Gentherm sites in multiple countries over the last 3 months and was able to observe changes in how we operate in all locations versus last year. The teams are engaged in targeted actions for growth in new markets, factory floor space occupation and efficiency are increasing and the teams are adopting tools we put in place to drive financial rigor. I was pleased to see these efforts starting to produce tangible results in the quarter. The first quarter also demonstrated our ability to execute in a dynamic environment, and we are confident in our ability to continually improve our operations. After spending the year with the team putting tools and processes in place, we concluded that realigning our operating model and structure will drive increased speed and transparency across the organization. Therefore, during the quarter, we initiated an organizational realignment that reduced spans and layers to increase agility and provides a concentrated focus on internal improvements as well as the ability to accelerate our growth platforms. This realignment positions us well to deliver key financial and operational priorities going forward. Strategically, this quarter marked an inflection point in our journey to transform Gentherm. We took action to position the company for sustainable, profitable growth with our announcement to combine with Modine Performance Technologies. This transaction transforms the company with an expanded product portfolio and broader end market exposure. We continue to execute our priorities and strategy even though the environment around us remains dynamic. Since our prior earnings call, the macro and geopolitical environment has changed significantly and is creating an increased level of economic uncertainty. Despite these recent events and other macro issues over the last year, light vehicle production schedules have remained relatively stable, which has allowed us to focus on operational improvements. We continue to assess key data inputs, including dealer inventory levels and customer schedules as well as collaborating directly with our customers to get real-time insights on future demand. That said, headwinds are beginning to emerge across the globe. These include direct cost increases in logistics due to lane disruptions and fuel surcharges as well as cost increases of petrochemicals used in raw materials. In addition, we are now starting to see cost inflation flow through to other materials, which are being indirectly impacted due to increases in processing-related costs. We continue to monitor developments in real time, and we are working closely with our suppliers and customers on a variety of mitigation strategies. We are preparing to implement pass-through or reimbursement mechanisms on applicable costs. We have actions ready to execute both commercially and operationally. We will remain agile, and we are confident in our ability to navigate through volatility and uncertainty. Now please turn to Slide 4, where I will discuss some of our first quarter highlights. The first quarter financial results were above our expectations. We secured $395 million of automotive new business awards, which were well balanced across region, customer and product. The pursuit pipeline looks robust for the remainder of the year. We made significant progress on our organic growth initiatives, including key announcements with KUKA Home and our new medical product, ThermAffyx, both of which I will discuss further in a few moments. Our product revenues for the quarter were $394 million, a quarterly record for the company, driven by strong Automotive Climate and Comfort Solutions growth over market. We delivered solid first quarter margin performance, driven by continued progress on our operational excellence initiatives. The business systems we put in place are beginning to have a meaningful impact, driving improved execution and expanded margins. As we build on this momentum, we remain confident in our ability to deliver sustained performance improvements over time. Turning to Slide 5. One of our top priorities over the last year has been scaling our existing products and technologies with new markets, new applications and nontraditional customers deliver strategic profitable growth. During the first quarter, we continued to prove the broad applicability of our technology beyond automotive through our achievements in home and office as well as medical. We officially launched and began supplying production parts to KUKA Home, which is a leading global furniture manufacturer. Since mid-2025, Gentherm played an important role as a collaborative innovation partner with KUKA, which led to co-branding of Enhanced Comfort by Gentherm. The launch this quarter also demonstrates our ability to generate revenue quickly in home and office market by utilizing our core assets and standard kit methodology to maintain the performance, quality and consumer experiences established in automotive applications. In March, Jon and I spent time in China at KUKA headquarters with their CEO and senior leadership team discussing our partnership. There is mutual interest in scaling Gentherm products across additional KUKA Home platforms. Beyond KUKA, our momentum in home and office is accelerating. Earlier this month, we were selected by a leading North American furniture brand to supply our climate and comfort products. This marks our fourth consecutive quarter securing a new home and office customer. We anticipate starting production with this customer later this year. Separately, in our medical business, we announced our FDA 510(k) submission for a new innovative product that is expected to redefine the standard of care for robotic surgeries. Our patented ThermAffyx system combines conductive air-free patient warming with securement technology to help prevent both hypothermia and patient movement on the inclined surfaces used during robotic procedures. We have been vocal about the importance of refreshing our product portfolio in the Medical segment and believe this innovative new solution will be a key contributor to accelerating our annual revenue. The regulatory approval process remains on track, and we expect the ThermAffyx system to begin generating revenue later this year. Overall, we remain committed to repositioning the company for growth by taking our technologies outside of light vehicle markets, and we achieved several important milestones during the quarter. Let's turn to Slide 6. In January, we took a major step in transforming Gentherm by announcing our agreement to combine with Modine Performance Technologies, creating a market leader in thermal and precision flow management. The more we work with the Modine team, the more excited I get about bringing this business into the Gentherm family. This is a well-run business with a great team. Through our work together, we are learning techniques and processes that Modine used to transform their business, and we intend to harness those lessons for the good of Gentherm. We have emphasized the importance of expanding our business beyond the light vehicle segment, and Modine is accelerating our access to critical growth markets, including power generation, commercial vehicles and heavy-duty equipment. This intentional shift in our end market exposure positions us for increased value creation. We are particularly excited about the new product and market opportunities this partnership unlocks and are more confident than ever in our combined growth trajectory. When we map out the next 5 years as a combined company, we see a clear path to generating $3.5 billion in revenue and more than $0.5 billion of earnings. I will now hand it over to Jon to discuss an update on the transaction and highlights for the quarter. Jonathan Douyard: Thanks, Bill. Now turning to Slide 7. Since the announcement, we have been working diligently with the Modine team to define and execute a project plan that ensures a timely, seamless closing of the merger. We have established an integration management office comprised of key stakeholders. And in March, we held a kickoff Integration Summit with business and functional leadership from both teams at our headquarters here in Michigan. Through the summit and ongoing interactions, the teams are focused on ensuring that the business can operate effectively on day 1 and that we are well positioned to deliver on value creation opportunities post merger. As we talked about that announcement, we intend to operate Modine Performance Technologies as a stand-alone division of Gentherm, similar to how the business is managed within Modine today. Given this structure, the primary integration areas relate to corporate systems and functional support, not on highly complex integration of facilities or organizations. In terms of other recent transaction highlights, we were pleased to receive HSR clearance to close from the Federal Trade Commission in March, a key regulatory milestone. Our teams continue to prepare for the S4 filing and the inputs into that process remain on track. Overall, we still expect this transaction to close later this year and are excited about the potential for the combined business. We will continue to keep you updated as the year progresses. Please turn to Slide 8 for a review of the first quarter financials. Overall, first quarter results were above expectations as revenue was higher, driven by stronger automotive volumes and outperformance in China. Revenue of $394 million was up 11.3% compared to the same period last year. Revenues, excluding foreign currency translation increased 7.2%. Automotive Climate and Comfort Solutions revenue increased 13.6% year-over-year or 9.8% ex-FX as we continue to see strong growth over market across all regions and product categories. We had particularly strong performance in China during the quarter, driven by the ramp-up of production on new program launches with domestic Chinese OEMs. This comes as a result of our intentional focus to shift revenue mix and better represent the local market. In addition, we saw increased take rates in China from global OEM customers as they look to remain competitive in the market. From an automotive product perspective, it was another strong quarter of revenue growth for our lumbar and massage comfort solutions, which grew 33% year-over-year. As we have discussed in the past, we expect to see the strong growth trend continue in this product into the future as we continue to launch previously won programs. Turning to profitability. We delivered $49.3 million of adjusted EBITDA or 12.5% of sales compared to 11.1% of sales in the first quarter of last year. The 140 basis point increase was primarily driven by operating leverage and strong net material performance, partially offset by annual price reductions and higher labor costs. On a reported GAAP basis, diluted earnings per share were $0.14 in the first quarter. This was impacted by approximately $0.70 per share related to merger and restructuring expenses. Adjusted diluted earnings per share were $0.84, up 65% compared to $0.51 per share in the first quarter of last year. Cash flow continues to be a point of emphasis for the company. And while we did have a typical seasonal operational cash outflow, the team delivered an $8 million improvement year-over-year. Additionally, CapEx purchases of $5.6 million were down $9.2 million year-over-year as we continue scrutinizing new investments. From a balance sheet perspective, we ended Q1 with net leverage of 0.2 turns, and we had liquidity of $456 million, giving us ample capacity to support our strategic priorities moving forward. Please turn to Slide 9, where I will discuss our 2026 guidance, which excludes any impact related to our planned combination with Modine Performance Technologies. As Bill mentioned in his opening remarks, the operating environment has been dynamic since we introduced guidance in February. Despite the stronger first quarter performance, given the high level of uncertainty in the macro environment, we are maintaining our full year guidance at this time. We expect revenue to be between $1.5 billion and $1.6 billion, representing approximately 3% growth for the year against the recent industry report where our key markets are expected to decrease approximately 2%, positioning us to deliver mid-single-digit revenue growth over market. For adjusted EBITDA, we expect to be in the range of $175 million to $195 million, which implies a midpoint adjusted EBITDA margin of approximately 12%. From a quarterly perspective, we expect the revenue profile to be spread fairly even throughout the year. However, we do expect margins to be depressed in the second and third quarter, and there are a couple of factors driving this. First, building on Bill's earlier comments, inflationary impacts stemming from the current geopolitical environment are expected to drive approximately $20 million in incremental costs during the year, recognizing that this estimate remains fluid and is evolving real time. Although we expect to mitigate a meaningful portion through commercial and operational initiatives, including benefits from the realignment, timing differences between cost realization and recovery are likely to create additional margin pressure. Additionally, as we work to finalize our global footprint transition later this year, we will begin depleting our inventory bank build in the second quarter, which will have a negative impact to gross margins. Turning to cash. Our estimate of adjusted free cash flow remains between $80 million and $100 million with CapEx in the range of $45 million to $55 million or approximately 3% of sales. Overall, we were pleased with our start to the year and are focused on strategic actions to accelerate profitable growth and reinforce operating discipline to drive long-term value. With that, I will hand it back to Bill for some closing remarks. William Presley: Thanks, Jon. Turning to Slide 10. I want to outline what we've accomplished, the key priorities today and how we will evolve. We are on a multiyear journey to deliver sustainable value creation. 2025 was reinforcement of the foundation that we will build on going forward. We established our strategic framework to deliver shareholder value, which focuses on profitable growth, operational excellence and superior financial performance. This drives everything we do. To drive profitable growth, we simplified and segmented into 4 technology platforms to clearly define our core competency and identify attractive markets outside of the light vehicle market where our products are applicable. This product and market alignment was a catalyst for reshaping our M&A funnel. We also saw opportunities in the business to operate more efficiently. During 2025, we focused on building core components of an operating system through business process standardization and increased utilization of assets to drive margin and cash generation improvements. We started reaping some of the benefits of that stronger operational rigor during the first quarter of 2026. With this foundation now in place, Gentherm is at an inflection point. The addition of Modine Performance Technologies accelerates our transformation. This action is the first step in establishing a product portfolio of mission-critical components across broad end markets. Our shared core competency of precision thermal and flow management allows us to scale into attractive markets together through cross-selling and integration. In addition, our complementary product expertise allows us to gain broader customer insights and provide more integrated solutions to pursue new high-growth opportunities. Gentherm continues to focus on the core business as we are confident in our ability to scale revenue and expand margins. We are actively launching products into new markets to deliver profitable growth while realigning the organization to drive speed, efficiency and accountability. As we move into the future, Gentherm will scale into attractive markets while improving profitability and cash flow, and we will leverage best practices from Modine Performance Technologies to outperform our peers. Despite the risk we may have in front of us during the months ahead, we are confident we have the right strategic plan established to drive performance improvements in the long run. We have built the foundation, we have a clear vision, and we are focused on execution. We will continue our relentless pursuit of building a more resilient company. We are at the beginning stages of transforming Gentherm into more than an automotive component supplier, where we will grow sustainably with differentiated and scalable technologies. With that, I'll turn the call back to the operator to begin the Q&A session. Operator: The first question is from Nathan Jones from Stifel. Nathan Jones: I guess I'll just start off with a question about the $20 million incremental costs you talked about. Can you just maybe provide us a little more color on how much of that passes through contractually to customers versus what you've got to go out and renegotiate versus potentially methods that you can offset that internally? Just any more detail you can give us on that. William Presley: Yes. Contractually, we're not on a simulator or escalator with any customers just because the scale of what we buy in any one product isn't large enough to be meaningful to them. So we'll have to go out, Nathan, and we'll have to work through recovery mechanisms with the customers on all of that. We will give some perspective... Nathan Jones: And so you'll -- sorry, the cost will hit pretty much immediately or it will take a couple of quarters to catch up with that pricing? William Presley: Yes. Timing-wise, we expect the costs to start hitting in Q2. So we think Q2 is going to be a definition of recovery mechanisms with the customers that we agreed to. And then there'll just be that timing disconnect that will start flowing in Q3, Q4. Nathan Jones: Okay. I guess my second question then I'm going to ask one about the internal operating structure changes. I think those are kind of important things to highlight. You talked about reducing spans and layers to increase focus. Can you maybe just provide a little more color on what you're doing there, how you think that catalyzes either whether it's growth or it's margin expansion or it's both? Just more color around those changes and how you think they improve the business, please? William Presley: Yes, absolutely. So it's intended, first of all, to do a couple of things, as we mentioned, and I'll get into some quick detail for you, Nathan. A lot of -- if you remember, Jon and I both started at the same day last year, right? So we took a year to thoughtfully understand the plumbing of the organization and how things were running. And one of the big messages we got from the broad organization was there's too many hoops. There's too many barriers. We're not moving fast enough. We're not making decisions fast enough. So we went through an organizational realignment, and we realigned it really based on product. So we segmented out valves as a business unit. So now we have Climate Comfort, Valves and Medical as a business unit within Gentherm Technologies. And over top of that, we'll have a very lean corporate structure. So that was intended to put focus on high-growth opportunities that was intended to drive continual improvement on key initiatives. So we're more aligned functionally now as opposed to a complicated matrix across regions. And we did -- we do expect that, that will have cost benefits. But it primarily was to segment the business to focus on high-growth opportunities, to continue to push the operational improvements and the sustainability there. For the year, though, it will -- annual run rate will be about $10 million-ish better on the OpEx, and we expect half of that to hit this year. Operator: The next question is from Ryan Sigdahl from Craig-Hallum Capital Group. Ryan Sigdahl: I want to start with the outperformance versus light vehicle production. This is as strong as we've seen in many years here, which was nice. Curious when I look at guidance, so 14-point outperformance in Q1, you're guiding to 5 points on the year. It implies a pretty meaningful deceleration kind of throughout the rest of the year versus the industry. Curious if you could elaborate on what the outperformance in Q1 was, why that's going to decelerate, anything from a onetime production orders, et cetera, standpoint? Jonathan Douyard: Yes. We wouldn't point to anything from a onetime perspective, and we really did see strength across all products, all regions. We pointed to China in particular. There was some outperformance there based on some launches that we did in the fourth quarter for some of the domestic OEMs that continue to show strength through the first quarter. As we look at the balance of the year, we certainly do not expect to outperform in the teens range. We'd expect it to moderate. I think at the top end of our guidance, it could push into that high single-digit range. But there's nothing specific to point to in terms of Q1 outperformance other than really just broad growth across regions and products. Ryan Sigdahl: And then GM yesterday or earlier this week, I guess, is suspending its next-gen electric truck program that was set to launch or start in 2028. Curious how much Gentherm's award backlog was from this program? Do you think you can offset that from a shift with more volume back to the ICE programs? Just curious kind of net positive, neutral, negative, how you guys think about that? William Presley: Yes. Overall, we just think it's neutral for us, Ryan. We've also won the ICE content for the platforms. So we just anticipate and based on everything we're seeing, the ICE volumes will compensate for the EV losses. Ryan Sigdahl: Very good. Maybe just a quick clarification, and then I'll hop back in the queue. But the $20 million of cost increase, is that a gross number? Or was that net of mitigation? Jonathan Douyard: That's a gross number and our best view of annualized impact or annual impact based on what we see today. Operator: The next question is from Matt Koranda from ROTH Capital Partners. Matt Koranda: Not to beat the dead horse here with the $20 million on incremental cost that you highlighted. But I guess I was curious, how much of that is incremental shipping versus material cost inflation that you're factoring in? And then on the pricing front, is it all offset via pricing? Or are there operating efficiencies that you think you'll offset the $20 million with as well? Jonathan Douyard: As you look at it, certainly a big piece of it is freight related. I'd say maybe 1/3 of it with the rest coming from commodities, and it's commodities that Bill -- or the product that Bill called out specifically, but it's also incremental processing costs. And so there's a downstream impact from increased petroleum prices. I think as we look at it, our mechanism from a recovery perspective will primarily be from recovery with the customer. We did point to the fact that the $5 million benefit that Bill talked about from the realignment will likely help offset pieces of that as well. I think we'll continue to push operationally, but we've got our teams focused on commercial recovery at this point. Matt Koranda: Okay. That makes sense. And then curious to hear a little bit more about the furniture market opportunity and how it's developed this year, I guess, just given the announcements around KUKA and the incremental wins that you highlighted. Have those catalyzed more discussions for you? Any way to characterize the opportunity funnel and how that contributes to '27 revenue? William Presley: Yes. I mean we'll start -- and again, we like the furniture business because of just super quick time to revenue that the industry has accepted and really bought into our standard methodology, our standard kit methodology. So we're getting good scale there on our assets with little to no investment. So we expect by '28 that that's clipping somewhere between $50 million and $100 million. So you can probably draw a line between now and then to figure out where '27 is. But we expect that to add 1 or 2 points of growth at accretive margins in the coming years. Operator: There are no further questions at this time. This concludes the question-and-answer session as well as today's teleconference. You may disconnect your lines at this time. Thank you for your participation.